March is the month when most of us like to see some green. But in addition to the greenery in the great outdoors (and on St. Patrick's Day), investors would also like to see some green in their portfolios.
Three Motley Fool contributors took at look at some biotech stocks that could make you richer in March (and beyond). Here's why they chose Axsome Therapeutics (AXSM 1.96%), Novocure (NVCR), and Vertex Pharmaceuticals (VRTX 0.06%).
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This biotech stock looks ready for a bull run
Prosper Junior Bakiny (Axsome Therapeutics): With a market cap of about $1.2 billion, Axsome Therapeutics qualifies as a small-cap stock. For opportunistic investors, that is great news. Why? It looks like the market is severely undervaluing this drugmaker's late-stage pipeline.
On the one hand, there are good reasons for that. Axsome Therapeutics ran into regulatory troubles with its leading candidate, AXS-05. Regulators delayed the approval of this potential medicine for major depressive disorder (MDD) because of deficiencies they found in Axsome's application. AXS-05 has been in limbo since August of last year.
The uncertainty associated with this lengthened review process is no doubt weighing on Axsome's stock performance. But there is hope for the company. First, AXS-05 proved safe and effective in a late-stage study. It even earned the priority review designation, a sign that the U.S. Food and Drug Administration (FDA) believes the drug could be superior to the current standards of care for MDD.
Axsome sees a potential patient population of some 19 million people for AXS-05 in this indication in the U.S. This medicine could reach blockbuster status at its peak. After the company's latest quarterly update, it looks increasingly likely to earn approval soon.
But the biotech also boasts several other programs in its late-stage pipeline. It is testing AXS-05 as a potential treatment for Alzheimer's disease agitation. Axsome is also awaiting approval for AXS-07 in treating migraines. And both AXS-12 and AXS-14 are in phase 3 studies.
All of these programs could earn Axsome Therapeutics far more in sales than the dollar figure of its current market cap. The biotech's potential upside is substantial.
Sure, it isn't without its risks. Axsome currently has no products on the market. It's unprofitable. The company could also run into additional regulatory headwinds.
Still, for investors willing to be patient, Axsome has enough promising pipeline candidates to earn at least a few approvals in the next 12 months. These approvals, and the income they should generate for the company, could help Axsome deliver excellent returns well beyond next year.
The odds appear to be ever in its favor
Keith Speights (Novocure): The Hunger Games come to mind when I think about Novocure -- in particular, the phrase from the books and movies, "May the odds be ever in your favor." I think the odds appear to be ever in this biotech's favor.
Novocure developed a way to use electric fields to fight cancer by disrupting the ability of tumor cells to divide. Its product, Tumor Treating Fields (TTFields), has already won regulatory approvals in treating glioblastoma (an aggressive form of brain cancer) and mesothelioma (a type of cancer caused by exposure to asbestos).
But Novocure has its sights set on several other indications. The company expects to announce results this year from a late-stage study targeting non-small cell lung cancer.
There's a good reason to be optimistic. Novocure announced in April 2021 that the independent data monitoring committee for the study determined that it was "likely unnecessary and possibly unethical" to continue enrolling patients in the control arm of the study. That seemed to be a big hint that TTFields was effective at least in the early part of the pivotal study.
Novocure should also announce results from two other late-stage studies next year. One of those studies targets brain metastases, while the other targets ovarian cancer. Results from yet another pivotal study of TTFields in treating pancreatic cancer are expected in 2024.
The company clearly has plenty of growth potential with this data on the way. However, the stock has crashed more than 60% from its highs set last year. Novocure's market cap is now under $8 billion. This low valuation improves the stock's odds of delivering long-term exceptional returns, in my view.
A money-making biotech with room for more growth
David Jagielski (Vertex Pharmaceuticals): Investing in biotech at a time when the markets are showing some hesitance around growth stocks can be risky. But Vertex Pharmaceuticals is a stock that's safer than most. The company's cystic fibrosis (CF) franchise continues to generate strong growth. Vertex also has some exciting opportunities down the road to further diversify its business.
In 2021, the company's product revenue totaled $7.6 billion, up 22% year over year. Top-selling CF drug Trikafta/Kaftrio led the way with $5.7 billion of that revenue, as its launch into new markets helped spur more growth. With low operating costs, the company netted $2.3 billion in profit last year, for a net margin of 31%.
While there may be concerns that the growth in the CF market may slow over time, the company has more in its pipeline that investors can get excited about. Vertex is collaborating with CRISPR Therapeutics on gene-editing therapy CTX001. The experimental therapy is currently in phase 3 testing as a treatment for sickle cell disease and beta-thalassemia. Vertex thinks that CTX001 presents a multi-billion dollar opportunity. The two companies plan to file for regulatory approval of the treatment before the end of this year.
Vertex also has other treatments in its pipeline, including VX-147, which treats APOL1-mediated kidney disease -- the potential population there is over 100,000 patients just across the U.S. and Europe. That's more than the 83,000 people who have CF in the U.S., Canada, Australia, and Europe.
Vertex could be a popular stock to buy this month, especially as investors continue to shift away from risky investments. The stock has risen so far this year while the S&P 500 has floundered.
I think Vertex appears to be a relatively safe biotech stock to invest in right now. The company is generating a strong profit margin while also accumulating more than $2.4 billion in free cash flow over the trailing 12 months. Its strong fundamentals and cash balance of more than $7.5 billion could enable Vertex to make acquisitions and invest internally to expand into its pipeline even further.
My view is that Vertex stands out as an attractive biotech stock, even for risk-averse investors. The stock could not only pick up more steam this month, but could also soar even higher over the long term if its pipeline candidates are successful.
