People aren't exactly tripping over themselves to invest in stocks right now. The market's volatility and economic issues (inflation, supply chain problems, etc.) have scared away many investors. But on the bright side, there are now plenty of gems hiding in plain sight in the market, and picking the right companies could pay rich rewards down the road.
Let's look at two stocks that could rebound from their recent woes in the market: Axsome Therapeutics (AXSM 3.32%) and CRISPR Therapeutics (CRSP -1.98%).
1. Axsome Therapeutics
Few things can wreak more havoc on biotech companies than regulatory rejections for their leading pipeline candidates. That's precisely what happened to Axsome Therapeutics. The company's shares have been hammered over the past year because it failed to earn regulatory approval for its two leading products. First it was AXS-05 -- a potential therapy for major depressive disorder (MDD) -- which could have earned the nod from regulators back in August 2021.
But the Food and Drug Administration (FDA) delayed the review process. Last month, the agency rejected Axsome's application for AXS-07 as a potential treatment for acute migraines. The good news is that the FDA did not question the safety or efficacy of either AXS-05 or AXS-07.
The agency flagged deficiencies in Axsome's application for AXS-05. And AXS-07 was rejected because of manufacturing issues.
It does not seem either therapy will need additional clinical trials to earn approval. Axsome has already received post-marketing requirements from the FDA for AXS-05, and a decision from the agency could come before the end of the second quarter. It's harder to know how long it will take for AXS-07, but this therapy also looks likely to earn approval eventually.
With 56 million potential patients for AXS-05 and AXS-07 across these two indications, these medicines could generate hundreds of millions of dollars annually for Axsome at their peak. Meanwhile, the company has several other promising pipeline candidates, including AXS-14, a potential medicine for fibromyalgia.
Lastly, Axsome recently acquired Sunosi, a narcolepsy treatment, from Jazz Pharmaceuticals. The deal cost the company $53 million up front, with additional royalties to be paid in the future. Sunosi will help Axsome generate some revenue while it awaits FDA approval for AXS-05 and AXS-07.
With a market cap of $865.8 million, the stock has fallen too low, and in my view it's just a matter of time before the biotech turns things around. That's why now is a great time to get in.
2. CRISPR Therapeutics
CRISPR Therapeutics is a clinical-stage biotech that focuses on developing gene-editing therapies. While the company has several promising pipeline candidates, the beating it took in the stock market over the past year is not surprising. Speculative growth stocks such as CRISPR are not very popular in today's environment. Still, there are good reasons to be optimistic about the company.
CRISPR Therapeutics' leading pipeline candidate is called CTX001. The company is developing it in collaboration with biotech giant Vertex Pharmaceuticals. CTX001 is a potential therapy for sickle cell disease (SCD) and transfusion-dependent beta-thalassemia (TDT). These two blood-related disorders are rare, and effective treatments are hard to come by for the patients who suffer from them. Caring for those with SCD or TDT is also an expensive proposition.
A recent study found that privately insured patients spend about $1.7 million on expenses related to their illness over their lifetime. And that's despite the fact that SCD can't be cured for most patients -- not yet, anyway. CTX001 could be a one-time curative treatment worth far more than the $1.7 million SCD patients spend on medical-related expenses.
CRISPR Therapeutics and Vertex Pharmaceuticals plan on submitting regulatory applications for CTX001 in both indications by the end of the year. The gene-editing therapy could hit the market sometime next year. While Vertex Pharmaceuticals will be the one marketing the therapy if it earns approval, the two entities will split the profits and costs associated with it. CRISPR will be responsible for 40% of the costs and pocket 40% of the profits.
Furthermore, the success of CTX001 would help validate CRISPR's gene-editing platform. The company is developing other gene-editing therapies for various forms of cancer. With CTX001 nearing regulatory submission and other pipeline programs making progress, CRISPR Therapeutics has the tools to turn things around.
