Bear markets don't last forever. They also give forward-thinking investors plenty of opportunities to buy great stocks at a discount.
We asked three Motley Fool contributors to identify stocks they think could double by 2025. Here's why they chose Axsome Therapeutics (AXSM 1.28%), Jazz Pharmaceuticals (JAZZ +1.37%), and Twist Bioscience (TWST 3.03%).
The sell-off is overdone
Prosper Junior Bakiny (Axsome Therapeutics): Investors intent on doubling their money by 2025 might benefit from looking at stocks that seem wildly undervalued and could experience multiple catalysts in the next couple of years. That describes biotech company Axsome Therapeutics pretty well. With a market cap of less than $850 million, Axsome falls in the small-cap category. But this drugmaker has a bright future ahead.
Axsome Therapeutics lagged the market in recent months, primarily because of regulatory roadblocks. The U.S. Food and Drug Administration (FDA) declined to approve AXS-05 as a treatment for major depressive disorder (MDD) and AXS-07 in treating acute migraine. But the agency didn't question the safety or efficacy of either medicine. Instead, regulators mentioned deficiencies in the application for AXS-05 and questioned AXS-07's manufacturing process.
NASDAQ: AXSM
Key Data Points
In my view, the smart money is on both AXS-05 and AXS-07 earning the green light from the FDA by the end of next year, especially considering that neither needs additional clinical trials. The commercial opportunity for both drugs looks attractive. Axsome has estimated peak annual sales between $1 billion to $3 billion for AXS-05 in treating MDD, and between $0.5 billion and $1 billion for AXS-07 in treating migraines. At the midpoint, these two therapies could generate peak annual sales worth more than double Axsome Therapeutics' current market cap.
Furthermore, Axsome boasts other pipeline candidates and a brand new addition to its lineup called Sunosi, a treatment for excessive daytime sleepiness associated with narcolepsy. The company's commercial assets are worth a lot more than its tiny market cap indicates, in my opinion. With several potential approvals coming down in the next two years, its shares could realistically double by 2025.
A bargain cannabis biotech stock
David Jagielski (Jazz Pharmaceuticals): Before its $7.2 billion acquisition of GW Pharmaceuticals last year, I wouldn't have thought much about Jazz's potential to double in value in just a few years. But since acquiring GW, there's a lot more upside to the stock.
Adding Epidiolex, the only cannabis-based drug that the U.S. Food and Drug Administration has approved, into the mix has opened up many more opportunities for Jazz. The seizure medication contributed $157.9 million in revenue during the company's first three months of 2022 and is now one of its top-selling drugs, accounting for 19% of total revenue.
NASDAQ: JAZZ
Key Data Points
But it's the growth opportunities that lie ahead that should make investors especially bullish. Jazz has expanded Epidiolex's reach into new markets. It's now available in four top European markets: The U.K., Germany, Italy, and Spain. There are more countries still on the radar as well.
Epidiolex is already approved for three indications. Jazz also plans to begin a phase 3 trial this year to evaluate the drug in treating epilepsy with myoclonic-atonic seizures.
Market researcher Grand View Research projects that the global cannabis pharmaceuticals market will increase at a compounded annual growth rate of 104.2% through 2028. That astounding level of growth bodes well for Jazz's prospects over the next few years.
The stock trades at a forward price-to-earnings multiple of only 8.7. That's much cheaper than the overall healthcare sector. With the stock down more than 20% over the past 12 months, now could be an optimal time to buy it.
An intriguing Twist
Keith Speights (Twist Bioscience): At first glance, Twist Bioscience might look like a stock you'd want to avoid completely. Shares of the synthetic DNA maker have plunged more than 70% since the fourth quarter of 2021.
NASDAQ: TWST
Key Data Points
But Twist's business is booming. The company reported record revenue in its latest quarter of $48.1 million, a 54% year-over-year increase.
That business consists of two main components right now. Twist makes a wide range of synthetic biology products, including DNA libraries used in drug discovery. It also markets next-generation sequencing (NGS) tools that help researchers prepare samples to be genetically sequenced.
These two markets currently represent a $3 billion annual opportunity. They're also both expected to expand by a compound annual growth rate of at least 20% over the next five years. That estimate is probably too pessimistic with the potential applications for Twist's technology in liquid biopsy factored in.
But what could really make this biotech stock see a huge boom is its efforts in storing data in DNA. The main problem with current data storage methods is that they degrade over time. DNA can last for hundreds of years. And a lot of data can be stored in a small amount of DNA. Twist even thinks that the entire internet could potentially be captured in a shoebox full of DNA.
Twist is still in the early stages of developing its DNA data storage technology. If it scores some key wins over the next few years, though, I think it's entirely possible that the stock could double or more by 2025.
