The biotech sector has had a challenging year so far. The SPDR S&P Biotech ETF is still down more than 26%, and the iShares Biotechnology ETF is down more than 19%, even though both have rallied a bit in the past few months.
Contrast that with Vertex Pharmaceuticals (VRTX 0.14%), Axsome Therapeutics (AXSM 0.31%), and Neurocrine Biosciences (NBIX -1.12%), as all are up 20% or more this year. Their momentum is likely to continue because all three biotech companies have blockbuster drugs and large, late-stage pipelines that could pay off for years to come.
Branching out from the core business
Vertex Pharmaceuticals specializes in treating cystic fibrosis (CF), a rare genetic condition that affects the lungs, pancreas, and other organs. The company has had a big year financially and in terms of drug development, and the shares are up more than 32% in 2022.
In the second quarter, the company reported revenue of $2.19 billion, up 22% year over year, and earnings per share (EPS) of $3.13, compared to EPS of $0.26 in the same period last year. The big driver is CF drug Trikafta/Kaftrio, which brought in $1.89 billion, up 50.7% over the second quarter of 2021. The company's yearly guidance predicts revenue between $8.6 billion and $8.8 billion, up from $7.6 billion last year.
The company has also seen success in its collaboration with CRISPR Therapeutics on development of exa-cel, a gene-editing therapy that is seen as a potential cure for transfusion-dependent thalassemia (TDT) and severe sickle cell disease (SCD), two rare genetic blood disorders, and has progressed to phase 3 trials for both.
A potential blockbuster in Auvelity
Axsome Therapeutics' stock is up more than 65% this year. The reason is the biopharmaceutical company, which specializes in therapies to treat central nervous system disorders, has gone from the clinical to commercial stage. It also has a potential blockbuster drug that was just approved last month by the Food and Drug Administration (FDA).
Axsome's first commercial product, Sunosi, to improve wakefulness in adults with excessive daytime sleepiness, was bought in May from Jazz Pharmaceuticals for $53 million, plus royalty payments. In a little more than a month, the drug has already brought in $8.8 million in revenue, the company said. However, the big payday is likely to come later this year when the company's major depressive disorder (MDD) drug, Auvelity, hits the market.
The big advantage of Auvelity over other antidepressants is its ability to take effect within a week, while the response time for most antidepressants is six to eight weeks or more. The FDA approved the drug on Aug. 19. The potential market, just in the United States alone, includes the 85 million people who had elevated depressive symptoms in 2021.
The company also has more late-stage therapies in its pipeline that could soon pay off, led by AXS-07 to treat acute migraines. The company just began enrolling its first patient in a phase 3 trial to look at the safety and effectiveness of the therapy in patients who have had an inadequate response to an oral Calcitonin Gene-Related Peptide (CGRP) inhibitor.
Building a healthy late-stage pipeline
Neurocrine Biosciences' shares are up more than 24% so far this year. The company specializes in what it calls under-addressed neurological, neuroendocrine, and neuropsychiatric disorders.
The company reported its second-quarter numbers on Aug. 4, with revenue listed at $378.2 million, up 32% year over year, and EPS of $0.84, compared to $0.72 in the same period last year.
Most of the Neurocrine's revenue ($350 million) came from movement disorder therapy Ingrezza. The drug is approved to treat patients with tardive dyskinesia, a disorder that results in involuntary, repetitive body movements. The company raised yearly guidance on Ingrezza revenue to between $1.35 billion to $1.4 billion.
The company's other marketed drug is Parkinson's disease treatment Ongentys.
Neurocrine has several other promising phase 3 trials. Ingrezza is in phase 3 trials to treat two different kinds of movement disorders: chorea (as it occurs in Huntington's disease) and dyskinetic cerebral palsy. Crinecerfont is in phase 3 trials, one for adults and the other for children, to treat congenital adrenal hyperplasia (CAH), a disorder that creates an enzyme deficiency that hinders the production of the adrenal hormone needed for development.
The company, flush with its Ingrezza profits, is looking to expand its portfolio and has a $56.5 million deal in the works to buy the Dirurnal Group, a British pharmaceutical company that specializes in therapies to treat chronic hormonal diseases. Its lead candidate, DNL-0200, is in phase 3 trials to treat CAH.
Three good choices
Neurocrine Biosciences and Vertex Pharmaceuticals are both profitable. It's hard not to be excited about the potential of Vertex because of the possibilities of exa-cel and the growth in sales of Trikafta/Kaftrio. Neurocrine is also using profits from its lead product, Ingrezza, to expand its portfolio. Axsome isn't profitable yet, but the potential patient base for Auvelity is so large, if the drug is approved, the stock will likely jump higher.
