Biotech companies with few products on the market and red ink on the bottom line may not look like the most attractive investments right now. Equity markets are still down substantially year-to-date, and in this environment investors prefer putting their money in safer stocks.
But for those with a long-term mindset -- and above-average risk tolerance -- relatively small but promising biotech stocks can be compelling options to buy and hold. Here are two biotech stocks to consider buying that could make investors richer in time: Axsome Therapeutics (AXSM -2.61%) and CRISPR Therapeutics (CRSP -1.35%).
1. Axsome Therapeutics
Axsome Therapeutics is fresh off an important regulatory milestone. In August, The company's therapy for major depressive disorder (MDD), Auvelity, earned approval from the U.S. Food and Drug Administration (FDA). Auvelity took a while to finally earn the green light due to deficiencies in Axsome's application. But now that it's ready to hit the market, it could become highly successful.
The number of people with depressive symptoms increased threefold at the start of the pandemic, a trend that has persisted. As of 2021, more than 80 million people in the U.S. experienced symptoms of depression. In clinical trials, patients taking Auvelity saw substantial improvement compared to those taking a placebo. What's more, the medicine works relatively fast, with results as early as one week.
The long-term opportunities for this medicine are exciting, especially considering potential label expansions. Axsome recently started a phase 3 clinical trial for Auvelity in treating Alzheimer's disease (AD) agitation. Patients suffering from agitation show signs of emotional distress and physical aggressiveness. There were six million (and growing) AD patients in the U.S. in 2020, and 70% of them suffered from agitation.
Further, there are no approved treatments for this condition, which shows the potential Auvelity has in this area.
Axsome is also running a phase 2 study for Auvelity in smoking cessation treatment. The biotech has other promising programs, including AXS-07, a potential treatment for migraines. The FDA declined to approve AXS-07 earlier this year, but that was due to manufacturing issues, not problems related to the medicine's safety or efficacy. That means there is still an excellent chance AXS-07 will win approval.
Given that more than 37 million patients in the U.S. suffer from acute migraines -- and more than 70% of them are not satisfied with current treatments -- AXS-07's potential also looks strong. Axsome's lineup features Sunosi, a therapy for excessive daytime sleepiness in narcolepsy patients. And in 2023, the company expects to submit an application to the FDA for AXS-14 in treating fibromyalgia (a condition whose symptoms include excessive fatigue and musculoskeletal pain).
Axsome's lineup should become even more impressive within the next few years. The company reported about $8.8 million in sales from Sunosi -- and in total -- during the second quarter. The biotech had no revenue in the second quarter of 2021. Meanwhile, its net loss of $41.4 million was slightly worse than the net loss of $32.3 million reported during the year-ago period.
Axsome Therapeutics is in an excellent position to improve its financial results now that its research efforts are paying off. Expect the biotech company to gain in prominence and size in the coming years.
2. CRISPR Therapeutics
CRISPR Therapeutics focuses on gene-editing therapies. The company's lead candidate is exa-cel (formerly known as CTX001), a potential treatment for two rare blood diseases: sickle cell disease (SCD) and transfusion-dependent beta-thalassemia (TDT). CRISPR has made some excellent decisions in its effort to market exa-cel. Most of all, it partnered with biotech giant Vertex Pharmaceuticals.
True, CRISPR Therapeutics will have to share the profits associated with exa-cel with its partner on this program if it gets approved. But clinical-stage biotechs are often strapped for cash, and developing innovative therapies isn't cheap. Further, whether an investigational treatment will earn approval is never a sure thing, no matter how promising it looks.
Regardless of whether exa-cel is approved, CRISPR Therapeutics has already collected payments from Vertex in exchange for sharing the rights to the therapy -- the former will receive 40% of the profits and incur 40% of the costs.
The most impressive thing, though, is that exa-cel has been able to produce excellent results in clinical trials to treat these two rare illnesses which have seriously challenged researchers. For instance, 42 of 44 TDT patients treated with the gene-editing therapy were transfusion-free, with follow-up ranging between 1.2 months and 37.2 months. The two that were not yet transfusion-free experienced substantial reductions in transfusion volume.
Vertex Pharmaceuticals and CRISPR Therapeutics plan on filing regulatory applications with the appropriate authorities in the U.S. and Europe by the end of the year. Potential launches could come in late next year. CRISPR also boasts other pipeline candidates. The company's gene-editing platform will get a major vote of confidence if exa-cel earns approval. Of course, it will work wonders for its financial results, too.
The biotech's status as a clinical-stage biotech that is not yet profitable does not inspire much confidence at first glance. But CRISPR Therapeutics could end up being an excellent pick for patient investors.
