3 High-Flying Stocks in 2022 That Should Keep Soaring in 2023

Momentum: In physics, it's a measure of mass and velocity. For stocks, it's the velocity of price changes. But in both realms, momentum can be sustained or it can be lost.

Investors obviously prefer stocks with momentum that can keep it going. With this in mind, we asked three Motley Fool contributors to pick high-flying stocks in 2022 that can keep soaring in 2023. Here's why they chose Axsome Therapeutics (AXSM -2.61%), Merck (MRK 0.10%), and Vertex Pharmaceuticals (VRTX -1.02%).  

Axsome: Multiple catalysts are on the way

Keith Speights (Axsome Therapeutics): With just a few weeks left in the year, shares of Axsome Therapeutics have more than doubled. Wall Street analysts think the biotech stock has additional upside potential of more than 30%. I think they're right.

Axsome's main catalyst in 2022 came in August with Food and Drug Administration (FDA) approval of Auvelity in treating major depressive disorder. The drug should have blockbuster potential over the next few years.

More positive catalysts are likely on the way. Axsome expects to file next year for FDA approvals of AXS-07 in treating migraine and AXS-14 in treating fibromyalgia. 

The company isn't stopping there. It recently announced positive results from a late-stage study of AXS-05 in treating Alzheimer's disease agitation. It is moving forward with another phase 3 study of the drug as a smoking cessation therapy. Axsome should report results from a pivotal study of AXS-12 in treating narcolepsy in the first half of 2023. It also is advancing solriamfetol into a phase 2/3 study targeting attention deficit hyperactivity disorder (ADHD).

With all of these arrows in its quiver, I look for Axsome to keep its tremendous momentum going strong into next year and beyond.

Merck: Up big and still cheap

David Jagielski (Merck):  Shares of drugmaker Merck are up an impressive 44% this year as the growth stock has been defying the current bear market. The business has been performing well this year with Merck projecting sales growth of up to 21% in 2022, recently upgrading its guidance. 

However, as well as Merck has been performing, its shares could still soar higher next year. While many of the company's drugs performed well and rose by more than 10% in Merck's most recent quarter (ending Sept. 30), there are still areas of its business -- such as animal health -- that should do better as the global economy returns to normal. Sales in that segment were down 3%, weighed down by foreign exchange.

Another catalyst that can lift the stock is sotatercept, a treatment for adults with pulmonary arterial hypertension. Merck released positive results from a phase 3 study earlier this year that showed sotatercept was safe and effective. And with a potential to reach $2 billion in peak annual revenue, the drug is a promising one for the company that might not be far from obtaining approval.

Merck is also looking at potentially adding some patent protection for its top-selling cancer drug, Keytruda, which could result in the stock being a safer long-term buy and commanding a higher earnings multiple. The company has trials ongoing to test the effectiveness of injecting Keytruda under the skin, which could create a new formulation that may result in patent protection until 2040 (currently, Keytruda would start to lose patent protection by 2028).

Trading at just 18 times earnings (the healthcare average is 23), Merck offers great value for long-term investors. And with a more promising outlook on Keytruda and sotatercept potentially obtaining approval soon, it wouldn't be surprising to see Merck's stock build on its gains next year.

Vertex: No signs of slowing down 

Prosper Junior Bakiny (Vertex Pharmaceuticals): Is it worth it to buy shares of a company near its 52-week high? In the case of Vertex Pharmaceuticals, the answer is a resounding yes. Although the biotech has crushed the market this year and has also done so going back even further, it is only getting started. It will almost certainly benefit from significant catalysts in 2023 that will send its stock price even higher.

Consider Vertex's pipeline. The company is running clinical trials for several exciting programs, including for VX-880 -- a medicine to potentially restore type 1 diabetes patients' ability to produce insulin. Vertex has already shared positive data from an ongoing phase 1/2 study for VX-880, and we can likely expect more in 2023.

There is also exa-cel, a potential treatment for two rare blood-related disorders called transfusion-dependent beta thalassemia and sickle cell disease. Vertex is on the verge of submitting regulatory applications for these programs in the U.S. and Europe, and approvals could come down by this time next year.

Meanwhile, Vertex recently kicked off a late-stage clinical trial for VX-548 in treating acute pain. It plans to begin a phase 2 study for this medicine, which targets neuropathic pain, by year-end. The company is also making progress with its programs targeting alpha-1 antitrypsin deficiency, a genetic disorder that can lead to lung or liver problems.

Pipeline progress always matters for biotechs, and Vertex should experience plenty of it in the next 12 months. But the company's existing lineup of medicines that target cystic fibrosis (CF) remains strong. Thanks to its CF franchise, Vertex is still growing its revenue and earnings at a good clip. That won't stop anytime soon.

In short, in the next year, investors can expect Vertex Pharmaceuticals to deliver solid financial results, earn approval for a potential blockbuster medicine in exa-cel, and make meaningful progress with other key candidates. Clearly, the drugmaker still has plenty of room to run.