The biotech industry is home to many large and prominent corporations, but there are also smaller and lesser-known drugmakers that are worth investors' consideration. Take Axsome Therapeutics (AXSM 0.49%) and Exelixis (EXEL -0.76%), two mid-cap biotechs with plenty to look forward to ahead.
Axsome and Exelixis may not be household names -- not yet, anyway -- but there are excellent reasons to think both could deliver solid returns over the next decade. Let's dig into why both biotech companies are worth investing in today.
1. Axsome Therapeutics
In August, Axsome Therapeutics earned approval from the U.S. Food and Drug Administration (FDA) for Auvelity, a medicine for depression. It was an important milestone for the company that came at an opportune time to provide a fast-acting option to the growing number of people who suffer from symptoms of depression, a number that soared during the pandemic.
Expect Auvelity to start recording revenue soon. But the approval of this drug in treating depression was just the beginning for Axsome Therapeutics. Over the next few years, the biotech will continue earning new approvals and label expansions, which will help drive revenue growth for the next decade and beyond. Auvelity is undergoing testing as a potential treatment for agitation (aggressive and restless behavior) associated with Alzheimer's disease (AD).
In November, Axsome announced positive results from a phase 3 clinical trial for Auvelity in this area. It is currently running a second late-stage study with data set to come in sometime in 2025. AD is a severe and growing problem, with plenty of drugmakers seeking to develop novel therapies to address it and its symptoms. Roughly 70% of AD patients suffer from agitation, so there is a massive opportunity here.
There are more exciting products in Axsome's pipeline. Later this year, it plans to resubmit AXS-07 to the FDA after the potential migraine medicine failed to earn approval last year. Given that the agency did not question AXS-07's safety and efficacy but instead pointed to some manufacturing problems, it seems highly likely that AXS-07 will eventually earn approval.
Further, Axsome expects data from an ongoing phase 3 clinical trial for AXS-12, a potential treatment for narcolepsy (a sleep disorder), in the first half of the year. The company is also on track to submit AXS-14, an investigational fibromyalgia (a condition that causes body pains and sleep problems) therapy, to the FDA for review this year.
Axsome Therapeutics has a market capitalization of $2.7 billion as of this writing. The company's stock could soar this year as it expects multiple catalysts. And once it establishes a solid portfolio of medicines, expect Axsome Therapeutics to deliver solid financial results through 2033.
2. Exelixis
Some biotechs seek to cast a wide net by developing drugs in multiple therapeutic areas. Exelixis has taken a different approach. The company focuses on the oncology market, which happens to be one of the largest and fastest-growing in the pharmaceutical industry.
Exelixis is best known for Cabometyx, which treats liver, kidney, and thyroid cancer. Cabometyx makes most of Exelixis' sales and remains the key driver behind the company's revenue growth. In 2022, the company's top line increased by a solid 12.3% year over year to $1.6 billion.
Exelixis was also active on the clinical front throughout 2022. The company advanced its next potential key growth driver, zanzalintinib, to two phase 3 studies.The potential medicine is being investigated in these trials as a treatment for metastatic colorectal cancer and advanced kidney cancer. In both of those cases, there is a need for new therapy options that address patients' needs. For instance, once colorectal cancer has metastasized -- which is when 25% of the cases are diagnosed -- the five-year survival rate is just 15%.
Exelixis is planning to advance zanzalintinib to more late-stage studies this year. The biotech is also planning to release data from several ongoing phase 3 clinical studies for Cabometyx. The cancer medicine is still being tested in dozens of clinical trials, so expect label expansions in the future. Exelexis is working on other internally developed programs.
The company has also made agreements with other companies to develop various cancer therapies. Exelixis is well positioned to launch at least one new product on the market in the next five years while also earning plenty of new indications for Cabometyx, thereby pushing the company's financial results even higher. At a price of about $17 per share, Exelixis looks like a buy right now.
