Growing one's wealth in the stock market is simple, at least in theory. All that's needed are time, the right investments, and the patience to hold shares of companies even during downturns. But in practice, it isn't always easy to pull that off. The tendency to panic-sell during a bear market is strong, and with hundreds of options, it can sometimes be challenging to separate the quality stocks from the rest of the pack.
Let's address the second problem: finding quality stocks that can help make an investor richer over a sufficiently long period -- say, five years or more. Following are two companies in the biotech industry that seem to have what it takes.
A blue-chip stock with an attractive dividend
Based in Switzerland, Novartis (NVS 0.45%) is a biotech with a long list of products. Some of the company's biggest growth drivers include heart-failure medicine Entresto, cancer drug Kisqali, and multiple sclerosis treatment Kesimpta. In 2022, sales of Entresto soared by 31% year over year to $4.7 billion. Kisqali and Kesimpta saw their revenues increase by 31% and 194% year over year to $1.2 billion and $1.1 billion, respectively.
Novartis had 11 other products with more than $1 billion in sales last year. However, the company's net sales declined by 2% year over year to $50.5 billion, a result it owed to unfavorable currency exchange dynamics. Year over year in constant currency, Novartis' top line increased by a decent 4% and adjusted earnings per share of $6.12 increased by 6%.
NYSE: NVS
Key Data Points
Novartis projected single-digit percentage growth on the top and bottom lines this year as it focuses on its strategic initiatives, which include the goal to accelerate growth through key pipeline innovations. The healthcare giant expects crucial data readouts from pivotal clinical trials regularly, leading to new approvals.
One of the company's key candidates is iptacopan. Last year, it reported positive results from a phase 3 clinical trial for this medicine, which targets, among other things, a rare blood disease with a significant unmet need called paroxysmal nocturnal hemoglobinuria. As Novartis rejuvenates its pipeline with products like iptacopan and currency exchange rates stabilize, expect stronger revenue growth in the medium term for the company.
And over five years or more, Novartis can deliver excellent total returns, especially for investors who opt for automatic dividend reinvestment. Novartis offers a yield of 4.25%, and it has raised its payouts by a decent 22.4% in the past five years. Novartis' strong dividend is a key reason it can make investors richer.
An under-the-radar company worth a second look
While it's not a bad idea to look carefully at some of the largest biotech stocks, smaller players in the field may be worth investing in, too.
That's the case with Axsome Therapeutics (AXSM +2.92%), a (barely) mid-cap drugmaker with excellent prospects. Axsome's lineup is made up of just two medicines: depression treatment Auvelity, which earned approval last year, and Sunosi, a therapy for narcolepsy that Axsome acquired about a year ago.
Auvelity carries excellent potential as a fast-acting treatment for depression that's being launched when the prevalence of this condition has increased because of pandemic-related factors. That's before factoring in the medicine's potential label expansions, including treatment of Alzheimer's disease (AD) agitation. Auvelity is undergoing a second phase 3 clinical trial along those lines after acing the first one.
NASDAQ: AXSM
Key Data Points
Elsewhere, the company expects pipeline progress this year on several fronts, and within the next two years, Axsome's lineup should be larger than it is today. Auvelity could achieve peak sales above $1 billion in treating depressive symptoms alone and also in targeting AD agitation. Axsome estimates a similar potential for Sunosi.
The company's potential migraine treatment, AXS-07, is another promising candidate. In my view, Axsome Therapeutics' current market capitalization of $2.7 billion doesn't reflect the biotech's long-term potential, even after more than doubling over the past year. And while the company remains unprofitable, that's not surprising considering it became a commercial-stage drugmaker only last year.
For patient investors, Axsome Therapeutics is well-positioned to deliver solid returns over the next five years and beyond as it develops and launches new medicines and earns key label expansions for its existing ones. Those who get in on the ground floor today will likely be glad they did so in a few years.
