After last year's tumble, the stock market is performing much better in 2023. That fits a historical pattern according to which downturns typically last only 10 months and rarely happen two years in a row. So investors can likely look forward to more decent performance for equities, at least in the short run.
Even so, some companies haven't been performing as well as the rest of the broader market since the year started. But a few of them could be excellent long-term stocks to buy on the dip. Let's look at two examples: Axsome Therapeutics (AXSM 0.49%) and Tandem Diabetes Care (TNDM 1.25%).
1. Axsome Therapeutics
Shares of Axsome Therapeutics are down by 7% this year after doubling in 2022. It is true that several of the drugmaker's catalysts are now in the rear-view mirror. Most notably, gaining regulatory approval for depression medicine Auvelity in August was a significant milestone. However, Axsome should still make further meaningful clinical and regulatory progress this year, which often helps biotech stocks soar. And more importantly, the company's long-term prospects are attractive.
Let's first consider some of the regulatory issues ahead for Axsome. The company plans on issuing applications to the U.S. Food and Drug Administration (FDA) for AXS-07 and AXS-14 later this year. The former targets acute migraines; it failed to earn the green light in 2022. But AXS-07 should eventually make it to the market considering that the FDA is accepting a new application following a fruitful back-and-forth with the company.
Meanwhile, AXS-14 is a potential therapy for fibromyalgia, a chronic disease that causes symptoms such as body pains and sleep problems. In addition, Axsome Therapeutics is expecting top-line results from a phase 3 clinical trial for AXS-12, a potential narcolepsy (a sleep disorder) treatment, in the first half of the year.
These developments and others could help jump-start Axsome Therapeutics stock, and that could start relatively soon with AXS-12's data readout, which should drop by the end of June. Regarding Axsome's long-term prospects, the company's current market cap of $3 billion does not fully reflect its potential, at least in my view.
Auvelity's sales should grow meaningfully for a long time, especially since the medicine earned approval during a pandemic that exacerbated symptoms of depression. And that's before we add the fact that this medicine could also earn approval in treating Alzheimer's disease agitation (restless or aggressive symptoms). After acing a phase 3 study along those lines last year, Auvelity is being evaluated in a second one, the results of which should come out in 2024.
Axsome's other approved treatment is Sunosi, which also targets narcolepsy. It is being evaluated as a potential ADHD treatment, with the results expected soon. Sunosi and Auvelity each have blockbuster aspirations. And the trio of AXS-12, AXS-14, and AXS-07 adds even more upside potential for Axsome Therapeutics.
The drugmaker should successfully earn key approvals over the next few years. From then on, it will be able to generate solid and growing revenue and earnings for a while.
2. Tandem Diabetes Care
Tandem Diabetes Care is a medical device company best known for its t:slim X2 insulin pump. Last year, the company's shares underperformed the struggling market as it dealt with slowing revenue growth and recurrent net losses.
TNDM Revenue (Quarterly YoY Growth) data by YCharts.
The company has yet to recover, with its stock down by 7% in 2023, but there are reasons to be optimistic. Let's consider several of them.
First, the company's insulin pump is one of the best on the market, which is why it has attracted and continues to attract more and more patients. The t:slim X2 boasts features like remote updates, a smaller frame than that of most competitors, continuous glucose monitoring (CGM) integration that allows patients to automate insulin delivery, and more.
Second, there is a long runway for growth for Tandem Diabetes Care. Many of those with diabetes still take their daily insulin with painful injections. Only about 36% of type 1 patients in the U.S. use insulin pumps; that number is much lower in most markets abroad. And that's before we account for the fact that the number of people with diabetes is rising.
Third, a larger installed base will create an increasing income stream for Tandem Diabetes Care. Patients who use its insulin pump need to buy supplies regularly, such as cartridges and infusion sets, and the pumps are replaced every four years. Tandem Diabetes Care ended 2022 with an installed base of 420,000.
The company aims to serve 1 million patients eventually, and there is plenty of room left for it to reach that goal. Although Tandem Diabetes Care has had a rough go of it over the past year and a half, the stock could be an excellent contrarian buy this month for investors willing to be patient and hold for a while.
