In some industries, quarterly earnings updates provide the main news that holds the potential to drive stocks higher. It's a different story in the biopharmaceutical world. Clinical updates and regulatory decisions can happen throughout the year.
Three Motley Fool contributors identified these stocks with huge catalysts on the way: Axsome Therapeutics (AXSM +5.04%), CRISPR Therapeutics (CRSP 0.15%), and Eli Lilly (LLY +2.53%). Here's what they had to say about these three stocks.
Several major milestones are around the corner
Keith Speights (Axsome Therapeutics): Axsome Therapeutics' first potential catalyst is only a few weeks away. The company is scheduled to announce its first-quarter results on May 8. Investors will no doubt be eager to find out how the launch of major depressive disorder drug Auvelity is going. Axsome could also have good news about the momentum for Sunosi, a sleep-disorder drug the company acquired from Jazz Pharmaceuticals.
NASDAQ: AXSM
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However, there's another catalyst coming soon that could be even bigger than the Q1 update. Axsome expects to announce top-line data from its late-stage clinical study evaluating AXS-12 in treating narcolepsy by the end of June. If those results are positive, the company could be on its way to adding another drug to its lineup.
But AXS-12 might have to fall in line behind two other new drugs. Axsome anticipates resubmitting for U.S. Food and Drug Administration (FDA) approval of AXS-07 in treating migraine in the second half of this year. It also intends to file for FDA approval of AXS-14 in treating fibromyalgia in 2023.
The company's market cap currently stands at a little over $3 billion. With sales for Auvelity and Sunosi picking up plus a promising late-stage pipeline, I think Axsome is a surprisingly underrated stock that has plenty of room to run.
Racing toward a major approval
Prosper Junior Bakiny (CRISPR Therapeutics): Few things can boost a biotech stock like an important regulatory approval. That is precisely what CRISPR Therapeutics is awaiting. With its partner Vertex Pharmaceuticals, the gene-editing specialist has completed regulatory applications for exa-cel in the U.S. and Europe. Regulatory authorities in both regions could issue approval by the end of the year or a bit later.
Exa-cel is a potential treatment for sickle cell disease (SCD) and beta-thalassemia, two rare blood diseases. CRISPR Therapeutics' stock recently jumped following a draft report from the Institute for Clinical and Economic Review, a prominent drug-pricing organization, according to which exa-cel could be cost-effective for SCD at a treatment price of up to $1.9 million.
NASDAQ: CRSP
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By the standards of gene-editing therapies, that's not an outrageous price. And it would mean a massive opportunity for exa-cel. CRISPR Therapeutics and Vertex Pharmaceuticals want to focus the initial launch of the medicine on 32,000 patients. But the exa-cel opportunity could extend far beyond this relatively small population, assuming the current research CRISPR Therapeutics and Vertex are doing to bring exa-cel to even more patients pans out. That would be the best-case scenario.
Even without that, CRISPR Therapeutics should benefit from the initial approval of exa-cel, and investors will probably send its shares up following the decision. More importantly, it will help vindicate the potential of its gene-editing platform and allow it to generate enough funds in a non-dilutive way (relatively smaller biotechs often rely on dilutive methods of financing) that would help it push other pipeline programs forward.
Eli Lilly stock could be about to take off
David Jagielski (Eli Lilly): Shares of Eli Lilly aren't up much so far this year, but this is a stock that has the potential to skyrocket in the near future. That's because the company doesn't have just one, but two catalysts that can drive the stock higher.
NYSE: LLY
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The first is diabetes treatment Mounjaro, which could soon obtain approval for weight loss. Investors only need to look to Ozempic-maker Novo Nordisk's stock (which is up more than 20% year to date) for the type of bullishness that may be waiting in the wings for Lilly. The potential weight loss of 22.5% from using Mounjaro could eclipse the results people achieve with Novo's Ozempic or Wegovy, where the weight loss is typically around 15%. Should Lilly obtain approval for Mounjaro this year for a weight-loss indication, investors shouldn't be surprised to see the stock start to take off.
Another potential catalyst is donanemab, the company's Alzheimer's treatment that has been effective in reducing amyloid plaque levels. The drug could compete against Biogen's Leqembi, which obtained accelerated approval earlier this year. Donanemab failed to obtain accelerated approval earlier this year, but that was ironically a positive development -- simply because the drug was too effective and it did not have enough of a sample size for health officials to give it the green light. But Lilly says that it remains "on track" for a mid-year traditional approval.
If one of those approvals comes through for Eli Lilly in 2023, the stock could soar. And if the company obtains both approvals, then Lilly could end up being one of the hottest growth stocks to own this year.
