There are plenty of well-known biotech giants that look like solid investments. But targeting smaller and relatively unknown companies in the industry could provide much juicier returns over the long run. Of course, smaller biotechs tend to be riskier investments, so it's important to pick those with excellent prospects.
Let's look at two biotech stocks that aren't among the most prominent names in the sector but are worth investing in nonetheless: Axsome Therapeutics (AXSM 1.29%) and CRISPR Therapeutics (CRSP +4.60%).
NASDAQ: AXSM
Key Data Points
1. Axsome Therapeutics
Thanks to crucial pipeline and regulatory progress, Axsome Therapeutics has outpaced the market over the past year. But there is substantial upside left for the company. You can see that by looking at the opportunity of its two approved medicines: depression treatment Auvelity, and Sunosi, which targets excessive daytime sleepiness in narcolepsy patients.
Axsome expects peak annual sales of $1 billion to $3 billion for Auvelity in its current indication, while Sunosi could reach $300 million to $500 million in peak annual sales in treating narcolepsy. But that's just the beginning. Axsome estimates that its late-stage pipeline and currently approved medicines could address the needs of 140 million patients in the U.S.
The biotech should earn several key approvals in the next couple of years. Some of these programs also boast blockbuster potential. Let's consider one of them. Axsome Therapeutics is also testing Auvelity in treating Alzheimer's disease (AD) agitation (restless and sometimes aggressive behavior). In November, the drugmaker reported positive results from a phase 3 study along these lines.
It is running a second late-stage trial that should wrap up by next year. Axsome thinks it could earn this new indication and launch Auvelity in treating AD agitation by 2025. AD is a worsening problem, partly due to the world's aging population. Of the 6 million patients with the disease in the U.S., roughly 70% experience agitation.
There are few safe and effective therapy options here, so Auvelity could be a welcome approval. Axsome Therapeutics projects peak annual sales between $1.5 billion and $3 billion for Auvelity in this indication. The company is also targeting smoking cessation, ADHD, fibromyalgia, and migraines. Axsome Therapeutics should establish a solid foundation for future top line-growth in the next half a decade.
That's why the biotech looks like a solid buy despite being relatively unknown and having a market cap of just $3.7 billion.
NASDAQ: CRSP
Key Data Points
2. CRISPR Therapeutics
CRISPR Therapeutics is another mid-cap biotech that deserves a second look. On one hand, the company currently has no approved product on the market. Sure, clinical-stage companies tend to be riskier prospects, but CRISPR Therapeutics is an exception since the biotech is on the verge of proving the value of its gene-editing platform.
CRISPR developed exa-cel, which targets two rare blood illnesses: beta-thalassemia and sickle cell disease. Exa-cel attracted the attention of biotech giant Vertex Pharmaceuticals, which invested plenty of money in helping develop the medicine in exchange for 60% of its rights. The two partners have completed regulatory applications in the U.S. and Europe.
They could launch the medicine by early 2024. Exa-cel boasts a massive commercial opportunity. Based on an estimated price of about $2 milion and the 32,000 initial patients CRISPR Therapeutics plans to target, that's a $64 billion market. That's one of the reasons why exa-cel's approval could send CRISPR Therapeutics' shares soaring. Beyond the short-term gains investors can expect, CRISPR will continue developing promising candidates.
It is working on gene-editing therapies across several areas, including oncology. The windfall from exa-cel will help fund its pipeline progress. So in the next five years, we should see plenty of regulatory and clinical wins for the company. CRISPR Therapeutics' market capitalization is currently $4.5 billion. Patient investors could see the company's size and share price appreciate substantially over the next decade.
