What's a great thing to do during the hot month of August? One option is to find somewhere cool. Another is to invest in stocks that could deliver their own kind of sizzle.
We asked three Motley Fool contributors to identify some fantastic growth stocks to buy in August. Here's why they picked Axsome Therapeutics (AXSM +1.32%), Eli Lilly (LLY +0.41%), and Vertex Pharmaceuticals (VRTX 0.73%).
Things are about to heat up
Keith Speights (Axsome Therapeutics): Admittedly, Axsome Therapeutics hasn't been an especially hot stock so far in 2023. However, I think that things are about to soon heat up for this up-and-coming biotech company.
NASDAQ: AXSM
Key Data Points
We'll soon find out how much momentum its major depressive disorder drug Auvelity has picked up. Axsome is scheduled to announce its second-quarter results on Aug. 7. Auvelity should be the star of that update, with sleep-disorder drug Sunosi playing a key supporting role.
Those Q2 results are just the beginning of the potential catalysts on tap for Axsome. The company plans to resubmit for U.S. approval of AXS-07 as a treatment for migraines before year's end. It also intends to file in the fourth quarter for approval of AXS-14 as a fibromyalgia treatment.
A couple of key clinical readouts are on the way as well. Axsome initially expected to report top-line results from a late-stage study evaluating AXS-12 in narcolepsy, but its timeline has been pushed back. Results from another late-stage study of AXS-05 (Auvelity) in treating Alzheimer's disease agitation should be announced in the first half of 2024.
Axsome believes that Auvelity, Sunosi, and its pipeline programs can together generate peak annual U.S. sales of between $5.8 billion and $11.5 billion. With the company's market cap currently at around $3.5 billion, even sales at the low end of that range should translate into tremendous growth prospects for the stock.
On the cusp of incredible growth
David Jagielski (Eli Lilly): One of the best growth stocks you can buy in the healthcare industry today is Eli Lilly. The drugmaker has some terrific assets in its portfolio and there could soon be more in the mix.
Revenues from top-selling diabetes drug Trulicity grew by 15% last year to more than $7.4 billion. Sales of breast cancer drug Verzenio, the company's next biggest moneymaker, grew by 84% to nearly $2.5 billion. In total, Eli Lilly had five drugs that contributed at least $2 billion each to its top line in 2022.
NYSE: LLY
Key Data Points
But that could pale in comparison to the growth that may be on the horizon. Lilly has multiple exciting weight-loss treatments that could be game-changers for people looking to shed pounds. Last month, the company said that in late-stage trials, over a period of 84 weeks, Mounjaro (tirzepatide) helped people lose 26.6% of their weight, on average, following "intensive lifestyle intervention" or with continued treatment. The drug isn't yet approved for weight loss, but the Food and Drug Administration has given it the OK for it to be prescribed as a diabetes treatment. At its peak, Mounjaro could easily generate billions in additional revenue annually for Eli Lilly.
As if that weren't enough of a reason to be bullish on the stock, there's Alzheimer's candidate donanemab, which may obtain approval later this year. That's another multibillion-dollar opportunity for Lilly. In clinical trials, the drug has achieved results similar to Leqembi, which is a similar treatment from Biogen that recently obtained Food and Drug Administration approval.
Eli Lilly's stock isn't cheap: It trades at more than 70 times earnings. But with some potentially huge catalysts on the way, a few years from now, it could in retrospect look like a bargain buy at the current price.
Firing on all cylinders
Prosper Junior Bakiny (Vertex Pharmaceuticals): It's been more than 10 years since Vertex Pharmaceuticals launched the first of its medicines that address the underlying causes of cystic fibrosis, an area where it holds a monopoly. After all this time, even with a modest pool of around 88,000 cystic fibrosis patients in the U.S., Europe, Australia, and Canada, the company continues to deliver excellent financial results.
In the first quarter, Vertex Pharmaceuticals' revenue increased by 14% year over year to $2.49 billion, while its net income jumped by 13% to $915.7 million. But things are about to get even more exciting for the biotech. It should continue to make progress in cystic fibrosis. It is also inching closer to regulatory approval of exa-cel, a groundbreaking gene-editing therapy that is intended to functionally cure a pair of rare blood diseases.
NASDAQ: VRTX
Key Data Points
Exa-cel boasts multibillion-dollar sales potential for Vertex, even accounting for the fact that it will share the profits with its partner on the project, CRISPR Therapeutics. The first approval of exa-cel could come late this year.
The company won't stop there, though. Several more programs are in its pipeline, including an ambitious therapy that offers a potential functional cure for type 1 diabetes. Given Vertex's track record, it wouldn't be surprising if it succeeds in that endeavor, although it is too early to know for sure.
At any rate, the company's cystic fibrosis franchise, a valuable new treatment that could launch within nine months, and several other candidates should allow it to continue growing its revenue and earnings at a good clip for a long time. That's why Vertex Pharmaceuticals is such a fantastic growth stock to buy.
