There are many ways to grow one's wealth over a decade, but few are as accessible as investing in stocks. Even with a relatively modest sum, picking the right investments and letting time and compounding work their magic will generate the kinds of returns most people would be proud to achieve. However, with scores of options to choose from on equity markets, it can sometimes be challenging to know which stocks are worth investing in.
Let's consider two biotech stocks that could generate steady returns in the next 10 years: AbbVie (ABBV 0.02%) and Axsome Therapeutics (AXSM 0.55%).
NYSE: ABBV
Key Data Points
1. AbbVie
AbbVie has been a terrific investment over the past decade. Revenue and earnings have generally grown at a good clip, and it has raised its dividend by 288%. Now that its blockbuster medicine Humira has seen its patent expire in the U.S., things are more complicated -- but that's no reason to give up on the company.
As Humira's sales drop, those of Skyrizi and Rinvoq, a pair of immunology medicines whose indications substantially overlap with those of Humira, are rising. Management expects this pair of drugs to exceed Humira's annual sales by 2027.
AbbVie is looking for growth elsewhere, too. It recently announced the acquisition of Cerevel Therapeutics, a neuroscience-focused biotech, for $8.7 billion in cash. The transaction will improve AbbVie's pipeline in that particular therapeutic area.
Back in 2020, AbbVie closed its acquisition of Allergan, which gave it access to key products, including its Botox franchise. There is nothing wrong with drugmakers relying on acquiring smaller companies to improve their lineups or pipelines, and that's what AbbVie is doing again.
The company does have an extensive pipeline of its own, with several dozen ongoing programs, many of which should result in brand-new approvals or label expansions. For instance, it launched a brand-new cancer medicine this year called Epkinly. So, despite its poor performance in the market this year, AbbVie isn't dead in the water -- far from it.
Patient investors can still expect the company to deliver solid returns and consistent dividend increases. AbbVie is part of the elite group of Dividend Kings: It has raised its payouts for 52 consecutive years, an impressive feat. The company's current yield is 4% -- much higher than the S&P 500's average of 1.62%.
With an underlying business that can still support dividend growth and a reasonable cash payout ratio of 42%, AbbVie can afford many more dividend hikes. That's another great reason to stick with this stock in the next decade.
NASDAQ: AXSM
Key Data Points
2. Axsome Therapeutics
Axsome Therapeutics is a mid-cap biotech with just two products on the market. The company's recent financial results aren't great. In the third quarter, it posted revenue of just about $58 million, which soared by 243% year over year. Its net loss per share of $1.32 was worse than the net loss per share of $1.07 recorded in the prior-year period.
However, things could soon change for Axsome Therapeutics given its pipeline. The company has a string of potential approvals, regulatory submissions, and late-stage clinical trials due to start or release top-line data in the next 12 months. For instance, one of its products, depression treatment Auvelity, is seeking a label expansion in treating Alzheimer's disease agitation (aggressive and restless symptoms). The biotech is running a phase 3 clinical trial whose data should be revealed next year.
Auvelity is also being developed to help with smoking cessation, with a phase 2/3 study planned for next year. Axsome Therapeutics' other approved product, narcolepsy treatment Sunosi, is undergoing a phase 3 study targeting ADHD, with top-line results due in the second half of 2024. There is much more to the biotech's pipeline.
Axsome's lineup should look very different in the next three years. Considering that even its oldest approved product, Sunosi, has been on the market only since 2019, the company should be able to deliver solid top-line growth through the next decade.
That could translate into superior stock market returns, too -- especially since, with the company's market capitalization of just $3.5 billion, investors don't appear to fully appreciate the potential of Axsome's late-stage pipeline. That makes it an attractive biotech stock to buy now and hold.
