It's not always a good idea to chase trends in a bull market, but sometimes the new wave of promising companies is more than a fad. In the biotech and pharma industries, right now is an exciting time, and there's reason to believe that the popular players of today will be strong investments for more than just a few months.
There are three companies in particular that you should know about, so let's cover each one below.
1. Vertex Pharmaceuticals
Vertex Pharmaceuticals (VRTX -0.06%) has a few different drivers that could power it to success during this bull market. First, there's the ongoing launch of its gene therapy Casgevy, which is a cure or near-cure for sickle cell disease (SCD) and beta thalassemia, a pair of rare hereditary disorders of the blood. That's a part of why analysts are expecting the company to bring in an average of $10.7 billion in sales this year.
Investors should note that launching Casgevy is strategically significant not only for its upcoming contribution to the top line, but because it's the culmination of the multi-year plan to diversify its product portfolio beyond its traditional home market of cystic fibrosis (CF) medicines. It isn't the only diversification event that's in play, either.
Vertex will likely soon be launching its candidate to treat acute pain, which recently reported favorable phase 3 clinical trial results. It plans to submit its request for approval to regulators at the U.S. Food and Drug Administration (FDA) by the middle of this year. It's also working on another regulatory approval submission for its latest drug for cystic fibrosis, which should be ready around the same time.
Catalysts are in the air, and more revenue and earnings are on the way. That's especially bullish in a bull market.
2. Compass Pathways
As a pre-revenue biotech business, Compass Pathways (CMPS 1.02%) stock depends on its research and development (R&D) activities to yield favorable clinical trial results to convince investors that it has a shot at eventually generating profits.
On that note, its lead candidate, COMP360, has one big bar to clear this year, and a lot is riding on its success. Sometime in the fourth quarter of this year, one of its two ongoing phase 3 clinical trials investigating COMP360's effectiveness in addressing treatment resistant depression (TRD) will report its top line data.
But COMP360 isn't any old antidepressant. It's a cutting-edge combination therapy that uses both psilocybin, the active ingredient in "magic mushrooms," and psychological support. That means it could potentially help people for whom the existing set of antidepressant therapies can't do much. This suggests that it could one day tap into a poorly exploited market where there's real demand for alternatives.
Positive late-stage results would do a lot to make the rest of its pipeline of psychedelic-derived medicines for mental health conditions look far more valuable. In the context of a bull market, that could lead to its shares being bid up significantly, especially if regulators signal that they're open to adjusting or removing the legal prohibitions on similar candidates.
In the meantime, with $220.2 million in cash on hand at the end of Q4, and another $31.4 million generated from a new stock offering, it has enough gas in the tank to survive for a while longer, so it could be worth a purchase.
3. Catalyst Pharmaceuticals
The biggest driver for Catalyst Pharmaceuticals (CPRX 1.43%) this year will be the launch of its drug Agamree, which treats Duchenne muscular dystrophy (DMD), a deadly and progressive neuromuscular disorder. With its 2023 non-GAAP net income reaching $223.1 million, up 96% from a year prior, all the signs point to more growth being on the way, and soon. And Agamree is just one opportunity of several.
Late last year, Catalyst submitted an application to regulators in Japan, seeking to get its drug Firdapse approved for sale there. It may hear back sometime this year. Firdapse treats Lambert-Eaton myasthenic syndrome (LEMS), a rare autoimmune disease that causes muscle weakness and a greatly increased risk of developing small cell lung cancer (SCLC). If the ruling is positive, it'll proceed to enter the market, in which there will be no competition, and it'll rake in sales for years to come.
On top of the other opportunities Catalyst has right now, the announcement of the acquisition of a new candidate could potentially send its stock soaring the most, depending on details. As it just closed a stock offering in January worth gross proceeds of $140.1 million, not to mention its $137.6 million in cash, equivalents, and investments as of the end of Q4 2023, it also has enough cash on hand to buy promising pharmaceutical assets to commercialize next year and beyond.
If investor dollars are flowing freely in the bull market, the gains for shareholders could be meaningful, to say the least.
