2 best biotech stocks to buy for summer 2021

This summer promises to be hot for a pair of biotech stocks that hardly anyone had heard of just a few years ago. PontBio (NASDAQ: BBIO) is launching its second drug right now, and Axsome Therapeutics (NASDAQ: AXSM) could be knee deep in its first new drug launch before it’s time to send the kids back to school this fall.

Both are poised to produce above-market earnings for investors. Here’s how they could do it.

Image source: Getty Images.

1. BridgeBio

This biotech company acts as a portfolio manager controlling a series of subsidiaries, each dedicated to an individual drug program. On May 28, QED Therapeutics became the second BridgeBio subsidiary to gain FDA approval for a new drug.

This medication, Truseltiq, is an easy-to-swallow capsule that makes it more difficult for mutated fibroblast growth factor receptors to stimulate tumor growth. It is currently approved to treat patients with advanced stages of a rare form of bile duct cancer called cholangiocarcinoma; clinical trials already underway could support the expansion of its drug label to include larger patient populations.

In February, the FDA approved the first new drug developed by a subsidiary of BridgeBio. Nulibry, from Origin Biosciences, is a cofactor replacement therapy for patients who cannot produce their own cPMP due to an often fatal disease called molybdenum type A cofactor deficiency.

While Nulibry is a relatively straightforward cofactor replacement therapy, almost the entire BridgeBio development pipeline consists of innovative new treatments for serious illnesses with clear genetic components. Investors can expect more new Truseltiq-like drugs to emerge from this pipeline.

One of BridgeBio’s subsidiaries has tested at an advanced stage a transthyretin stabilizer (TTR) called acoramidis that patients can take orally. The drug, if approved, could generate sales of billions of dollars a year. In 2019, Pfizer (NYSE: PFE) launched a TTR stabilizer in the United States called Vyndaqel which generated $ 1.3 billion in revenue last year.

Leading data is expected in the fourth quarter of a study on the long-term outcomes of acoramidis in patients with heart damage caused by TTR amyloidosis. If the results make acoramidis competitive with Pfizer’s drug, BridgeBio’s stock could jump overnight.

Doctor smiling at a patient.

Image source: Getty Images.

2. Axsome Therapeutics

This biotechnology takes advantage of known drug interactions to develop new treatments for common neurological diseases. Axsome Therapeutics’ lead candidate, AXS-05, is a combination of bupropion, a popular antidepressant, and dextromethorphan, an ingredient in most cough medications.

Treatment with AXS-05 has beaten the pants of a placebo in pivotal clinical trials. In April, the FDA began reviewing Axsome Therapeutics’ application for the drug as a treatment for major depressive disorder (MDD).

Each year, doctors in the United States write more than 100 million prescriptions for serotonin reuptake inhibitors such as Zoloft, Lexipro, Celexa, and Prozac to treat people with anxiety and depression. Addressing the serotonin levels of these patients can be incredibly helpful, but it doesn’t always do the job. Additionally, serotonin medications have debilitating side effects that are much less common in MDD patients who take bupropion. As an extra-strength version of a drug that doctors are already comfortable with, AXS-05 could quickly become one of the most prescribed treatments of its kind.

We will know more about the future of AXS-05 as a treatment for MDD after the FDA makes an approval decision. This should happen in August. Further, AXS-05 could also be approved as a treatment for agitation caused by Alzheimer’s disease. In the Advance-1 clinical trial, Alzheimer’s patients taking AXS-05 showed significantly less agitation than those given placebo or bupropion. Patients treated with AXS-05 even reported fewer side effects than those randomized to either control group.

There are currently more than 6 million people in the United States with Alzheimer’s disease, and more than two-thirds of these also suffer from agitation. With the AXS-05’s clean safety profile, it won’t take much to convince healthcare providers to try it, if it is approved.

Axsome Therapeutics will likely wait for an approval decision for AXS-05 as an MDD treatment before submitting an additional application to expand its addressable patient population to include Alzheimer’s agitation.

In the meantime, the company plans to submit a new drug application for the second candidate in its pipeline that has produced convincing evidence of efficacy, AXS-07. In May, the company told investors that a new drug application for AXS-07 as a migraine treatment would likely reach the FDA before the end of the second quarter.

Know the risks

Axsome Therapeutics has a market capitalization of $ 2.3 billion, but does not yet have reliable sources of revenue. If unforeseen obstacles get in the way of the AXS-05, its stock could drop sharply.

With two FDA-approved drugs already in its arsenal, BridgeBio is in a more solid position financially. The $ 8.7 billion market capitalization of this holding company, however, indicates that investors have taken into account the prospect of great success over the next several years. Any problem with acoramidis or Truseltiq could cause the stock price to drop sharply.

These look like risks worth taking. Remember to keep these stocks in a well-diversified portfolio.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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