Companies in the biotechnology sector are among the investment options with the best long-term potential.
One of the great advantages of this area is that its stability does not depend entirely on financial crises.
Many investors have a predilection for stocks in the healthcare sector because of the guaranteed permanence of their business.
Companies in the biotechnology sector stand out from the rest thanks to the guarantee of permanence of this business. Despite financial crises, people will always suffer from illnesses that need medical attention and medicines to be treated. This first edition of Agenda Biotech presents two investments that could yield juicy results in the future.
The aim of this column is to collect and analyze stocks unique to the health sector in order to present them as investment options. In this sense, we evaluate their business schemes, treatments in development, capacity and various elements that guarantee their viability for investment capital. The content is contrasted with works from other specialized media.
In this opportunity, two promising companies in the pharmaceutical sector are analyzed: Axsome Therapeutics (AXSM) and Exelixis (EXEL). The data of these companies are public and available to anyone who wishes to investigate them on their own. Interpretation is the responsibility of the author of this column and is strictly for informational purposes only. Under no circumstances should any investment decision be made with this work as a guide or influence.
What makes these two investments important?
These two biotech investments are not randomly picked, but both companies have remarkable merits. Although AXSM and EXEL are not among the best known or the largest capitalization companies, the work they have been doing is outstanding. In other words, they are not powerful companies yet, but in a decade the situation could be different, so investing now could be a very smart decision.
During 2022, macroeconomic conditions were marked by high inflation and constant rate hikes. Despite this, companies in the healthcare sector did not stop their development and research work for a moment. It should not be lost sight of the fact that the projects of these companies are generally focused on the long term.
The tests and phases that a drug goes through usually take time and the capital that is invested in them is always thought of over long periods of time. Consequently, a crisis such as the current one, or even a longer one, occurs in the midst of long processes and does not usually interrupt the phase through which the development of a potential drug is passing.
Thus, these two investments enter precisely in this context of a long time to yield results. An unusual case happened with the covid-19 vaccines, which were developed in an unusually short time. It is unlikely that other medicines will be released and brought to the public in such a short time in the future.
Thus, investors in these two companies did not place their capital with early returns in mind. The same treatment should be given to all investors who decide to put capital into them. The characteristics of these two companies are shown below.
In August last year, the U.S. Food and Drug Administration (FDA) gave this company some big news. It was the approval of Auvelity, a drug designed to combat depression, one of the main ills of today’s society.
This marked a turning point for the company’s projection, since the approval came at a time of great pressure. The pandemic conditions led millions of people to extreme nervous situations and the treatment became an option with quick results. The deaths and the social and work pressures and the whole negative environment of the pandemic triggered cases of depression. Hence, this treatment is promising for the company’s finances and its investors.
But this is not the end of the success story for Axsome. After the approval of its depression medicine, another good news is expected in the coming years. The company could receive new approvals and label expansions. The result of this would be unequivocal: increased revenues for the company over the next decade.
On the other hand, it highlights the fact that Auvelity is being tested as a potential treatment for agitation. The latter is about aggressive and restless behavior linked to Alzheimer’s disease. In November, the company announced positive results for the third clinical phase of this treatment direction. A second late-stage study is currently underway, with data results due in 2025.
It should be noted that 70% of Alzheimer’s patients suffer from agitation. This indicates that the treatment could be a masterstroke for the company. While this story may be more than enough to highlight the advantages of placing capital in the first of these two investments, there are more plus points.
Over the course of 2023, Axsome expects to resubmit AXS-07 to the FDA. This migraine drug was not approved last year for reasons linked to manufacturing. However, the agency did not question the efficacy and safety of the treatment, which is a more than positive aspect that suggests simple corrections to obtain a new positive result.
Another treatment the company is working on is AXS-12, which is aimed at curing narcolepsy. This is a disease that causes sleep disorder. It is currently in the third phase of clinical trials. Similarly, Axsome is working on AXS-14, an investigational therapy for fibromyalgia (causing muscle pain and sleeping problems). This drug will be reviewed later this year by the FDA.
The market capitalization of this pharmaceutical company is $2.7 billion dollars. This year, the company could achieve amazing results if the various catalysts described above are combined. Establishing a promising portfolio in healthcare could not do without shares of this company, whose results could be juicy in 2033. Shares are trading at $62.79 apiece, according to Yahoo Finance data.
The first of these two sector investments is in good esteem among experts. For analysts at SimplyWall.st, the shares are 86.4% below estimates. Likewise, revenues are expected to increase by more than 65.40%.
The second of these biotech sector investment options is Exelixis. This company is not far behind if compared in projection to the previous one and could even rub shoulders with other major companies in a few years. It is noteworthy that, unlike other companies, this one does not focus on the creation of medicines for multiple conditions.
Instead, the firm focuses entirely on oncology. However, this is no small thing. We are talking about one of the largest and fastest growing markets in the entire healthcare field. Among the company’s flagship treatments is the well-known Cabometyx. It attacks liver, kidney and thyroid cancer.
According to the CDC, some 36,000 cases of liver cancer are detected each year in the United States. Some 28,000 people die of this disease every year. Although the number has been declining in recent years, it is a slight drop compared to the growth of the last decades.
To get an idea of the importance of this treatment, it should be said that it is the main driver of the firm’s revenues. Likewise, it is the best-selling medicine in the entire Exelixis repertoire. In 2022, the drugmaker’s gross revenues reached $1.6 billion. This is a 12.3% year-over-year growth.
Along the same lines as the previous company, the second of these two potential investments has potential that stretches out of sight. In a decade’s time, the results for investors could be impressive, given the company’s ongoing development. It should not be lost from the radar that there are other treatments on which the pharmaceutical company is actively working.
Other Exelixis treatments
As you might expect, this company didn’t sleep on a single treatment development no matter how successful it is. During 2022, the firm was actively in the research arena and one of its most promising developments is Zanzalintinib. It is a drug that is in phase three clinical trials.
This potential treatment is being investigated in these trials for its ability to treat metastatic colorectal cancer and advanced kidney cancer. The importance of this development carried out by the company is that, for example, colorectal cancer, when it metastasizes, has a five-year survival rate of only 15%. Furthermore, when this type of cancer metastasizes, 25% of existing cases are diagnosed.
According to the American Cancer Society, excluding skin cancer, colorectal cancer is the third most common form of this disease in the United States. More than 152,000 new cases are expected by 2023 even though the number of new cases has been falling on average since the 1980s.
With that data in mind, the company plans to conduct further late-stage studies by 2023. On the other hand, the firm expects to publish more clinical phase three results for Cabometyx. This cancer treatment is in the midst of testing in several fields, so label expansions are expected in the future.
At the same time, the company is working in alliance with other pharmaceutical companies for respective developments. It should be noted that all this joint work is linked to cancer treatments. The company is well positioned to launch a new product in the next five years, so its projection and potential are of great magnitude.
At the time of writing, Exelixis shares are $17.55 each. Simplywall.st experts say their holdings are 60.01% below potential. They also claim that the company’s earnings are poised to soar by 24.28%. Either way, these two investments present themselves as a great opportunity for the most patient investors.
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