You’ve probably heard all the old expressions about acting too quickly. “Haste makes waste” and “Look before you leap” are two that readily come to mind. However, there’s also danger in waiting too long to make a decision — especially when it comes to investing.
Three Motley Fool contributors have identified growth stocks they think can be bought right now without any hesitation. Here’s why they picked AbbVie (ABBV 0.40%), Axsome Therapeutics (AXSM -4.40%), and Vertex Pharmaceuticals (VRTX 1.38%).
AbbVie could be a steal of a deal
David Jagielski (AbbVie): One underrated stock that investors appear to be discounting too heavily right now is AbbVie. The drugmaker has a strong pipeline, a diverse mix of products, and excellent free cash flow, and yet it trades at less than 13 times its estimated future earnings. That’s a bargain when you consider that investors pay a multiple of more than 19 for the average stock in the S&P 500.
Investors are discounting the stock due to Humira and the growing competition the autoimmune disorder drug is facing right now. AbbVie expects a 37% decline in Humira’s sales this year. But there are many promising drugs in the company’s portfolio that should help alleviate concerns for investors. By 2027, for instance, immunology drugs Skyrizi and Rinvoq could bring in more than $21 billion in revenue, effectively replacing Humira’s lost sales.
Vraylar, a treatment for schizophrenia and bipolar disorder, could bring in up to $4 billion in annual revenue at its peak. Ubrelvy, a migraine medication, is another potential blockbuster that can generate at least $1 billion in sales. There’s also Qulipta, a drug for migraine prevention, which could add yet another $1 billion in revenue at its peak. And with a pipeline featuring over 90 different compounds, devices, or indications that AbbVie is developing, there could still be more growth catalysts to come for the business.
In the past four years, AbbVie has generated $75.8 billion in free cash flow. With strong financials like that, it’s hard not to like the company’s growth prospects, as it can easily reinvest its profits back into more promising opportunities down the road. At such a low valuation, this is a growth stock that investors shouldn’t hesitate to buy, in my opinion.
The early innings of an exciting growth story
Prosper Junior Bakiny (Axsome Therapeutics): Axsome Therapeutics only became a commercial-stage biotech last year. It isn’t surprising that the company is rapidly growing its sales. In the third quarter, the drugmaker’s revenue of $57.8 million soared by 244% year over year, thanks to its two approved medicines — depression treatment Auvelity, and Sunosi, which targets excessive daytime sleepiness in narcolepsy patients.
Both products should continue driving solid top-line growth for a while, but that’s not the most exciting part of Axsome Therapeutics’ business. The company’s late-stage pipeline is rich and could lead to several additional approvals in the next three years.
Axsome expects to resubmit for U.S. Food and Drug Administration (FDA) approval for AXS-07 in treating migraine in the first half of 2024. The company plans to file for FDA approval of AXS-14 in fibromyalgia in the first part of next year as well. It’s evaluating AXS-05 in a phase 3 clinical study for treating Alzheimer’s disease agitation. The drug is also in a phase 2 trial for smoking cessation. AXS-12 is in late-stage testing as a potential treatment for cataplexy in narcolepsy. Axsome is on track to soon advance solriamfetol into phase 3 studies for binge eating disorder and shift work disorder.
The biotech estimates that this pipeline, along with its approved products, targets more than 162 million patients in the U.S. So, investors should brace themselves for solid regulatory progress. However, Axsome Therapeutics stock hasn’t performed well this year. The company’s shares are down by more than 20% year to date, and its market cap is below $3 billion. In my view, that severely understates Axsome Therapeutics’ potential, which means now is as good a time as any to smash that buy button.
A crystal-clear growth runway
Keith Speights (Vertex Pharmaceuticals): There are plenty of stocks with solid growth prospects. I can’t think of many, though, that offer such a crystal-clear growth runway as Vertex Pharmaceuticals.
The obvious way that Vertex should be able to grow is with its cystic fibrosis (CF) therapies. No other company is even close to commercializing a drug that can treat the underlying cause of CF. Vertex has already captured around 70% of the CF market. The big biotech should be able to expand market share by treating younger patients and obtaining additional reimbursements. New products on the way should also enable Vertex to go after patients who have discontinued treatment with its existing therapies and patients who can’t benefit from existing therapies.
Vertex and its partner, CRISPR Therapeutics, await FDA approvals for exa-cel in treating two rare blood diseases. The agency set a PDUFA date of Dec. 8, 2023, for the therapy in treating sickle cell disease and a PDUFA date of March 30, 2024, for the transfusion-dependent beta-thalassemia indication. If approved, the drug will become the first CRISPR gene-editing therapy on the market.
The company isn’t just targeting rare diseases. It expects to announce results in early 2024 from late-stage studies of VX-548 in treating acute pain. VX-548 isn’t an opioid and therefore doesn’t have the addictive qualities or side effects associated with opioids. Vertex is also advancing three programs in earlier-stage testing that hold the potential to cure type 1 diabetes.
However, there’s another rare-disease candidate in Vertex’s pipeline that investors should watch. The biotech has a pivotal trial underway for inaxaplin in treating APOL1-mediated kidney disease (AMKD). This indication affects more patients than CF does. There are currently no approved therapies that target the underlying cause of AMKD.
This content was originally published here.
