There’s nothing wrong with investing in well-known, market-leading corporations. Many still have excellent prospects and robust underlying businesses. However, it’s also worth considering smaller, little-known companies that could achieve significantly greater prominence in their industries. In fact, these stocks often have even more upside than better-established ones.
With that as a backdrop, let’s consider two companies in the biotech industry that could make steady progress in the next few years toward joining the ranks of market leaders: Viking Therapeutics(NASDAQ: VKTX) and Axsome Therapeutics(NASDAQ: AXSM).
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The weight loss market could reach $150 billion by 2035, according to some estimates. That’s up from $15 billion last year. Driving this rapid growth are new breakthroughs in the field and soaring demand for medicines in this area, considering the vast number of diseases associated with obesity. Viking Therapeutics, a mid-cap biotech company, could successfully carve a niche in the field.
The company’s leading candidate, VK2735, is undergoing a phase 3 study in a subcutaneous indication and recently completed mid-stage trials in an oral formulation. The medicine’s efficacy looks promising so far. As a dual GLP-1/GIP agonist, it belongs to the same class of drugs as Eli Lilly‘s famous tirzepatide (Zepbound). While Viking might not exactly challenge Lilly and the other established leader in this field, Novo Nordisk, it won’t need to. The biotech would gain significant prominence if its leading programs pan out and receive approval in the next few years.
It also bodes well that Viking Therapeutics developed both oral and subcutaneous formulations of VK2735. While injectable weight loss therapies have proved highly effective, they’re also more expensive to manufacture and store. Oral pills could help increase access to these kinds of drugs by offering patients more affordable options.
Viking is working on another weight-loss candidate in preclinical studies and plans to request approval to start human clinical trials next year. Furthermore, the company has another exciting candidate, VK2809, an investigational treatment for metabolic dysfunction-associated steatohepatitis (MASH) that has passed phase 2 studies. Viking’s shares could soar in the next five years if it makes solid progress across the pipeline.
As usual, there are risks to consider, especially potential clinical or regulatory setbacks. Viking Therapeutics probably isn’t the safest stock to buy, given its clinical-stage status. But for those with an above-average appetite for risk, the company looks attractive, as it could become a well-established biotech down the line.
Axsome Therapeutics has made tremendous clinical and regulatory progress in the past five years. That has paid off for the biotech, as it now generates strong, growing sales. Revenue in the third quarter was $171 million, a 63% year-over-year increase. Axsome owes that performance primarily to Auvelity, a depression medicine. Here’s why there is plenty of upside left for the biotech.
First, Auvelity has only been on the market since 2022. It has plenty more years of growing sales before it hits a patent cliff. Axsome Therapeutics expects it to achieve blockbuster status in treating depression alone.
Second, the medicine could earn some label expansions. Axsome is now awaiting approval for Auvelity in Alzheimer’s disease (AD) agitation. This indication could be another meaningful growth driver, given the significant need for new treatment options in AD. The company estimates that Auvelity could reach peak sales of $1.5 billion to $3 billion in AD agitation.
Third, Axsome has other approved products, plus some that could soon earn approval; these should help it improve its financial results. The company received the green light for Symbravo, a migraine treatment, earlier this year. It’s inching closer to submitting a regulatory application for AXS-12 in narcolepsy. And it’s running or recently completed late-stage clinical trials for other medicines, including AXS-14 in fibromyalgia, and solriamfetol (approved under the brand name Sunosi) in ADHD.
And there’s much more. Axsome Therapeutics’ lineup is driving solid sales, and its late-stage pipeline is deep, with several new approvals and label expansions expected in the next five years. The company could deliver strong returns along the way.
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Prosper Junior Bakiny has positions in Eli Lilly, Novo Nordisk, and Viking Therapeutics. The Motley Fool has positions in and recommends Axsome Therapeutics. The Motley Fool recommends Novo Nordisk and Viking Therapeutics. The Motley Fool has a disclosure policy.
2 Monster Stocks in the Making was originally published by The Motley Fool
