Regardless of how stocks are performing right now, history tells us that the market tends to generate solid returns over long periods. Investors can do even better than the average market performance by buying shares of companies likely to beat broader equities.
Two excellent candidates are Vertex Pharmaceuticals (VRTX 1.91%) and Axsome Therapeutics (AXSM 1.91%). Here's what makes these stocks solid candidates to outperform the market in the next half-decade.
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1. Vertex Pharmaceuticals
Vertex Pharmaceuticals has made significant clinical progress recently. Over the past six months, it has earned approval for two new medicines. The first is Alyftrek, a next-gen medicine for cystic fibrosis (CF), the area Vertex has dominated for over a decade. The second is Journavx, an oral, non-opioid pain inhibitor -- the first of its kind. These new approvals help strengthen and diversify Vertex's product lineup.
The company still has room to grow in its core CF area; only about 75% of CF patients in its core geographies and 33% in other regions are currently benefiting from its medicines. Meanwhile, Journavx fills an unmet need: Opioid-based pain therapies can have significant adverse side effects. Vertex estimates a market of 80 million patients in acute pain. According to some projections, the medicine could generate $2.9 billion in revenue by 2030.
NASDAQ: VRTX
Key Data Points
Revenue and earnings should continue growing at a good clip in the next five years, even before we account for Casgevy, a gene-editing medicine that earned approval in late 2023 and early 2024 for a pair of rare blood diseases. Administering gene-editing therapies is a complex and lengthy process, so Casgevy isn't yet contributing much to the top line. However, it boasts blockbuster potential and will eventually be a meaningful growth driver for the company.
Lastly, Vertex has an attractive pipeline. It's running clinical trials for brand-new products that could be breakthroughs. One is inaxaplin, a potential medicine for APOL1-mediated kidney disease. There are no drugs that address the underlying causes of this disease; Vertex aims to launch the first. And that's just the tip of the innovation iceberg with this biotech.
Its shares recently fell post-earnings due to several issues that hardly change its long-term prospects. Vertex Pharmaceuticals' solid business and more diversified lineup will allow it to bounce back, and still provide superior returns through 2030 and beyond.
2. Axsome Therapeutics
Axsome Therapeutics' top line is growing fast. Revenue in the first quarter was $121.5 million, 62% higher than the year-ago period. The company owes much of this performance to Auvelity, a medication for major depressive disorder (MDD) approved in 2022. The drug's sales should continue increasing at a good clip, but there's more for investors to look forward to. Auvelity, also known as AXS-05, recently completed a clinical trial in treating agitation associated with Alzheimer's disease (AD).
Axsome plans a regulatory submission in the third quarter. There are more than 4 million patients in the U.S. who suffer from AD agitation, but there's only one approved therapy. An approval here would significantly expand Auvelity's addressable market, and jolt its already impressive sales growth.
NASDAQ: AXSM
Key Data Points
In January, Axsome earned approval for Symbravo, a migraine therapy that will be another growth driver for the company. And the biotech has several more brand-new approvals or label expansions on the way. Solriamfetol, a medicine it markets as Sunosi in treating narcolepsy, recently produced positive results in phase 3 studies for MDD and ADHD (attention-deficit/hyperactivity disorder). Another candidate, AXS-14, completed phase 3 studies last year and could soon reach the desk of regulators for approval in treating fibromyalgia.
Axsome Therapeutics' lineup will look much stronger within a few years. In the meantime, the biotech will continue to grow its revenue at a good clip. The stock has crushed the market so far this year. It may or may not maintain its momentum in the next few weeks, but it looks likely to perform well through the end of the decade.
