Biotech's 3 Best Growth Stocks

A biotech growth stock can be a good investment for investors whose portfolios are typically risky. For example, the sector rose in January but later sold off hard as investors sought safe harbors as the broader market turned. However, since bank sector fears have eased, the SPDR S&P Biotech ETF (NYSEARCA: XBI) has risen 4.4% in the past week as optimism returns to the market.

‍

Biotech growth stocks are also recession-proof trades, according to the flip side of the coin.  In order to live longer, healthier lives, an aging population needs medications and treatments. A number of technologies have been developed to address this need, including gene therapies, immuno-oncology, precision medicine, and machine-learning drug discovery.

‍

The time is right for biotech investors to be excited about the future of the industry. It is just as easy as asking Andy Acker, one of the managers of the Janus Henderson Global Life Sciences Fund (NASDAQ: JAGLX) for his opinion.

‍

The [Food and Drug Administration (FDA)] has 75 new medicines pending approval decisions, which could make this the year of new product launches. Last year was the year when [drug clinical trial] data was positive, and this year could be the year when new products are launched. The current number of new product approvals could be the highest of all time, as the previous record was 59 in 2018.

‍

The following are our three favorite biotech growth stocks.

‍

Axsome Therapeutics (AXSM)

‍

My first recommendation for biotech growth stocks is Axsome Therapeutics (NASDAQ: AXSM). As of this year, it plans to submit two more drugs for FDA approval this year along with two other products that it currently has approved on the market. The company is currently worth $2.7 billion.

‍

In the first, Jazz Pharmaceuticals (NASDAQ: JAZZ) purchased Sunosi for $53 million, a drug for sleep disorders. Nearly $58 million will be generated in 2021 by the drug, a dopamine-norepinephrine reuptake inhibitor that treats narcolepsy. It was introduced to the United States in May and internationally in November. Sales of Sunosi in 2022 reached $44.8 million.

‍

The other approved drug at Axsome is Auvelity, a fast-acting oral depression treatment that launched in October. It's the first of its kind. In addition to treating agitation in Alzheimer's patients, Auvelity has been tested for helping people quit smoking and for treating agitation in people with other mental disorders. It takes effect within a week, in contrast to other antidepressants that take weeks or months.

‍

Axsome plans to submit a total of three products for FDA approval this year, including AXS-07 to treat migraines and AXS-14 to treat fibromyalgia.

‍

With a $2.7 billion market cap, the company's long-term prospects are not adequately reflected by the market cap. Although the stock is down 19% year-to-date, it has increased 78% in the past 12 months.

‍

Reata Pharmaceuticals (RETA)

‍

Reata Pharmaceuticals (NASDAQ: RETA) is another promising biotech growth stock to consider. The stock has gained 137% this year and nearly 200% in the past week.

‍

Skyclarys, the company's treatment for Friedreich's ataxia, was approved by the FDA following the explosive rally. Reata notes that the neurodegenerative disease is rare, with only 5,000 cases diagnosed in the U.S. so far. It has severe consequences, however, and is a progressive disease.

‍

A press release issued by the company describes Friedreich's ataxia as a progressive loss of coordination, muscle weakness, fatigue, and motor incapacitation by the time the patient is in their teens or early twenties, and eventually death.

‍

It's great news for RETA investors that Skyclarys has been approved for Friedreich's ataxia, as it's the only treatment available in the U.S. For Friedreich's ataxia, Skyclarys is the only treatment available. According to Seeking Alpha contributor Stephen Ayers, Skyclarys' peak revenue in the U.S. could be between $800 million and $1 billion.

‍

Recently, Cantor Fitzgerald increased its price target for RETA stock from $121, implying more than a 50% upside, to $138 from $121.

‍

CRISPR Therapeutics (CRSP)

‍

As a final option, we have CRISPR Therapeutics (NASDAQ: CRSP), which is focusing on gene-based medicines for serious diseases. CRISPR Therapeutics has the advantage of being one of the best companies utilizing this technology.

‍

Earlier this week, the company announced a licensing agreement with Vertex Pharmaceuticals (NASDAQ: VRTX) to develop a hypoimmune cell therapy treatment for type I diabetes.

‍

Neither company has collaborated before.  Currently, exa-cel is being investigated for the treatment of transfusion-dependent beta-thalassemia and sickle cell disease. Currently, the exa-cel is being reviewed by the European Medicines Agency (EMA), and the FDA has granted it a rolling review.

‍

In light of the current lack of treatment options, this one-time treatment could provide a big catalyst for the company's shares if it is successful.

‍