There is no denying that this year has been a difficult year for the biotech market. The shares of quite a few small and big biotech businesses alike are set to start the year in negative territory. However, those disappointing performances will not necessarily be extended into the future.
Here are two stocks that had a bad year in 2021 but might soar in 2022.
Long-term catalysts ahead for this biotech
Shares of Axsome Therapeutics have fallen by over 50% in 2021. The company has had several setbacks. With the largest setback being the review of Axsome Therapeutics’ top pipeline candidate, AXS-05, which was postponed. The FDA was scheduled to finish its review of the possible therapy for a depressive disorder in late Aug.
But the agency found issues in Axsome Therapeutics’ application. Because of this, the FDA has yet to have the drug approved. While this problem hurt its stock performance, the future does look bright for the company. AXS-05 has proved effective at reducing some symptoms of depression during a late-stage study.
The demand for a medicine like AXS-05 has risen as a result of the Covid-19 pandemic, with the number of individuals suffering from depression increasing to 80 million since the beginning of the outbreak. AXS-05’s delayed review is not ideal. But given the great results it has delivered in clinical trials and the high demand for more depression therapies, it will eventually hit the market.
But Axsome Therapeutics is also creating several other drugs. These include AXS-07, a possible treatment for migraines, and AXS-14 and AXS-12, aimed at treating fibromyalgia and narcolepsy, respectively. The company predicts the potential yearly sales of these therapies to be between $4 billion to $9 billion.
Axsome Therapeutics has a market cap of about $1.4 billion and is less than 50% of the lower end of these predictions. That gives the company a massive upside potential. Naturally, some risks are involved; the company might run into more regulatory setbacks for AXS-05 or some other pipeline candidate.
But on the bright side, if the company begins racking up on regulatory approvals for all of its therapies, its share price will skyrocket in 2022 and the years to come. While I would not suggest going all-in on Axsome Therapeutics — it would be best to begin with a small position, for now it seems 2022 will be a much better year for the company.
Ready for take off
Recently trades have been moving away from higher-priced growth stocks and into a more value-oriented investments. Novartis is One stock that has benefited from that, which has gone up over 5% in the last month while the S&P 500 has dropped 2%. The drug maker’s shares are still down 9% so far this year. However. if the shift to value shares continues, Novartis might continue climbing in 2022.
The company itself is in great shape. Novartis announced a profit of $9.8 billion on sales of $52.4 billion over the last year, good for a profit margin of just below 19%. It has also produced a lot of money, with free cash flow in that time coming in at $12.2 billion. And the business is getting even more money into its financials after it sold its stake in drug maker Roche for $20.7 billion. Because of this large amount of cash, the business is planning to purchase back up to $15 billion worth of its stock by the end of 2023.
Cash is king, and Novartis is collecting plenty of it recently. That will give the business a lot of flexibility moving into the future if it wanted to pursue an acquisition or invest in growing its company in other ways. The expectation is that through new approvals and products its company can keep growing sales by at minimum 4% each year until 2026.
Currently, the stock is trading at about 20 times earnings. That is ideal given that the avg. healthcare stock is trading at a multiple of over 25. And Novartis’ dividend yield of 3.8% helps make the stock seem even more lucrative to long-term investors. The avg stock on the S&P 500 is paying a dividend that yields just 1.3%. I am confident that as traders begin to focus more on value in 2022, Novartis might become one of the more popular stocks to own.
Author: Blake Ambrose