If you go to California’s Redwood National Park, you can see the world’s tallest tree — a redwood called Hyperion that’s over 380 feet tall. Like every other tree, though, Hyperion started as a small seed.
Stocks can be like this, beginning small but growing to a giant size over time. Three Motley Fool contributors think they’ve found some monster stocks in the making you can buy right now. Here’s why they picked Altimmune (NASDAQ: ALT), Axsome Therapeutics (NASDAQ: AXSM), and Viking Therapeutics (NASDAQ: VKTX).
A small-cap stock with big potential
David Jagielski (Altimmune): Altimmune is a clinical-stage biopharmaceutical company with a modest market cap, but it has an exciting drug in its portfolio that could soon make it a hot buy with investors. The company has a glucagon-like peptide 1 (GLP-1) treatment, pemvidutide, which has been generating some encouraging results in clinical trials.
In a phase 2 trial which lasted 48 weeks, patients taking pemvidutide achieved a mean weight loss of 15.6%. And 30% of patients lost at least 20% of their body weight. Those are comparable numbers to Wegovy, which is Novo Nordisk‘s GLP-1 drug. In addition to being effective for weight loss, Altimmune is optimistic that pemvidutide can help with other comorbidities, including metabolic dysfunction-associated steatotic liver disease (MASLD) and hypertension.
The market for anti-obesity drugs could top $100 billion, according to estimates from Goldman Sachs. While Novo Nordisk and Eli Lilly are likely to dominate the market, there could be room for pemvidutide to penetrate the market and be a potential blockbuster drug as well. What it may come down to are the side effects of these drugs as patients may tolerate certain treatments better than others. While Eli Lilly and Novo Nordisk are the early winners in the GLP-1 drug market, investors shouldn’t rule out Altimmune in the long run.
At a market cap of just over $500 million, this stock could grow significantly higher if pemvidutide obtains approval. While the business is unprofitable and Altimmune comes with a fair bit of risk, it has the potential to be a monster growth stock in the future.
A promising biotech on the ascent
Prosper Junior Bakiny (Axsome Therapeutics): If it were easy to pick a long-term winner among smaller biotechs, everyone would do it. Too many factors can make — or break — a company looking to rise in prominence. That said, there are important clues to pick out when doing this exercise. Several of them lend credence to Axsome Therapeutics’ claims of becoming a much more important player in the industry somewhere down the road.
First, the company already has two products on the market (clinical-stage companies are far riskier). One is Auvelity, a treatment for depression, and the other is Sunosi, which treats daytime sleepiness due to narcolepsy. Second, and perhaps more importantly, Axsome Therapeutics’ late-stage pipeline is incredibly exciting. Note that these products are already in phase 3 studies; some have even aced at least one such clinical trial already.
At this stage of development, the probability of a successful launch is much higher than in phase 2 or phase 1 studies. Axsome Therapeutics is running late-stage studies for several therapies, including Auvelity in Alzheimer’s disease agitation and Sunosi in ADHD, while AXS-07 and AXS-14 are ready for regulatory submissions in treating migraine and fibromyalgia, respectively.
Axsome Therapeutics expects six phase 3 data readouts starting in the second half of the year and into 2025, and several more late-stage clinical-trial initiations. Even a modest success rate of 50% would mean that Axsome Therapeutics’ lineup will be transformed in the next three years. And there will likely be more clinical and regulatory progress later on, given the company’s track record.
So, Axsome Therapeutics looks like a highly promising biotech that is well on its way to the top. Investing in the stock now looks like a great move.
An especially promising pipeline
Keith Speights (Viking Therapeutics): Viking Therapeutics is the largest of these three monsters in the making with a market cap of nearly $8 billion. The company doesn’t have an approved product yet, but investors are justifiably excited about its pipeline.
Viking has four programs in clinical development. Its lead candidate, VK2809, is currently in a phase 2b clinical study targeting nonalcoholic steatohepatitis (NASH), also known as metabolic-associated steatohepatitis (MASH). The company expects 52-week histology results from this study in the second quarter of 2024.
In February, Viking announced positive results from a phase 2 study evaluating an injectable version of VK2735 in treating obesity. The experimental drug delivered greater weight loss than Lilly’s Mounjaro/Zepbound and Novo Nordisk’s Ozempic/Wegovy.
Viking had more good news in March with results from a phase 1 study of an oral tablet version of VK2735. Importantly, the side effects of the tablet weren’t problematic. The company plans to advance the oral drug into a phase 2 study in the second half of this year.
In addition to these three programs, Viking is evaluating VK0214 in a phase 1b clinical trial targeting X-linked adrenoleukodystrophy (X-ALD), a rare genetic disease that affects the nervous system and the adrenal glands. The company expects to report results from this study by mid-2024.
As David mentioned earlier, obesity could become a $100 billion-plus annual market. Some analysts think the NASH/MASH market could also top $100 billion. X-ALD doesn’t present as big of an opportunity, but there are currently no approved therapies for the disease. Viking could grow into a much larger drugmaker if its pipeline candidates sail through clinical testing and win regulatory approvals.
Should you invest $1,000 in Viking Therapeutics right now?
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David Jagielski has no position in any of the stocks mentioned. Keith Speights has no position in any of the stocks mentioned. Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Axsome Therapeutics and Goldman Sachs Group. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
3 Monster Stocks in the Making You Can Buy Right Now was originally published by The Motley Fool
