Prediction: These 2 Biotech Stocks Could Double in the Next 5 Years

Key Points

• Viking Therapeutics' recent decline presents an excellent entry point for investors.

• Axsome's financial results are strong, and the stock has several catalysts on the way.

• 10 stocks we like better than Viking Therapeutics ›

The biotech industry can be highly volatile. Companies in the sector can sometimes see their shares double in a short period due to hitting important clinical milestones. Over a more extended period, such as five years, it becomes even more common to observe this performance.

Two biotechs that have numerous catalysts in place to perform well over the next five years are Viking Therapeutics (NASDAQ: VKTX) and Axsome Therapeutics (NASDAQ: AXSM). To double investors' capital by the end of 2030, these two relatively small drugmakers would each need to record a compound annual growth rate of 14.9% through the next five years. Here's why they could.

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1. Viking Therapeutics

Viking Therapeutics' shares recently fell due to weak phase 2 results for its investigational oral GLP-1 weight management medicine, VK2735. Or at least, that was the market sentiment. Looking closer at the data reveals a somewhat different picture: At the highest dose, oral VK2735 resulted in an average weight loss of 12.2% in just 13 weeks. By comparison, Eli Lilly's orforglipron posted a 12.4% weight loss after 72 weeks.

Although it's always challenging to compare efficacy across studies, Viking's product appears more potent. The market focused on the high percentage of patients in the biotech's trial who dropped out due to gastrointestinal side effects, but there are solutions for that problem. Lower doses of the medicine had fewer such adverse reactions, while still posting strong efficacy in this 13-week study. Viking could choose to pursue those options, or opt to slowly and gradually increase the medicine's dosage to get patients up to the highest level.

Oral VK2735 is still very much in play. The medicine could make waves in the exciting oral GLP-1 market. Most current options are administered subcutaneously, and the easier-to-manufacture oral pills will come with several advantages. Among other benefits, they'll be easier to transport and more cost-effective for patients.

Elsewhere, Viking's phase 3 study for the subcutaneous version of VK2735 is ongoing. It hit it out of the park in phase 2 studies; strong phase 3 data should send the stock price soaring. Furthermore, the company's pipeline also features its promising therapy for metabolic dysfunction-associated steatohepatitis (MASH), VK2809, which is expected to move to late-stage studies soon.

Like all clinical-stage biotech companies, Viking Therapeutics is somewhat risky. However, strong phase 2 data, which the company has produced at least twice, makes it less risky than most similarly sized peers. And provided it can record solid clinical and regulatory progress over the next five years, these catalysts will jolt the stock and lead to superior returns, especially as the market is still underestimating Viking's oral VK2375.

2. Axsome Therapeutics

Axsome Therapeutics has made significant regulatory progress over the past few years. It earned approval for Auvelity in major depressive disorder (MDD), and for Symbravo in treating migraines. That's despite several setbacks it experienced with the U.S. Food and Drug Administration (FDA), including a complete response letter for Symbravo before it eventually earned approval.

Axsome's top line is growing steadily. Revenue for the second quarter totaled $150 million, a 72% increase over the comparable period of the previous fiscal year.

Its currently approved medicines still have years of exclusivity left in the tank before they run into patent cliffs, considering that they haven't been on the market very long. And just as important, Axsome Therapeutics should secure the necessary approvals and label expansions over the next half-decade.

For instance, the company is seeking approval for AXS-05, the generic name for Auvelity, in the treatment of agitation associated with Alzheimer's disease (AD). As the company notes, there are approximately 7 million people in the U.S. with AD, a number projected to increase significantly. Yet there is only one medicine approved by the FDA for agitation, even though 70% of AD patients experience it. This could be a significant opportunity for Axsome, which plans to submit regulatory applications for AXS-05 in AD agitation during the third quarter.

The company could have several other catalysts. It's developing products like AXS-12 in cataplexy and AXS-14 in fibromyalgia, and is on track to send an application for approval for AXS-12 by year-end. It has several other pipeline programs as well.

Over the next five years, Axsome Therapeutics' revenue should continue growing at a steady pace, as the company earns label expansions and new approvals. The stock is well positioned, given the momentum it's maintained over the past few years. It could double investors' money by 2030.

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Prosper Junior Bakiny has positions in Eli Lilly and Viking Therapeutics. The Motley Fool has positions in and recommends Axsome Therapeutics. The Motley Fool recommends Viking Therapeutics. The Motley Fool has a disclosure policy.