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Alzheimer's Disease: 5 Stocks on Biotech Radars

Thursday concludes the American Academy of Neurology (AAN) 2021 virtual conference where hundreds of researchers from companies, universities and other labs presented over 2,000 scientific abstracts in multiple formats.

The annual meeting provides the space for thousands of neurology professionals -- neurologists and neuroscientists -- to learn about scientific breakthroughs and cutting-edge therapeutics in areas ranging from stroke and brain tumors to sleep disorders, depression and migraines.

One of the highlights for a public company, Jazz Pharmaceuticals JAZZ, was in their Phase 3 data for Xywav in the treatment of a sleep disorder called idiopathic hypersomnia (IH). Jazz has already built a very successful business on their narcolepsy drug Xyrem and recently made an agreement to acquire GW Pharmaceuticals, the only company with an FDA-approved medicine derived from cannabis, for approximately $7.5 billion.

In the video that accompanies this article, I go over the charts of several public companies involved in dedicated R&D to treat Alzheimer's Disease (AD), including Biogen BIIB. Alzheimer's is the holy grail right now in neurology and diseases of the central nervous system (CNS) because as a form of rapid, non-normal dementia, it is considered especially pernicious as it progresses so quickly in destroying memory.

And because the precise cause of the disease is still unknown, with much research concentrating on the protein amyloid plaques found in brain tissue, no lab or company has developed an efficacious treatment yet. In fact, even the giant Pfizer gave up the hunt a few years ago.

Aducanumab is Biogen's proposed treatment candidate for early AD that is intended to slow the progression of the disease. With research success often imminent and then fleeting, the stock has been whipping like a rollercoaster between $220 and $380 for nearly four years.

Small Players Gain a Big Following

What's been interesting for the past couple of years, and especially the last few months, is to watch the rise of emerging, small-cap Biotech companies trying to take on the big AD and other neurological and CNS diseases.

The first name that comes to mind is Axsome Therapeutics AXSM. I discovered this little gem in experimental CNS treatments in July of 2018 trading under $2.50. In January of 2019, it vaulted above $8 on positive data for its major depressive disorder (MDD) candidate AXS-05.

Unfortunately for me and my followers in the Zacks Healthcare Innovators portfolio, I sold too soon -- settling for low triple-digit gains when the stock went on to massive quadruple-digit gains above $25, then $50, then $100. As investors in moon-shots, we live to learn and sometimes regret the ones that got away.

After strong pivotal data in major depressive disorder for AXS-05, FDA approval this year seems likely according to several Biotech analysts. Data from a Phase 2 trial released in December showed AXS-05's substantial benefit in patients with depression who had failed to respond to two or more prior antidepressant treatments.

44% of patients experienced a rapid and substantial improvement in depressive symptoms, while 53% reported improved functioning by the second week. By the sixth week of treatment, 67% of patients saw improvement in depressive symptoms while 64% experienced improved functioning.

Data also showed that AXS-05 was well tolerated and that its safety profile was found to be consistent with what was previously reported in controlled trials in major depressive disorder.

Diverse and De-Risked Pipeline

In January, Jefferies analyst Chris Howerton initiated coverage of Axsome Therapeutics with a Buy rating and $129 price target -- when shares were trading above $80. According to Howerton and his team, the company's AXS-05 is "poised to be first new oral mechanism of action to treat depression in decades."

The analyst also argued that even just a 2% market share in third line therapy in this space is "a $1 billion opportunity." He also views the rest of Axsome's pipeline as "diverse and de-risked."

That would include starting Phase 3 trials for AXS-05 in Alzheimer's disease agitation, and an NDA (new drug application) for AXS-07 in the acute treatment of migraine.

Axsome is also expecting clinical trial readouts in the Phase 2 MERIT trial of AXS-05 in TRD (treatment resistant depression), with topline data expected in the second half of the year.

The company announced that they will also be initiating Phase 3 clinical trials of AXS-12 in the treatment of narcolepsy in Q2 of 2021, and they have scheduled meetings with the FDA for AXS-14 in fibromyalgia and for AXS-05 in smoking cessation.

Team Who Gave You AXSM, Gives You AVXL

Here's what I wrote to my Healthcare Innovators members in June of 2020...

Portfolio is buying Anavex Life Sciences (AVXL) between $4 and $4.60

Anavex Life Sciences AVXL is an emerging biopharmaceutical company engaged in the discovery and development of novel drug targets for the treatment of cancer and neurological diseases. The company's proprietary SIGMACEPTOR Discovery Platform involves the rational drug design of compounds that fulfill specific criteria based on unmet market needs and new scientific advances. Selected drug candidates demonstrate high, non-exclusive affinity for sigma receptors, which are involved in the modulation of multiple cellular biochemical signaling pathways.

The company is too small to have coverage from any major Wall Street research houses. But I am betting on the analyst at HC Wainwright who was the big bull on Axsome Therapeutics AXSM before its moonshot from $2.50 to $$100.

Raghuram Selvaraju, Ph.D, has a $12 price target on AVXL because he believes in the company's pipeline for a potential Alzheimer's treatment and one in Rett syndrome.

(end of excerpt from June 2020 buy alert)

In early February, along with lots of crazy Game-Stopping, bear-stomping action in the stock market, AVXL was the target of a short-squeeze that launched shares as high as $28. We took our profits above $20 because I knew the price move was not justified or sustainable without company-specific pipeline catalysts.

And now AVXL is settling in around $12. In the latest update from the Wainwright analyst, who now has a $17 PT on AVXL shares, he reiterated his views that there is good risk/reward in the stock after the company reported in late March that the Independent Data Safety Monitoring Board (DSMB) for the company's Phase 2b/3 study of the investigational compound ANAVEX2-73 (blarcamesine) in Alzheimer's disease (AD) had completed its review of the preliminary study data and found the company could proceed with the trials.

Be sure to watch the video and see the all the Biotech charts I think are interesting right now, including another emerging Alzheimer's player, Cassava Sciences SAVA, which rocketed from $20 to $100+ at the same "launch party" as AVXL in early Feb.

The Alzheimer's stocks are finding excitable fans (and short-sellers) for good reason: the first FDA-approved treatment could be a $3-6 billion blockbuster at peak sales. So stay tuned to AD-TV here in Cook's Kitchen!

Kevin Cook is a Senior Stock Strategist at Zacks Investment Research where he runs the Healthcare Innovators portfolio.

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Biogen Inc. (BIIB): Free Stock Analysis Report
 
Jazz Pharmaceuticals PLC (JAZZ): Free Stock Analysis Report
 
Axsome Therapeutics, Inc. (AXSM): Free Stock Analysis Report
 
Anavex Life Sciences Corp. (AVXL): Free Stock Analysis Report
 
Cassava Sciences, Inc. (SAVA): Free Stock Analysis Report
 
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