The U.S. stock market is in a weird place. While the major indexes have been soaring to new heights this year, corporate profits have started to cool off after a banner year in 2018 and the ongoing trade war between the U.S. and China threatens to push the global economy into a recession.
Now, the Federal Reserve did decide to take a more friendly approach to interest rate hikes last February, but even this positive catalyst can’t fully explain the market’s double-digit surge in 2019. In plain English, this overheated market is due for a pullback — meaning that investors should probably start to eschew growth stocks in favor of defensive plays in the months ahead.
Having said all that, there are a handful of promising growth stocks still worth buying, even in this conflicted market. For example…
Axsome Therapeutics (NASDAQ:AXSM) and PhaseBio Pharmaceuticals (NASDAQ:PHAS) are two small-cap biotech stocks that should continue to post stellar returns on capital for the foreseeable future. Here’s what you need to know right now.
Axsome: A compelling growth story
Axsome’s shares have gained a jaw-dropping 468% since the start of 2019. Even so, this small-cap biotech appears poised for even more stately gains.
What’s the lowdown? Axsome’s AXS-05 is being developed for a host of high-value indications, such as treatment-resistant depression, major depressive disorder (MDD), agitation associated with Alzheimer’s disease, and smoking cessation.
Where do things stand now? The drug is currently in late-stage trials for treatment-resistant depression and Alzheimer’s disease-related agitation. The drug also received the highly coveted Breakthrough Therapy Designation (BTD) from the Food and Drug Administration for its MDD indication earlier this year. As BTD can lead to an accelerated regulatory pathway, Axsome’s lead product candidate has a shot at grabbing three major approvals in the not-so-distant future.
Are there any red flags? The main knock against this company is that AXS-05 consists of bupropion (an older antidepressant available in generic form) and dextromethorphan (a cough syrup that can be purchased over the counter). Therefore, Axsome might have a hard time convincing payers to dole out a premium for a cocktail drug that can — in theory at least — be purchased separately as cheap generics.
Fortunately, the company shouldn’t need to implement sky-high prices to make AXS-05 a smashing success. Most of the drug’s intended indications, after all, have sizable target markets capable of producing heavy sales volumes.
What’s the bottom line? Axsome isn’t a stock for…
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