Clinical trials are a difficult and grueling process for companies. The FDA and other regulatory agencies require the highest possible standards in order to approve new drugs. To meet those standards, companies must spend exorbitant sums recruiting patients, testing drugs and cataloging the data. And with most clinical trials ending in failure, all that money may be wasted without generating revenue.
Because of this, it’s no wonder that most drug stocks will seek to use proven methods to treat common diseases. Many of the new drugs coming on the market are small modifications to older drugs. These modifications are useful, often improving treatment or reducing side effects, but they do not radically alter treatment outcomes. But with clinical trials being so expensive, it’s hard to fault drug stocks for being so conservative.
But not every drug stock is content to make minor changes. Many of the best drug stocks to buy are entering bold new territory to create radical new treatments. These treatments are going through clinical trials and could offer a change in patient outcomes. If FDA approval is forthcoming, these new drugs have the potential to upend their market and bring big gains for their investors. The largest gains will come from getting in early before the clinical trials have ended and data is announced.
So, for an investor looking for drug stocks to buy, it’s important to look for both the safe, conservative ones and the big, game-changing ones. Higher rewards often coincide with higher risk, of course. However, the possibility of completely dominating a market with a new treatment should not be overlooked. So here are three of the best long-shot drug stocks to buy.
Acelyrin (SLRN)
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Recently, Acelyrin (NASDAQ:SLRN) presented the promising drug, izokibep, that could be a breakthrough in the treatment of psoriatic arthritis. Psoriasis is one of the most common autoimmune disorders. And psoriatic arthritis affects around one-third of psoriasis sufferers. With such a high prevalence, the need for new treatments is acute.
There is currently no cure for psoriatic arthritis, and current treatments are of limited effectiveness in halting or reversing the disease. However, izokibep’s has promise, showing statistically significant efficacy in phase 2 clinical trials. Acelyrin is now continuing with a Phase 2/Phase 3 trial to further prove the drug’s effectiveness. The primary completion date for the trial is January 2024, so news could come out very soon. And if the news is positive, FDA approval may not be far behind.
It should be noted that izokibep has previously failed to prove efficacy in treating a different disease, and the stock fell hard on that news. But that result will have no bearing on the outcome of this clinical trial. And with the stock already depressed by negative sentiment, a positive outcome in the psoriatic arthritis trial could send its price up significantly.
Acelyrin’s most recent earnings report shows them with $556 million in cash and cash equivalents with a net loss of $26 million. The company has more than enough runway to finish its clinical trials and seek FDA approval. While nothing is guaranteed in medicine, if the drug is effective in its current trials, Acelyrin will prove itself one of the best drug stocks to buy today.
Vertex Pharmaceuticals (VRTX)
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Acute pain is very difficult to treat. Many current treatments involve habit-forming drugs such as opioids. That has not only contributed to an addiction crisis, but opioids also have harmful side effects even beyond addiction. With so much difficulty in treating acute pain, there is a huge need for new drugs.
Vertex Pharmaceuticals (NASDAQ:VRTX) is poised to bring just that with its groundbreaking non-opioid pain medication, VX-548. VX-548 already showed promise in Phase 2 clinical trials and received Breakthrough Therapy and Fast Track designations as well. By targeting voltage-gated sodium channels that facilitate the sensation of pain in nerve cells, VX-548 can manage pain without the risk of addiction or harmful side effects like respiratory depression and sedation.
Vertex is now running a Phase 3 trial investigating VX-548 for acute pain. And the company is also running multiple trials for its efficacy in specific pain scenarios, such as after surgery or in treating diabetes pain. These trials are all ending in the first half of 2024, and VX-548’s wide-ranging utility could give it a very big market to sell to if it gets approved.
Financially, Vertex has been mostly stable. Its Q2 2023 earnings report showed revenue and earnings at $2.5 billion and $916 million, respectively. That’s up slightly from Q2 2022’s revenue and earnings of $2.2 billion and $811 million, respectively. But to truly go to the next level, Vertex will need a new breakout star. And VX-548 could be it. A powerful, non-addictive pain medication would make Vertex a great drug stock to buy.
AbbVie (ABBV)
Closeup of AbbVie (ABBV) building corporate office, an American biopharmaceutical company with its headquarters in Lake Bluff, Illinois, USA
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Alzheimer’s disease remains a devastating condition with no known cure. Currently, available treatments can only slow the disease’s progression, not reverse or stop it. But AbbVie (NYSE:ABBV) is trialing a new drug which could be a game-changer.
ABBV-552 is a unique anti-Alzheimer drug different from most currently on the market. Many current therapies focus on anti-amyloid beta antibodies, which bind to amyloid beta to help the immune system destroy it. As amyloid beta is believed to play a key role in Alzheimer’s, its destruction should slow the disease. However, these therapies have had limited effectiveness. And because they increase the activity of the immune system, they have shown harmful side effects such as inflammation or bleeding in the brain.
What sets ABBV-552 apart is its mostly unique mechanism of action. This drug aims to enhance the release of neurotransmitters in nerve cells. And since neurotransmitters are how nerves communicate with each other, this enhanced release should facilitate improved nerve cell and brain activity. Unlike antibody-based treatments with their side effects, ABBV-552 appears to have a favorable safety profile. That would be a big relief for patients and doctors who have shied away from antibody-based therapies due to their safety.
ABBV-552 is still undergoing Phase 2 clinical trials, which should finish by June 2024. With a good result, Phase 3 trials could begin not long after. And with still no cure in sight for Alzheimer’s disease, the door is still wide open for the AbbVie treatment to demonstrate success and corner the market. As our population continues to age, diseases like Alzheimer’s will only become more prevalent. The company that can cure such diseases will have the best drug stock you can buy.
On the date of publication, John Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
John Blankenhorn is a neuroscientist at Emory University. He has significant experience in biochemistry, biotechnology and pharmaceutical research.
