3 Under-the-Radar Stocks to Buy and Hold for a Decade

It isn't only the most popular stocks that deliver strong returns. There are plenty of little-known corporations with attractive prospects that can be great additions to a well-diversified portfolio for investors who take the time to find them. In that spirit, let's consider three under-the-radar companies that are worth a second look right now: Madrigal Pharmaceuticals (NASDAQ: MDGL), Axsome Therapeutics (NASDAQ: AXSM), and Kailera Therapeutics (NASDAQ: KLRA). These three biotechs could offer attractive returns over the next decade.

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1. Madrigal Pharmaceuticals

Madrigal Pharmaceuticals made history in 2024 when it earned approval for Rezdiffra, the first medicine for metabolic dysfunction-associated steatohepatitis (MASH). There was a dire need for a treatment for MASH when Madrigal first entered the field: Millions of patients in the U.S. alone suffer from the disease. Sure enough, Madrigal Pharmaceuticals has made significant headway in this market. As of March 31, more than 42,250 patients were being treated with Rezdiffra. Madrigal Pharmaceuticals' first-quarter revenue increased by 127% year over year to $311.3 million, driven by Rezdiffra, the company's only approved medicine.

Yet, the biotech company still has a large addressable market. Madrigal Pharmaceuticals is targeting about 315,000 MASH patients who are being seen by specialists. It still has a long way to go before capturing even 50% of this addressable opportunity. Further, Madrigal Pharmaceuticals has a pipeline of additional assets that will address the needs of even more MASH patients.

The company could make significant progress in this niche over the next decade while delivering solid top-line growth. There are some risks, including increased competition. Novo Nordisk also earned approval for a medicine for MASH last year. There will be more brand-new market entrants in the future. Further, Madrigal Pharmaceuticals could encounter clinical or regulatory setbacks that might sink the stock. But even with these caveats, the company's leading product, strong pipeline, and first-mover advantage in this niche could allow it to deliver excellent returns over the next 10 years.

2. Axsome Therapeutics

Axsome Therapeutics has several products in its portfolio that are driving solid top-line growth. The list includes Auvelity, a depression medicine that is its main growth pillar. In the first quarter, Axsome Therapeutics' top line increased by 57% year over year to $191.2 million. Auvelity's sales came in at $153.2 million, 59% higher than the year-ago period. Here's the great news: Auvelity just earned a label expansion for the treatment of Alzheimer's disease agitation.

This new indication should meaningfully move the needle for Axsome Therapeutics. Here's why. Although AD agitation affects more than five million people in the U.S., there is a dire need for new treatment options, considering there weren't many that were FDA-approved. Axsome Therapeutics' Auvelity will help fill that need. The drugmaker now projects peak sales of $8 billion for Auvelity.

Meanwhile, Axsome Therapeutics's trailing-12-month revenue is only $708.24 million. And beyond Auvelity, the company should rely on other growth drivers as well. Axsome Therapeutics' migraine treatment, Symbravo, was approved early last year and is slowly ramping up sales.

The biotech should also launch new products. Axsome Therapeutics requested approval for AXS-12, an investigational medicine for cataplexy associated with narcolepsy. Further, the drugmaker has several exciting phase 3 pipeline programs that could lead to new approvals or label expansions. Axsome Therapeutics has outpaced broader equities over the past five years, and the company could do the same through 2036 if it continues to make solid clinical progress while delivering excellent financial results.

3. Kailera Therapeutics

Kailera Therapeutics is a biotech company that recently went public. The drugmaker specializes in developing weight loss medicines. Unlike Madrigal Pharmaceuticals and Axsome Therapeutics, Kailera Therapeutics doesn't have a single marketed drug. That makes it riskier. However, investing in this company may be a great way to capitalize on the fast-growing anti-obesity market. This therapeutic area is projected to grow significantly over the next five to 10 years.

And although pharmaceutical giants such as Novo Nordisk and Eli Lilly are currently the leaders in this niche, there may be plenty of room for smaller players like Kailera Therapeutics to carve out a niche. The biotech's pipeline is promising, too, with several exciting candidates that are making progress. Kailera Therapeutics' leading candidate, ribupatide injection, is currently being tested in phase 3 studies.

Importantly, ribupatide mimics the action of two separate gut hormones: GLP-1 and GIP. Many scientists believe that this approach may offer greater efficacy than traditional GLP-1 medicines like Wegovy. Meanwhile, Kailera Therapeutics is developing an oral version of ribupatide, for which it is planning to start phase 3 studies next year.

And the company has another asset in phase 1 clinical trials, KAI-4729, that mimics the action of three separate gut hormones: GLP-1, GIP, and glucagon. Again, Kailera Therapeutics is on the risky side. However, if it can make waves in the large and growing weight-loss market over the next five years, it could deliver excellent returns. Those comfortable with volatility should consider initiating small positions in this stock.

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