Axsome Therapeutics should expand its approved lineup while not facing the threat of generic competition through 2036.
Eli Lilly is a leader in its core market and could diversify its lineup over the long run.
Artificial intelligence (AI) stocks are garnering significant attention from Wall Street, and for good reasons. The technology is changing the world and significantly increasing the profits of some AI-focused companies. They could make their shareholders much richer over the long run.
However, there are plenty of attractive growth stocks outside the AI industry that investors might want to consider. Let's discuss two of them: Axsome Therapeutics (NASDAQ:AXSM), and Eli Lilly (NYSE:LLY). Both healthcare stocks could deliver solid returns over the next 10 years. Let me explain.
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Axsome Therapeutics is a biotech company specializing in developing medicines for conditions affecting the central nervous system. The company isn't profitable yet, but its sales are growing at a good clip.
In the second quarter, Axsome Therapeutics' revenue increased by 46% year over year to $218.4 million. The company's net loss per share widened slightly, going from $0.97 in the year-ago period to $0.99.
However, there are good reasons to be bullish on Axsome Therapeutics' prospects. The company's Auvelity, which is approved to treat depression, is doing much of the heavy lifting right now. In April, it earned approval to treat agitation in Alzheimer's disease (AD), a market with high unmet needs and few treatment options.
This label expansion should significantly boost the medicine's sales over the long run, especially given that the world's population is aging, the prevalence of AD is predicted to increase, and Auvelity won't face generic competition in the U.S. until the late 2030s. But Auvelity is just one of several promising products in Axsome Therapeutics' arsenal.
The company's late-stage pipeline looks particularly promising, with several Phase 3 programs and one medicine, AXS-12, that has already succeeded in Phase 3 studies. Axsome Therapeutics requested approval for AXS-12 in narcolepsy, with a decision expected by May of next year. The company also has several earlier-stage programs.
Axsome's deep pipeline of products, most of which won't lose patent exclusivity over the next 10 years, could allow the company to sustain healthy top-line growth, turn a profit, and deliver attractive returns through 2036.
Eli Lilly is currently dominating the market for weight loss drugs, while its diabetes portfolio is as strong as ever. The company's Mounjaro for diabetes and Zepbound for chronic weight management are helping it post outstanding sales and earnings growth for a pharmaceutical giant of this size.
In the second quarter, Eli Lilly's revenue increased by 48% year over year to $23 billion, while its non-GAAP net earnings per share jumped 33% year over year to $8.38. Zepbound's revenue jumped 46% year over year to $4.9 billion, while Mounjaro's sales were $9.9 billion, 91% higher than the prior-year quarter.
Eli Lilly will face increased competition in its core area over the medium term, but the company is well-positioned to handle that problem. Eli Lilly has an attractive pipeline with highly differentiated products that could help it expand the market, rather than just cannibalize sales of its current best-selling drugs.
For instance, the company's retatrutide has performed extremely well in several Phase 3 studies in obesity -- and across obesity-related conditions -- and could be targeted to patients who have failed to lose significant weight on currently approved treatments. It is also being developed in some indications Zepbound won't touch. Eli Lilly's eloralintide is another promising weight loss product with the potential for fewer side effects.
Beyond diabetes and weight loss, Eli Lilly boasts attractive candidates across oncology, immunology, neuroscience, pain treatments, and other areas. There is a reason Eli Lilly has become the largest healthcare stock by market cap.
Over the next decade, the company could solidify its lead in its core markets while making significant progress elsewhere, potentially diversifying its portfolio. That will help it overcome increased competition in the diabetes and weight-loss markets. Here's one more reason to invest in Eli Lilly for the long haul: It is an excellent dividend growth stock.
The company's forward yield isn't that impressive at 0.5%, but that's largely because the company has crushed broader equities over the past five years. And during that period, it increased its dividend by 103.5%.
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Prosper Junior Bakiny has positions in Eli Lilly. The Motley Fool has positions in and recommends Axsome Therapeutics and Eli Lilly. The Motley Fool has a disclosure policy.