Much to the chagrin of investors looking to get rich quickly with a biopharma investment, the drug development cycle is, by necessity, a protracted affair. Sometimes, medicines take upwards of a decade to develop. That means the longer your investing time horizon is, the more likely it is that you'll be able to capture the full benefit of all of the catalysts that a company's pipeline delivers throughout the drug development process.
With that in mind, let's take a look at a pair of compelling picks to buy and hold for at least five years, as there's reason to believe that both will be quite productive between now and then.
1. Summit Therapeutics
Summit Therapeutics (SMMT -5.55%) is a biotech stock that few investors have heard of, but it has the makings of a winner over the next five years. However, it doesn't have any revenue yet.
In late September, it published the results of a phase 3 trial conducted by its collaborator in China, Akesobio, from which it licenses ivonescimab. In the trial, patients with non-small-cell lung cancer (NSCLC) were treated with either ivonescimab or the drug that's the standard of care for that condition, Merck's biologic called Keytruda.
The results indicate that the median progression-free survival (PFS) period for patients taking ivonescimab was 11.1 months, whereas patients taking Keytruda had a median PFS of 5.8 months. Furthermore, just 1.5% of the patients treated with ivonescimab had to stop treatment due to adverse events, compared to 3% of the patients treated with Keytruda.
In short, this trial suggests that Summit's candidate could be a massive improvement over the standard of care for NSCLC.
Summit is also conducting a pair of late-stage trials in the U.S. One trial is testing it in combination with chemotherapy in comparison to Keytruda plus chemo; another trial is comparing it to chemotherapy plus a placebo. Both will be wrapped up within the next five years, even if they take significantly longer than is currently anticipated, and they may report data well in advance of the end of that period. If history is any guide, regulators at the Food and Drug Administration (FDA) will grant a lot more weight to the two U.S.-based trials, so they're higher stakes as far as the chances of getting the candidate approved to treat any condition go.
Nonetheless, the data from the trial in China, as well as Akesobio's other ongoing and past trials with ivonescimab, paint a very favorable picture for Summit's stock in the near future. As Akesobio handled all of the phase 1 and phase 2 clinical trials, Summit didn't need to pay research and development (R&D) fees for them -- and the same situation is likely to apply if it attempts to license any of Akesobio's myriad number of other ivonescimab programs for cancer indications.
Therefore, the biotech won't likely need much capital to build on its successes if its collaborator can notch a few wins in China, which is a big advantage.
2. Merck
Despite Summit's impressive data, Merck is still another biopharma company that's worth buying and holding for at least five years. And Keytruda is a big part of that story.
It brought in $16.7 billion in total revenue for Q3, $7.4 billion of which were from Keytruda. Sales of the drug rose by 17% compared to a year prior, and on Sept. 25, Japan approved it to treat NSCLC in the presence of unresectable urothelial carcinoma. The pipeline is chock-full of ongoing clinical trials investigating it for other contexts, even many years after the drug's first approval.
Not all of those trials will pan out favorably, but it doesn't matter. The point is that Merck spent money developing and launching the Keytruda molecule once and, since then, has been continuously expanding the drug's addressable market with incremental spending, making it a major driver of earnings.
Over the next five years, the company will also be onboarding other sources of revenue so that its top line won't suffer when Keytruda's manufacturing exclusivity protections inevitably expire. On that front, it has more than 80 programs currently in phase 2 clinical trials, with upwards of 30 in late-stage clinical trials leading up to potential approval by regulators. Oncology drugs are the focus of its pipeline, and each new oncology drug is a potential companion to bundle into a new product with Keytruda in the medium term.
Once again, even if many of those programs fail, many others will succeed, and Merck will continue to invest in its pipeline all the while to make sure that it can continue to grow. Given its long history of implementing that plan successfully, the stock's future looks bright.
