3 Top Biotech Stocks Poised for Growth as Tariff Fears Ramp Up
Making the investment case for these three small- and mid-cap names as volatility is likely to continue.
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Every change on the tariff front continues to make significant headlines and is providing the market with an extra dose of volatility.
This is likely to remain the case throughout the first half of 2025. Some disputes should be resolved in short order, while others, like those around China, might prove more intractable. This is just one of many reasons I expect small- and mid-cap stocks to outshine their larger brethren in the months and quarters ahead as I laid out in my column on Monday.
Today, I will highlight three small- or mid-cap biotech and biopharma names that have been core stakes in my portfolio for quite some time, mostly within covered call positions. Each company has seen some positive news flow in recent weeks.
Let’s start with BridgeBio Pharma, Inc. BBIO, whose stock has moved up nicely since I last touched on it back in early October.
In late November, the firm’s lead pipeline asset Attruby received FDA approval for the rare heart disorder transthyretin cardiac amyloidosis also known as ATTR-CM. Attruby is taking direct aim at Pfizer’s PFE leading franchise in the space that does north of $3 billion in annual sales. Attruby got the green light in Europe this week and will be marketed on the continent by BridgeBio’s deep pocketed partner Bayer who has European rights to the drug. I added to my stake in BBIO on Tuesday via covered call orders.
The investment case for Avadel Pharmaceuticals AVDL is growing stronger and I have recently rolled my existing covered call holdings on this small-cap biopharma forward and also added to my stake executing new covered call orders. In January, management provided initial FY2025 revenue guidance of between $240 million to $260 million. The midpoint of that range represents 50% sales growth over FY2024. In addition, the company is turning profitable projecting $20 million to $40 million in free cash flow in the new fiscal year.
More importantly, the company has drawn interest from an activist investor who is pushing for a sale of the company to unlock shareholder value. I agree with this assessment as the stock is significantly undervalued at roughly three times FY2025E sales equating for the net cash on the balance sheet. The stock trades around $9 a share when it should be trading in the low to mid-teens.
Finally, we have Axsome Therapeutics AXSM, which has doubled since I last did a feature on it back in September 2023. In mid-January, management guided Q4 revenue higher than expected. In late January, the company garnered FDA approval for its drug Symbravo for the acute treatment of migraine with or without aura in adults.
The shares got another boost this week when Axsome announced it has settled patent litigation with Teva TEVA over its antidepressant drug Auvelity. The slew of goods news early in 2025 has pushed the stock up some 55% year to date. I wouldn’t be chasing the shares here. However, if they fall back 5% to 10%, I will probably add to my holdings.
At the time of publication, Jensen was long AVDL, AXSM, BBIO and PFE.
