Better Growth Buy: Axsome vs Revolution Medicines

Axsome Therapeutics (NASDAQ: AXSM) and Revolution Medicines (NASDAQ: RVMD) have offered investors significant growth so far this year. The biotech companies saw their shares soar 34% and 135%, respectively, in the first half. This may have happened as investors, seeking growth beyond the popular theme of artificial intelligence (AI), looked to biotech innovators -- companies with newly launched products or exciting progress in clinical development.

Axsome and Revolution have been stocks to watch in these areas. Axsome has won approval for two products rather recently, and Revolution has announced fantastic phase 3 results for its lead oncology candidate -- one that could transform the treatment of certain cancers. These stocks both make solid buys for an investor looking for growth in the healthcare space. But if you could only buy one, which one should you choose? Let's find out.

The case for Axsome

Axsome is a specialist in central nervous system disorders, and the company already has three products on the market -- Auvelity for depression and Alzheimer's agitation, Sunosi for excessive daytime sleepiness associated with sleep apnea and narcolepsy, and Symbravo for migraine.

Regulators approved Symbravo early last year, and they gave the nod to Auvelity in the Alzheimer's indication a couple of months ago. So these represent two new growth drivers for the company.

Meanwhile, the earlier approvals have helped the company generate double-digit revenue gains. In the recent quarter, Auvelity's sales advanced 59% to $153 million, while Sunosi sales climbed 34% to $33 million. Symbravo, as a newer product, doesn't have comparative year-earlier sales, but it generated more than $4 million in revenue, and prescription trends are strong.

I also like the fact that Axsome has a full late-stage pipeline, with five phase 3 programs underway -- and the company recently applied for regulatory review of AXS-12 for narcolepsy. All of this should fuel growth down the road.

The case for Revolution

Revolution is earlier-stage than Axsome since the company doesn't yet have commercialized products. But Revolution has candidates in registrational trials -- those that support regulatory review -- for the treatment of pancreatic cancer and non-small cell lung cancer. So the company is approaching the finish line, which means revenue may not be too far off.

Importantly, Revolution's technology could be game-changing, and recent results in a phase 3 trial were very strong. Revolution's tri-complex inhibitor platform has turned formerly "undruggable" targets into "druggable" ones. This platform is able to act on RAS proteins, turning off signaling that promotes the growth of cancer cells.

The company's lead candidate, daraxonrasib, delivered record survival benefit in a phase 3 trial in pancreatic cancer, with median overall survival of 13.2 months versus 6.7 months for patients on the standard treatment of chemotherapy.

Though Revolution isn't generating product revenue now, if its technique and candidates continue along the current path, the company could be a major oncology winner over time.

The better buy?

Axsome and Revolution stock prices each climbed in the first half of the year, and over the long term, I would expect them to gain further. Today, though, I don't think investors have to rush to get in on Revolution. The stock has advanced significantly, in the triple digits, in a period of just a few months -- and stocks generally don't advance in a straight line upward forever. So I expect that there will be opportunities to buy Revolution on the dip.

As for Axsome, the company's growth is likely to happen sooner, considering it already has products on the market, and they are generating double-digit revenue growth. I also like the fact that Axsome has two recent approvals, as they are likely to offer revenue a boost as the products' sales advance. On top of this, a potential approval of AXS-12 could offer yet another revenue driver in the not-too-distant future.

And though Axsome stock has gained this year, there is still room for the stock to run. All of this makes Axsome the better growth buy right now.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Axsome Therapeutics. The Motley Fool has a disclosure policy.