This year hasn’t been as mind-blowing of a year as 2017 for healthcare stocks but even so, healthcare stocks have performed quite well over the first eight months or so; relatively speaking. But which healthcare stocks are smart picks right now?
Abiomed (ABMD) makes the list because as it’s one of the top healthcare companies in the world right now. At its core, Abiomed is a medical device company that is targeting heart recovery. The company is host to a family of minimally invasive heart pumps that are surgically implanted to help keep a patient’s blood flowing. Abiomed is currently the singular company in the world that has a product like this, and it has been growing very fast in recent years.
Abiomed’s relative-monopoly position has allowed it to deliver strong financial results. In the last five years, Abiomed’s revenue and net income have grown 280% and 2,760%, respectively. Wall Street has responded to the prosperity by bidding up shares more than 1,500%.
Laboratory Corporation of America (LH) is one of the biggest providers of lab tests in the country and could be well positioned to remain profitable from all of that testing. Being a part of so many medical procedures already, Laboratory Corporation of America doesn’t appear to look like a rapid-growth business.
However, analysts are anticipating roughly 11% annualized earnings growth over the next few years from the testing giant, in part because it’s taking advantage of Splunk to guarantee its equipment remains effective. That should help boost operating efficiencies to allow Lab Corp’s earnings to jump faster than revenues.
On another note, Vertex Pharmaceuticals (VRTX) already has three drugs approved for treating cystic fibrosis (CF): Kalydeco, Orkambi, and Symdeko. These products are the only approved therapies that address the base causes of CF. They also have helped make the biotech very profitable, with a cash stockpile of $2.8 billion at the end of June.
There are around 34,000 CF patients across the world who can be treated by Vertex’s three drugs with their current approved indications. But Vertex thinks that number should jump to 44,000 as it secures label expansions based on age and approvals for additional mutations that cause CF. But the biotech also has triple-drug combos in late-stage testing that could boost the addressable population to 68,000 patients.
Vertex’s prior success with its current drugs and earlier clinical studies of its triple-drug combos should result in strong reactions including the approval of these pipeline candidates. The chief rival for Vertex, Galapagos, reported very disappointing results in June for one of its primary CF drugs and based on those results its partner, AbbVie, actually pulled out of a planned study. This means that Vertex could be likely to keep benefiting from a monopoly in CF for a little while longer.
