Trying to get rich quick is a fantastic way to lose money, but there are a few great healthcare stocks that could help you accumulate wealth over the long run.
For risk-averse investors looking for fast-growing dividend income, CVS Health (CVS -1.07%) is poised to boost quarterly payments at a healthy pace. If your appetite for risk is higher, though, Celldex Therapeutics (CLDX -1.99%) expects data that could send its stock through the roof this year. For those of you with a risk tolerance somewhere in between, Celgene (CELG) is a highly profitable biotech positioned to grow by leaps and bounds in the years ahead.
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CVS Health: A unique position
Investors looking for a quality business positioned to grow along with America's enormous healthcare sector will find a lot to like about this company's interesting mix of related operations. You might equate CVS Health with retail pharmacies, but its pharmacy services segment contributes nearly as much to the bottom line. The biggest operation in the segment is the pharmacy benefits management (PBM) business, which the company claims to be the nation's largest.
The PBM earns fees for helping subscribers control pharmaceutical spending. They accomplish this tricky task by negotiating with drugmakers for lower prices in return for easier patient access to their products and promoting the use of lower-cost generic options when available.
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The recent acquisition of Omnicare made CVS Health a leading U.S. supplier of pharmaceutical services to assisted living and long-term care facilities. This business should fold nicely into the company's existing operations.
Combining diverse healthcare-related operations with its huge retail presence has made CVS Health consistently profitable. Investors will appreciate the company's willingness to return those profits to shareholders. Over the past five years, the company has increased its dividend payout at a 25.2% annual rate. Despite raising the dividend at a blazing pace, the company used just 19.7% of trailing free cash flow to make payments over the past twelve months. This means that the dividend is plenty safe -- and, in fact, it may even keep climbing.
Celldex Therapeutics: Big year ahead
If you're more interested in a stock with tremendous upside potential over the next year and don't mind accepting some risk, this clinical-stage biotech stock deserves your attention. Celldex Therapeutics doesn't have any approved drugs to sell yet, but that could change soon.
The biotech's lead candidate, glembatumumab vedotin (glemba for short), is a cancer drug that targets a surface protein found on several types of aggressive tumor cells, including breast cancer. A group with difficult-to-treat triple-negative breast cancer showed a highly significant reduction in their risk of disease progression or death compared to standard chemotherapy.
Currently, glemba is in a trial designed to support an application for treatment of triple-negative breast cancer patients. If results expected by the end of the year are consistent with earlier observations, an approval would most likely follow. If successful, demand from perhaps 100,000 patients with limited treatment options could drive annual glemba sales past the $1 billion mark,
An approval for glemba to treat triple-negative breast cancer would send this stock soaring, but that's not the only shot Celldex will be taking soon. An investigator-sponsored trial with glemba as a treatment for a rare form of eye cancer should produce data in the first half of the year. The company also expects data from a combination study with glemba and its mid-stage candidate varlilumab in advanced melanoma this year.
Glemba and varlilumab are just two of seven fully owned clinical-stage candidates in this biotech's robust pipeline. With a market cap of around $390 million at recent prices, moving just one into the commercial arena could lead to windfall gains
Celgene: Big and getting bigger
With a market cap of around $87.8 billion, this big biotech might not be capable of an overnight double. Hitting its internal growth forecasts, though, could help its shareholders become rich in the years ahead.
At recent prices, Celgene stock is trading at about 16 times this year's earnings estimates. That's a bit less than the average stock in the broad market benchmark S&P 500 index. Such a low forward multiple would make sense if profits were growing in mid-single digits, but Celgene expects to dazzle investors in the years ahead. Management has projected adjusted earnings per share will reach at least $13 by 2020, which works out to an annual growth rate of around 22% over the next several years.
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In 2016, Celgene's net product sales surged 22% higher than the previous year, and adjusted earnings per share rose 26% as profit margins widened. Blood cancer therapy Revlimid was the company's leading growth driver again last year. Luckily, accelerating sales of psoriasis treatment Otezla and cancer therapy Pomalyst are reducing its dependence on its most important product.
Further ahead, a clinical-stage pipeline chock-full of new drug candidates such as ozanimod for the treatment of multiple sclerosis, Crohn's disease, and ulcerative colitis, gives investors data to look for this year. Celgene might not offer a dividend now, but strong profitability and multiple paths to continued growth make this a great stock for steady wealth accumulation.
