2 Healthcare Stocks That Dominated in 2015

With 2015 wrapping up, two MarketFoolery guest analysts look back on their favorite healthcare stocks. In this video segment, Kristine Harjes and Michael Douglass talk about why Portola Pharmaceuticals (PTLA) and Exelixis (EXEL -0.76%) have been so exciting for investors this year, what the two companies are working on now, and how their prospects look for the future.

A full transcript follows the video.

This podcast was recorded on Dec. 15, 2015.

Chris Hill: Let's move on to individual stocks. Kristine, your healthcare stock of the year?

Kristine Harjes: So this one has been my favorite stock all year long. It's up 70% year to date. This is Portola Pharmaceuticals.

Hill: Household name. I think we're all familiar with it.

Harjes: If you listen to me talk about biotech enough, you'll have heard of Portola. So basically, their story is, they're developing a reversal agent for the new generation of blood thinners that are out there. And they're really popular, they work really well, they're made by some of the biggest pharmaceutical companies out there, but there's no reversal agent. And you hear that, at first, and you're like, "OK, cool, why would you need to reverse a drug?"

Hill: Right -- doesn't that just make it a blood thickener?

Harjes: Yeah, essentially, that's what it is. It stops the blood thinning, which is really good if you have somebody that might be prone to any sort of emergency, for a bleeding event or any sort of situation where you might need to quickly reverse the effects of the blood thinner. And this does occur every once in a while. So Portola is making this reversal agent. If it gets approved, and we're looking at probably a 2016 approval, this is going to have to be in stock at every hospital across the nation, because this new generation of blood thinner is becoming more and more popular.

Meanwhile, another reason that I really like this company is because they're tiny, but they're working with the big guys. So you've got Johnson & Johnson, they make Xarelto, that's their blood thinner that's in this new class, Bristol-Myers Squibb has Eliquis, and all these companies are just throwing money at Portola, like, "Please, make this reversal agent," because doctors are hesitant to prescribe the new anticoagulant if you don't have the reversal approved and on hand.

So as soon as it gets approved, which I as a shareholder am surely hoping that it does, and by all means it looks like it will, you're going to have Johnson & Johnson on your side, you're going to have BMY on your side, promoting the drug for you. And meanwhile, Portola still has worldwide rights to the drug. So huge success story there, and hopefully more good news to come in 2016.

Hill: Is this a company that is small enough that a Johnson & Johnson or some other behemoth would look at them and say, "Why don't we just buy these guys?"

Harjes: It's possible.

Hill: But that's not maybe in the top five of why you would want to own this stock?

Harjes: Personally, I would never invest in a company just because of its buyout potential. Truly, I think if a company is a potential candidate for a buyout, it's because they're a fantastic business, and that's the reason I would want to put my money behind them to begin with.

Hill: Michael Douglass, what have you got?

Michael Douglass: A stock that should be well known to many Fools -- it's called Exelixis. Exelixis has returned over 200% so far in 2015. Now, of course, we've got two weeks left, so, maybe they could give all that back. But it seems fairly unlikely.

Harjes: That's biotech for you.

Hill: I was going to say, yeah, this is a biotech. ... You just look at a five-year chart of this stock, very much a roller coaster.

Douglass: Volatile ride.

Hill: So, a really good 2015 ...

Douglass: Kind of a Cinderella story from 2014.

Hill: Change the date and maybe we're having a different conversation.

Douglass: Yeah. And I specifically meant, for 2015, this has been a great stock. And that's because, their primary drug, Cometriq, it failed in a big prostate cancer trial last year, and that was a big part of the reason why its market cap suffered so much last year. This year, recently actually, in November, it did very well in a second-line kidney cancer trial. Well, Cabozantinib, which is the drug behind Cometriq.

And that has really helped the company, as well as its recent approval for its drug Cotellic, which is partnered with Roche, which is a melanoma drug. So, really, a double dose of good news for Exelixis. And certainly, when you look at its market cap, which is about $1.1 billion, you think about the potential sales, it may be that there's still some growth opportunity in the company. It's definitely on my radar, it's on my watch list.