What are the top health stocks to buy now? There is a wide range of U.S. and international healthcare and medical choices to invest in. Three health stocks, in particular, look especially intriguing.
|Celgene (NASDAQ:CELG)||$94 billion||44.4|
|Intuitive Surgical (NASDAQ:ISRG)||$34 billion||46.6|
|Vertex Pharmaceuticals (NASDAQ:VRTX)||$33 billion||181|
At first glance, you might think that these stocks may be too expensive with their high earnings multiples. However, Celgene, Intuitive Surgical, and Vertex Pharmaceuticals have tremendous growth prospects that rank them among the top health stocks to buy. Here's why.
Celgene is best known for its lucrative blood cancer franchise. Revlimid generated nearly $7 billion in sales last year, up 20% from 2015. Pomalyst made $1.3 billion, a 33% year-over-year increase. Both drugs should continue to experience sales growth in the future, especially if all goes well for Revlimid in several late-stage studies targeting additional indications. Celgene also has several promising pipeline candidates for treating various blood cancers, including CC-486 and luspatercept.
The big biotech's greatest near-term growth potential, however, could come from other therapeutic areas. Autoimmune disease drug Otezla has already been a big winner for Celgene, raking in more than $1 billion last year. Celgene hopes to win approval for two other autoimmune disease candidates in the next couple of years -- ozanimod and GED-0301. Both drugs hold the potential for peak sales of at least $2 billion if approved.
Celgene stock is up only a small amount so far this year. One big knock against the company is its heavy dependence on Revlimid. However, the biotech's current lineup and pipeline should enable Celgene to grow earnings by more than 20% annually over the next few years. This growth potential makes Celgene an attractive alternative for investors looking for a solid healthcare stock.
Intuitive Surgical is the global leader in robotic surgical systems. Last year, the company reported revenue of $2.7 billion, up more than 13% year over year. Roughly 71% of that total revenue stemmed from recurring sources, including sales of instruments, accessories, and services.
There are multiple growth opportunities for Intuitive Surgical. One is in international expansion. More than 65% of the company's da Vinci robotic surgical systems are installed in the U.S., but the potential market is much larger outside the U.S., particularly in Asia. Intuitive Surgical should also benefit from demographic trends that will increase the numbers of potential patients requiring the types of procedures for which da Vinci is ideally suites, including hysterectomies and prostatectomies.
Intuitive Surgical stock has soared more than 40% year to date, hitting all-time highs. Although the company could face more competition in the next few years, its growth prospects appear to be solid. Look for Intuitive Surgical to work hard to expand into new procedures to drive revenue and earnings higher in the future.
Vertex Pharmaceuticals made $1.7 billion in revenue in 2016. Its two cystic fibrosis (CF) drugs, Kalydeco and Orkambi, generated nearly 99% of total revenue. Vertex also markets hepatitis C drug Incivek, but its sales have plunged in the face of intense competition from newer rivals that can cure the disease for many patients.
Cystic fibrosis continues to be the primary growth market for Vertex. The biotech expects sales for Orkambi to grow as it finalizes reimbursement arrangements with additional European countries. Vertex also has great expectations for a combination treatment of tezacaftor and Kalydeco. The company announced positive results from two late-stage studies of the combo CF treatment in March and anticipates filing for regulatory approval in the U.S. and Europe in the third quarter of 2017.
Vertex stock has skyrocketed more than 70% so far in 2017. Continued sales momentum for its CF franchise combined with the encouraging late-stage study results did the trick. Wall Street thinks Vertex should grow earnings by more than 60% annually over the next few years, so there should be plenty of room for the stock to go even higher.
Keith Speights owns shares of Celgene. The Motley Fool owns shares of and recommends Celgene and Intuitive Surgical. The Motley Fool recommends Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.