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5 of the Most Disruptive Stocks in Healthcare

By Todd Campbell - Feb 28, 2018 at 8:15AM

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These innovative companies hope to change healthcare for the better.

Investing in companies that are revolutionizing healthcare can be profit-friendly, but deciding what stocks to buy can be hard. Healthcare innovation can come in fits and starts and revenue streams are only as certain as the patents protecting them. Here are five of the most disruptive stocks that investors can buy today.

No. 1: Financing discovery

There's no denying that brand-name drugs are expensive, but at least Celgene's (CELG) using a lot of its profit to finance envelope-pushing science that may pan out into next-generation medicines.

A man sitting on a stack of books points to a wall covered in scribbles of ideas.

Image source: Getty Images.

Celgene's collaboration partners include gene therapy pioneer Juno Therapeutics, which it recently acquired and bluebird bio. Both of those companies are working on ways to supercharge a patient's immune system to fight cancer.

It's also working with Agios, Jounce Therapeutics, Epizyme, and Acceleron Therapeutics on drugs that could someday change how doctors treat various tough-to-tackle diseases. For example, Agios is working on leukemia drugs that work by targeting metabolic mutations and Jounce Therapeutics is developing a drug that could help immunotherapies like PD-1 inhibitors work better in solid tumor cancer.

Celgene also provides venture capital to help new biotech companies get off the ground. For instance, it was an early investor in CRISPR Therapeutics, a biotech researching the use of genetic scissors to cut and replace DNA mutations to cure genetic disease.

Granted, there's no guarantee these efforts will result in new standards of care, but it's possible, and that makes Celgene one of the most disruptive companies in healthcare.

No. 2: Diving into DNA

Manipulating genetic code to reduce or boost proteins that contribute to disease is one of the biggest trends in medicine and these drug discoveries are often being enabled by gene sequencers made by Illumina, Inc. (ILMN 0.20%), the market-share leading player in the industry.

Illumina's machines have significantly improved the speed and cost of gene sequencing and as a result, researchers are using its machines to make new genetic breakthroughs in ways that were only imagined 10 years ago. Illumina launched its latest sequencer last year and eventually, new technology could lower the cost of gene sequencing to as little as $100. If that happens, genetic screening and treatment could become much more common. 

The company's also investing in new ways to make the genetic information gathered by its sequencers more useful. It's investing seed money and experience in Helix, a company that's building a DNA repository and app store, and Grail, a company working on new detection technology that may allow doctors to catch cancer in its earliest stages via a simple blood test.

No. 3: A robotics revolution

Robotic surgery isn't science fiction, it's already being commonly used in hospitals worldwide thanks to Intuitive Surgical's (ISRG 2.53%) da Vinci surgical robot.

Using technology developed to provide surgery on the battlefield, Intuitive Surgical's da Vinci system has already been used to perform over 5 million surgeries. As more providers discover the advantages of robotic surgery, including improved recovery times and fewer complications, that number will climb. In 2017 alone there were 875,000 procedures done using da Vinci systems. 

Currently, da Vincis are most commonly used to perform urology and gynecological procedures, but increasingly they're being used in other minimally invasive laparoscopic procedures such as hernia repair and colorectal surgery. As these systems get more advanced and surgeons become even more proficient with them, robotic surgery is likely to become mainstream.

A doctor video conferencing in with an elderly patient using her computer.

Image source: Getty Images.

No. 4: A 21st century approach to doctor visits

Drug prices get the press for contributing to healthcare's runaway cost, but expenses tied to everyday care, such as primary care and specialty care doctor visits, are the biggest cost culprits. To bend the cost curve, Teladoc (TDOC 3.57%) is partnering with insurers to provide patients with virtual doctor visits.

Patients can use their smartphone or a computer to discuss health concerns with care providers, often on short notice, and this telehealth option can improve scheduling and reduce costs, all while eliminating the need to wait in a lobby.

Teladoc is changing how patients get second opinions for more complex healthcare, too. Last year, it acquired Best Doctors, a virtual second opinions company. Best Doctors' physicians are rated as being at the top of their specialty by their peers, and their experience is already being leveraged to improve patient outcomes and lower costs.

No. 5: Personal and precision treatment

Genetic treatments, including those being developed by Celgene's partners, could be the future, but Celgene's far from the only company working on gene therapy and gene editing.

For example, Sangamo Therapeutics (SGMO -1.37%) is knee-deep in clinical trials using zinc finger nuclease (ZFN) technology to rewrite genetic code to help hemophilia patients and recently, Gilead Sciences inked a deal to see if this technology can be used to create next-generation gene therapies that work better.

It will be a bit before we know for sure if those approaches succeed, but tinkering with genetic code to treat disease may not be as far off in the future as you think. In December, the FDA approved a gene therapy by Spark Therapeutics that inserts a functional copy of a gene into a person's eye to restore their vision. The drug, Luxturna, can only be used in people with RPE65 mutation-associated retinal dystrophy, but the potential to develop one-and-done treatments that provide life-altering results like this is starting to be realized.

Overall, these companies are disruptive in different ways, but they all share one thing in common, a seemingly unquenchable desire to change healthcare as we know it. They're likely to suffer disappointments along the way, but long-term, each is a company that investors ought to be considering for their portfolios.

 

 

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Stocks Mentioned

Celgene Corporation Stock Quote
Celgene Corporation
CELG
Illumina, Inc. Stock Quote
Illumina, Inc.
ILMN
$193.93 (0.20%) $0.38
Intuitive Surgical, Inc. Stock Quote
Intuitive Surgical, Inc.
ISRG
$209.67 (2.53%) $5.17
Sangamo Therapeutics Stock Quote
Sangamo Therapeutics
SGMO
$4.31 (-1.37%) $0.06
Teladoc Health, Inc. Stock Quote
Teladoc Health, Inc.
TDOC
$37.17 (3.57%) $1.28

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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