If you're considering investing in one or more recent initial public offerings in the healthcare sector, you've got many options. Over the last year, 76 healthcare companies have gone public, according to finviz.com's data.
While quite a few of these stocks look interesting, two that stand out are digital health specialist Livongo Health (LVGO) and biotech BioNTech (BNTX 0.55%). Both stocks are getting a tailwind from the COVID-19 pandemic, with BioNTech a direct play on the crisis and Livongo an indirect play.
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Overview: 2 recent healthcare IPOs to consider buying
|
Company |
Market Cap |
Forward P/E |
Projected Average Annual EPS Growth Over Next 5 Years* |
YTD 2020 Stock Return |
|---|---|---|---|---|
| Livongo Health | $10.6 billion | 815 | N/A | 322% |
| BioNTech | $16.3 billion | N/A | N/A | 108% |
| S&P 500 | -- | -- | -- | (0.4%) |
Data sources: Yahoo! Finance and YCharts. P/E = price-to-earnings ratio. EPS = earnings per share. YTD = year to date. *Wall Street's projections. Data as of July 9, 2020.
Livongo Health
Livongo Health was founded in 2008 and held its initial public offering (IPO) in July 2019. It provides a digital health platform for helping people to manage chronic conditions. Starting with diabetes, the company has expanded its platform to include hypertension, weight management, diabetes prevention, and behavioral health.
Its members receive artificial intelligence-generated "actionable, personalized, and timely health signals," which the company calls "applied health signals."
Livongo ended the first quarter with more than 328,000 members, up about 100% year over year. Its client count climbed 44% from the prior quarter, with clients including more than 30% of Fortune 500 companies. Four of the seven largest U.S. healthcare plans cover the company's services.
In the first quarter, Livongo's revenue soared 115% year over year to $68.8 million. Its reported net loss narrowed to $5.6 million, or $0.06 per share, from $14.4 million, or $0.79 per share, in the year-ago period. Adjusted for one-time items, it posted net income of $3.9 million, or $0.03 per share, compared with a net loss of $8.9 million, or $0.49 per share, in the first quarter of last year. The adjusted profit probably came as a happy surprise to many investors, as Wall Street had been expecting an adjusted loss per share of $0.04.
"The COVID-19 pandemic has accelerated the need for new virtual care delivery models like Livongo," CEO Zane Burke said in the earnings release. "[O]ur remote monitoring, digitally powered and real-time personal coaching capabilities, and access to telehealth services are well suited to track vital signs of interest in maintaining the health of our members."
Last week, Livongo announced powerful preliminary second quarter revenue results. It now expects second quarter revenue to be in the range of $86 million to $87 million, representing growth of about 110% to 113% year over year. Prior guidance was $73 million to $75 million. The company plans to release its full second quarter results after the market close on Thursday, Aug. 6.
BioNTech
BioNTech was founded in 2008 and went public in October 2019. The German company is in the race to develop a vaccine for immunization against SARS-CoV-2, the novel coronavirus that causes COVID-19. While this is a crowded field, this clinical-stage biotech's partnership with pharmaceutical giant Pfizer (PFE 0.23%) makes it one of the top players to watch.
Like the more well-known biotech Moderna, BioNTech's COVID-19 vaccine platform is messenger RNA (mRNA) based.
On July 1, BioNTech and Pfizer announced positive preliminary results from a phase 1/2 clinical trial of the most advanced of their four vaccine candidates, BNT162b1. A phase 2b/3 study of a lead vaccine candidate could begin as early as this month. If that study is successful and the vaccine receives approval by the Food and Drug Administration (FDA), they're "expecting to manufacture up to 100 million doses by the end of 2020 and potentially more than 1.2 billion doses by the end of 2021."
As with any biotech that doesn't yet have products on the market, BioNTech is speculative. The successful development of a COVID-19 vaccine should light a fire under the company's stock, while a failure would almost surely sink the stock.
That said, BioNTech isn't a one-trick pony. The company's main focus is on developing individualized cancer drugs, and it has 10 cancer drug candidates in 11 ongoing clinical trials. It has some big-name partners in this realm, including Sanofi and Roche subsidiary Genentech.
