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These 5 Stocks Are The Biggest S&P 500 Healthcare Winners of 2020

By Rachel Warren – Updated Aug 27, 2020 at 3:21PM

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Some of the names on this list may surprise you.

In the days and weeks leading up to the start of the coronavirus pandemic, the S&P 500 index was hitting all-time highs. On Feb. 19 of this year, it achieved a record peak since the Great Recession of 2008, closing at 3,386.15. 

Then the bottom fell out. By March 23, the S&P 500 had hit a record low, closing at just 2,237.40 -- a more than 1,100-point drop from its high just a month earlier. 

While this has undoubtedly been an extremely rough year for the stock market, we've seen an impressive rally since March thanks to increased optimism regarding a successful vaccine, the distribution of coronavirus stimulus funds (and hopes for a second round), and low interest rates. On Monday, the S&P 500 closed at its new all-time high of 3,431.28.

Throughout the pandemic stock market's highs and lows, some surprising winners have emerged among the S&P 500. Healthcare companies Dexcom (DXCM 7.20%), Abiomed (ABMD -2.76%), West Pharmaceutical Services (WST -3.09%), Regeneron Pharmaceuticals (REGN -0.04%), and IDEXX Laboratories (IDXX -3.19%) have flourished while others have fallen to abysmal lows -- and each has a uniquely promising growth story to tell. 

Let's take a closer look.

young woman cheering as she looks at her computer

Image Source: Getty Images.

1. Dexcom

A leader in diabetes care, San Diego-based Dexcom makes continuous glucose monitoring systems. In 2018, the American Diabetes Association reported that 10.5% of the U.S. population, or more than 34 million Americans, was diabetic. The World Health Organization reports that in 2016, diabetes was the cause of 1.6 million fatalities across the globe. Diabetes is also one of the conditions associated with a heightened likelihood of severe illness or death from COVID-19. Given these facts, it's not surprising that the demand for Dexcom's products not only boomed but exploded during the pandemic.

Dexcom released its first-quarter 2020 results on April 28, reporting a 44% increase in revenue from Q1 2019. Revenue growth in international markets was up 61% in Q1 2020, while domestic U.S. revenue rose by 39% in the quarter, which ended on March 31. On July 28, Dexcom released its financial results for the second quarter ending on June 30. Q2 revenue was up 34% year-over-year. . Its operating income according to generally accepted accounting principles (GAAP) totaled $67.8 million, representing 15% of the company's total revenue for Q2 2020 ($451 million). Dexcom is projecting a 25% increase in revenue for full-year 2020 to $1.9 billion.

Dexcom has also made its continuous glucose monitoring products accessible to providers in the U.S. and Canada in an effort to increase the safety of frontline medical workers while ensuring diabetes patients receive the care and attention they need during the pandemic.

Shares of Dexcom held firm when the wider market fell in March, and have risen steadily since April. The stock is up nearly 93% year to date.  

2. Abiomed

With a market capitalization of nearly $14 billion, Abiomed is a large-cap company that develops and manufactures medical devices. The company is known for its Impella system, featuring the smallest heart pump in the world.

There's been a fair share of controversy surrounding the company's Impella RP device in particular over the past year. The U.S. Food and Drug Administration (FDA) sent a letter to healthcare providers on Feb. 4, 2019, warning of an increased risk of mortality in patients who received the Impella RP -- more than had been detected in prior premarket clinical studies. However, a subsequent letter sent in May 2019 revealed that subjects showing higher incidence of mortality would not have met the eligibility requirements for premarket clinical studies. This past June, the FDA granted the Impella RP an emergency use authorization (EUA) for cardiovascular patients who have contracted the novel coronavirus.

In fiscal 2020, Abiomed reported a 9% increase in revenue to $840.9 million. Its operating income increased nearly 11%. The company also marked the close of fiscal 2020 with zero outstanding debt and more than $650 million in cash. Abiomed's revenue in the first fiscal quarter of 2021 was down about 21% from fiscal Q1 2020, with operating income having decreased 44%. Global sales of Impella were also down 22% in the quarter.

Due to the uncertainty regarding the impact of the COVID-19 pandemic on the 2021 fiscal year, Abiomed is keeping mum about its full-year revenue guidance. However, despite its mixed financial performance, the stock is up by more than 80% from its closing price on Jan. 2. Shares of the company have been hovering at about $300 since July. DXCM Chart

DXCM data by YCharts

3. West Pharmaceutical Services

West Pharmaceutical Services fills a void in a less-talked-about side of the healthcare industry. The company makes delivery systems and packaging for pharmaceutical products. It has a market capitalization of nearly $20 billion and pays a modest dividend of about 0.24%. The company is a relative newbie to the S&P 500, having just joined the index in May.

Shares of West Pharmaceutical closed at $269.67 on Monday, not far from their 52-week high of $279.54. The stock is up nearly 78% since the beginning of the year.

West Pharmaceutical reported strong sales growth in both the first and second quarters of this year. In Q1, the company's net sales increased by nearly 11%; in Q2, that number was more than 12%. The company also boosted its full-year net sales guidance in its Q2 report, anticipating between $2 billion and $2.1 billion. In the first half of the year, West Pharmaceutical's free cash flow was up 42% compared to the first six months of 2019 and totaled $136 million.

The company's incredible resilience during a recession isn't surprising. Its wide-ranging product lineup, which includes cartridge systems, vial containers, and intradermal delivery methods, are all essential healthcare solutions in high demand during regular times -- and even more so during the pandemic.

4. Regeneron Pharmaceuticals 

Shares of Regeneron Pharmaceuticals have climbed steadily since February, up an impressive 59% year to date. The stock doesn't come cheap; one share will run you close to $600.

Regeneron reported year-over-year revenue increases of 33% ($1.8 billion) and 24% ($2 billion) in the first and second quarters, respectively. The company's blockbuster drug Eylea, which treats neovascular (wet) age-related macular degeneration, diabetic retinopathy, and other retinal diseases, recorded U.S. net sales of $1.2 billion in Q1 and $1.1 billion in Q2. Another key revenue driver this year has been eczema medication Dupixent, the product of Regeneron's long-standing antibody drug collaboration with Sanofi (SNY 1.08%). Notably, sales of Dupixent were up 129% in the first quarter of 2020. The drug was also recently approved by the FDA for children between 6 and 11 who are suffering from mild to severe atopic dermatitis.

Regeneron has several products in its pipeline for investors to have hope about. Perhaps the most closely watched is the dual antibody cocktail solution for COVID-19, REGN-COV2, that it's developing and manufacturing in partnership with Roche Holdings (RHHBY -0.54%). Under the terms of the agreement, Regeneron would manage domestic distribution of REGN-COV2 while Roche would handle its distribution in international markets. After receiving a positive safety review following the phase 1 study, REGN-COV2 is now being evaluated in multiple late-stage trials. Two phase 2/3 studies are assessing the candidate's efficacy as a potential treatment, and a separate phase 3 study is evaluating its ability to prevent illness in subjects whose household members have contracted COVID-19.

Regeneron entered into a $450 million contract with the Biomedical Advanced Research and Development Authority (BARDA) back in July to supply the government with both treatment doses and preventative doses from the initial lots of REGN-COV2. Of course, this is pending the success of REGN-COV2 in late-stage clinical studies and the FDA's issuance of an EUA or approval.

5. IDEXX Laboratories

The final stock on our list that has continued to flex its muscles throughout 2020 is IDEXX Laboratories. The company fills a unique niche in animal healthcare, offering a variety of products and services including livestock software monitoring systems, microbiological water tests, software for veterinarians, and pet diagnostic tests. IDEXX's stock has experienced more than 44% growth since the start of 2020, despite an initial 31% dip when the market fell in March.

IDEXX is contributing to the fight against COVID-19. The company announced in April that it was launching its IDEXX SARS-CoV-2 (COVID-19) RealPCR Test, a coronavirus diagnostic test for pets. In May, the FDA issued an EUA to IDEXX's subsidiary OPTI Medical Systems, Inc., for a laboratory test kit for humans that identifies the presence of SARS-CoV-2, the disease that causes COVID-19. The test has also received the European Union's CE Mark regulatory certification.

As for the company's balance sheet, IDEXX reported $2.4 billion in revenue last year, boosted by 11% recurring revenue in its companion animal group diagnostics (CAG) division. Revenue was up 9% in Q1 to reach $626 million, and in Q2 it rose another 3% to hit $638 million. Both results were also bolstered by its CAG segment, despite the lockdown's adverse impact on routine veterinary visits, which caused delays in diagnostic testing. IDEXX closed the second quarter of 2020 reporting a gross margin of nearly 60% (up 180 basis points year over year) and operating margin over 30% (up 380 basis points year over year).

Rachel Warren has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Abiomed and Idexx Laboratories. The Motley Fool recommends DexCom. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Regeneron Pharmaceuticals, Inc. Stock Quote
Regeneron Pharmaceuticals, Inc.
$731.59 (-0.04%) $0.28
Abiomed Stock Quote
$259.82 (-2.76%) $-7.38
DexCom, Inc. Stock Quote
DexCom, Inc.
$102.06 (7.20%) $6.85
Idexx Laboratories Stock Quote
Idexx Laboratories
$335.00 (-3.19%) $-11.02
West Pharmaceutical Services Stock Quote
West Pharmaceutical Services
$248.35 (-3.09%) $-7.91
Sanofi Stock Quote
$39.32 (1.08%) $0.42
Roche Holding Ltd. (ADR) Stock Quote
Roche Holding Ltd. (ADR)
$40.83 (-0.54%) $0.22

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

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