If you weren't paying attention during the last big stock market correction, don't worry. The next big dip is always right around the quarter.
If you plan to buy up shares of the best the healthcare sector has to offer the next time the market panics, Teladoc Health (TDOC -3.35%), Veeva Systems (VEEV 0.04%), and Alnylam (ALNY -4.41%) are the stocks you want in your shopping list. Here's why.
Teladoc Health: Room to grow fast
An $18.5 billion merger pending between Teladoc Health and chronic condition management pioneer Livongo (LVGO) will help the telehealth services behemoth take an important step ahead of the competition. Over the past several years, employers and other healthcare plan sponsors have slowly started realizing that expecting their members to manage chronic medical conditions alone is a lot more expensive than helping them.
Meanwhile, social distancing efforts to contain the COVID-19 pandemic revved up demand for remote medical services. Teladoc Health reported 203% more visits during the second quarter than during the same period last year. At just 2.8 million visits during the three-month period ended Jun. 30, 2020, though, it's clear the company has only scraped the surface. Per the Centers for Disease Control and Prevention, six out of 10 Americans live with at least one chronic condition, typically requiring frequent routine check-ins with healthcare providers.
Teladoc Health will probably facilitate more telehealth visits for this patient population than any of its competitors. With room to grow and a strong lead over the competition, Teladoc belongs at the top of your list of stocks to buy the next time the market tanks.
Veeva Systems: Steady grower
This provider of cloud services to the life sciences industry isn't growing quite as quickly as Teladoc Health, but Veeva Systems is poised to rake in rapidly growing profits for years to come. The life sciences industry is a wonky place, consisting mainly of businesses that need help managing torrents of information produced by commercializing prescription drugs and developing new ones. Veeva offers biopharmaceutical companies a customer relationship service on salesforce.com's platform, plus a unique suite of industry-specific tools wholly owned by Veeva.
The COVID-19 lockdowns aren't helping Veeva's sales team sign new clients, but they didn't stop total revenue from rising 33% year over year to $354 million during the company's fiscal second quarter ended Jul. 31, 2020. Adjusted earnings rose in line with revenue, and there's a good chance the company can continue along at this trajectory for years to come.
There are competing vendors that help drugmakers track customer relationships and others that help track prescribing habits. Veeva keeps gaining biopharmaceutical industry clients because it's the only vendor that companies need during the initial discovery of experimental new drugs, through their clinical-stage development, and throughout their commercialization.
Veeva isn't finished making itself indispensable to life science businesses, either. Later this year, the company will launch MyVeeva for Doctors, an application that helps healthcare providers access content and services from across Veeva's client base.
Alnylam Pharmaceuticals: Running interference
This biotechnology company is built around a practice it pioneered: RNA interference (RNAi). All of Alnylam's drugs use small strands of RNA to interfere with the production of troublesome proteins responsible for a variety of diseases.
In 2018, the company launched its first drug, Onpattro, a treatment that reduces the production of transthyretin (TTR) before it can break into amyloid fragments that accumulate and cause irreversible nerve damage. This year, Alnylam expects Onpattro sales to reach between $280 million and $300 million, and it isn't the only rapidly growing revenue stream feeding the company's top line. Last November, the Food and Drug Administration approved Alnylam's second drug, Givlaari, for the treatment of acute hepatic porphyria.
Alnylam's late-stage pipeline includes lumasiran, a potential treatment for primary hyperoxaluria type 1 currently under review at the FDA. During a pivotal study, urinary oxalate levels among patients treated with lumasiran showed fell 65.4% on average, which was a difference of 53.5% relative to volunteers randomized to receive a placebo.
There are thousands of rare diseases that lack treatment options, but Alnylam's approach isn't limited to esoteric disorders. The company's partner, Novartis (NVS -0.73%), is awaiting approval from the FDA for a cholesterol-lowering treatment called inclisiran.
Shares of Teladoc Health have been trading at around 16.6 times this year's sales expectations. By this metric, it's the least expensive stock on this list. Investors buying up any of these stocks need the underlying businesses to meet some high expectations just to avoid a loss.
All of these healthcare sector darlings have what it takes to provide market-beating gains from their present positions. That said, your chance to come out ahead rises significantly by opening positions at bargain prices.