Big healthcare companies have become even larger in 2020. While the coronavirus pandemic has played a role, these five large-cap healthcare stocks have outperformed their peers for a variety of reasons.
|Symbol (Company)||Stock Performance in 2020||Market Cap|
|Moderna (MRNA 0.46%)||680%||$60.4 billion|
|BioNTech (BNTX 1.48%)||254%||$28.9 billion|
|Teladoc Health (TDOC 0.05%)||143%||$29.5 billion|
|10x Genomics (TXG 2.67%)||95%||$16.0 billion|
|Veeva Systems (VEEV -0.14%)||93%||$41.2 billion|
Here's what led to five of the healthcare sector's most dramatic gains this year.
This company's developing potential new vaccines at great expense, but a lack of approved products to sell led Moderna to report a stunning $514 million loss in 2019. Despite the negative cash flow, Moderna's rapid development of potential new coronavirus vaccine mRNA-1273 has convinced many investors that they are one of the most valuable companies in the entire biopharmaceutical industry right now.
During a randomized clinical trial with more than 30,000 participants, none who received mRNA-1273 grew severely ill from COVID-19. Given these results, it seems likely that the FDA will authorize mRNA-1273 for emergency use following a public discussion with independent experts on Dec. 17, 2020.
There's a good chance Moderna will record a great deal of revenue for mRNA-1273 in 2021. Yet the company's next potential vaccine -- mRNA-1647, which prevents cytomegalovirus -- isn't progressing as quickly. Even if all goes well, the company's next vaccine product won't be ready to launch until 2024 at the earliest.
Like Moderna, BioNTech is developing an experimental vaccine for the prevention of COVID-19 that is likely to become its first and only source of revenue for the foreseeable future. Clinical trial results suggest BioNTech's candidate BNT162b2 is 95% effective at preventing COVID-19, although there was one severe case among the thousands of patients randomized to receive the vaccine.
Unlike Moderna, BioNTech has partnered with a large pharmaceutical company with a history of successful new vaccine launches: Pfizer (PFE 0.52%). Pfizer will get a chance to flex its international drug distributing muscles soon. Regulators in the U.K. leapfrogged the FDA to grant emergency use authorization to BNT162b2 on Dec. 2, 2020.
In July, BioNTech signed a deal to distribute around 40 million doses throughout the U.K. Distribution in the U.S. could begin soon. The FDA is expected to issue an authorization decision shortly after an independent advisory meeting discusses BNT162b2's request on Dec. 10.
3. Teladoc Health
The COVID-19 pandemic's social distancing guidelines have benefited America's leading provider of telehealth services. It also looks like the gains are here to stay. Teladoc Health reported 2.8 million visits in the third quarter. That was 206% more than the year-ago period and right in line with the previous quarter, when restrictions on visiting physicians were far more strict.
Reducing the risk of hospitalizations from poorly controlled diabetes and other chronic conditions can save healthcare plan sponsors a bundle. This is why Teladoc Health investors can also look forward to plenty of cross-sales related to a recent merger with Livongo Health.
Livongo's proprietary algorithms alert and nudge its users to better manage their conditions, with the goal of avoiding expensive hospitalizations. At the end of September, Livongo's flagship diabetes service boasted over 442,000 members, which was more than double the amount a year earlier.
There's room for the company to continue growing at this pace. A majority of American adults will need to manage at least one chronic condition before they're 65 years old. An estimated 96 cents of every Medicare dollar spent is used to manage a chronic condition.
4. 10x Genomics
This laboratory hardware business made its stock market debut in 2019 and sales have soared ever since. That's because 10x Genomics sells a leading suite of tools capable of single-cell analysis.
The tools 10x Genomic sells have been flying off the shelves because they allow drug developers and academic researchers to analyze cellular processes with unprecedented precision. Leading up to the COVID-19 pandemic, 10x Genomics shareholders were used to sales growing at triple-digit percentages, but laboratory closures have been a major headwind in 2020.
While sales of new instruments are still under pressure, sales of the consumable goods used to run 10x Genomics' installed tools offset the headwind. Enough of the company's clients made it back to work in the third quarter to drive total revenue 67% higher year over year.
5. Veeva Systems
Veeva Systems began as a provider of customer relationship management tools from salesforce.com that were adapted to serve the unique needs of pharmaceutical sales teams. Now, this company provides highly specialized cloud-based services for biopharmaceutical industry heavyweights, hundreds of smaller drug developers, and a growing hodge-podge of companies operating in highly regulated industries.
Before new drug applications were filed electronically, the paper they were printed on could fill a small office from floor to ceiling. Since its humble beginnings, Veeva has developed a growing suite of wholly owned tools that help drugmakers track the information that goes into new drug applications. Veeva can upsell tools to manage large-scale pharmaceutical manufacturing as well.
Veeva Systems is the only steadily profitable company on this list. Those profits are growing at an impressive pace. The company expects operations to earn an adjusted profit of around $567 million this fiscal year, which is 38% more than the company reported in fiscal 2020 and 85% more than in fiscal 2019.
Large isn't necessarily safe
Large-cap stocks are generally considered safer than their smaller cousins, but there are some big risks on this list. With the exception of Veeva Systems, these stocks are large now because investors expect significant profits soon. If anything gets in their way, though, they could quickly get sent back to the minor leagues, along with your investment.