Few industries stand to experience as much change as the healthcare industry over the next 10 years. By 2030, every baby boomer will be more than 65 years old, making one 1 of every 5 Americans past retirement age. That massive demographic shift, coupled with advances in genomic medicine and digitization, is likely to transform the way we think about medical care. One thing seems certain: The push toward lower costs, better management of chronic diseases, and more personalized care will get much of the attention.
Teladoc Health (TDOC -3.28%), Inari Medical (NARI -0.42%), and Fulgent Genetics (FLGT -3.57%) are all at the forefront of those trends. If they can fend off competition, their stocks could reward shareholders with the mindset and patience to buy and hold for the next decade.
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1. Teladoc Health
When Teladoc purchased Livongo Health last year, it essentially doubled its size and established a foothold in the growing market for chronic disease management. Diabetes patients, Livongo's specialty, account for $1 out of every $4 spent on healthcare in the U.S. With Teladoc's virtual primary care service, a program that is currently being piloted, the telehealth leader has connected two ends of the patient journey critical to diagnosing and managing the costly disease. In fact, CEO Jason Gorevic said on the latest earnings call that over 25% of the diabetes and pre-diabetes diagnoses made through the virtual primary care program were first-time diagnoses. That means a Teladoc program is discovering new customers for Livongo's services. Benefits like this make it likely management will exceed the $500 million in revenue synergies that were promised when the deal was consummated.
If the company does come to rule the telehealth landscape, it won't be without competition. Alphabet-backed Amwell went public in September and Hims & Hers Health, which offers prescription and medication delivery for issues like depression, hair loss, and erectile dysfunction, became available to the public in January. Amazon's app-based telehealth offering will reportedly be offered to its U.S. workforce and a few other employers later this year.
For now, Teladoc shareholders can rest easy knowing the telehealth market is projected to grow 25% a year to almost $600 billion by 2027. For context, the company is guiding for roughly $2 billion in sales this year and 80% growth. That leaves a lot of room for shareholders to win from the early industry leader even as competition heats up.
2. Inari Medical
Inari is focused on removing blood clots, specifically deep vein thrombosis (DVT) and pulmonary emboli (PE). Its disposable catheter-based devices are easy to learn how to use and provide a safer, cheaper, and more effective alternative to traditional clot-busting drugs. Management believes the market opportunity is about $3.8 billion and growing rapidly. The company recently reported full-year 2020 results, posting $140 million in revenue, 173% more than 2019. Unlike Teladoc, Inari's performance was in spite of the pandemic, which limited access to hospitals where sales and training would typically occur. As the limitations lift, Inari is investing in growth.
To scale training, the company introduced what it calls Clot Warrior Academy, a live video-based training platform. It continues to expand the sales force and geographic targets. Management believes the more education clinicians have, the more patients will be served who could benefit from the procedures. That number of potential patients is currently estimated to be 85% to 90% of PE patients and 60% of DVT patients. The company is also highlighting clinical studies to show both the efficacy of its procedures and the inadequacy of the drugs typically used to treat these conditions.
Similar to Edwards Lifesciences for heart disease, Inari offers a minimally invasive treatment that costs less, is simpler to perform, and produces better, safer outcomes for patients. Edwards has enjoyed a 470% stock gain in the past 10 years. With a large and growing market and innovative solution, shareholders of Inari could end up with similar returns.
3. Fulgent Genetics
Fulgent is helping usher in the era of personalized medicine. The company offers more than 19,000 genetic tests, as well as diagnostics for active COVID-19 infections, neutralizing antibodies, and a combination test for COVID-19 and influenza. The company's genetic testing business was already booming before the pandemic, increasing 52% from 2018 to 2019. After sputtering in the early part of last year, the core business rebounded to post 43% growth in the fourth quarter. Management is predicting 92% growth in genetic testing for 2021. That market is growing fast and is expected to reach $21 billion by 2027.
COVID-19 testing dominated 2020 and the company expects this year to be no different. Fulgent conducted 230 times more billable tests last year than the year before, leading to 3,400% revenue growth. Sales are expected to increase by 90% to $295 million this year. All of that testing is creating meaningful relationships that will benefit shareholders long after the pandemic ends.
Aside from the headline-grabbing contracts with the Department of Homeland Security, New York City public school system, and JetBlue Airways, Fulgent is gaining exposure to all-important insurers. It has become an in-network lab for some regional payers and is hoping to achieve that status with several national insurance companies soon. Those tie-ups, along with the continuing prevalence of COVID-19, promise to bolster the top line for at least the next year or two. With the company's ability to translate those sales into profits -- Fulgent believes it will earn $12.50 per share this year -- shareholders should be rewarded over the coming decade.
