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What Investors Should Look for With Exelixis, DermTech, and Teladoc Health

By Keith Speights and Brian Orelli, PhD - Updated Jun 28, 2021 at 8:41AM

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All three healthcare stocks could have solid growth prospects.

Some healthcare stocks are especially intriguing to investors. Telehealth leader Teladoc Health (TDOC -3.94%), biotech Exelixis (EXEL 0.56%), and skin genomics testing pioneer DermTech (DMTK -28.94%) are three that certainly belong in the category. In this Motley Fool Live video recorded on May 12, Motley Fool contributors Keith Speights and Brian Orelli answer a viewer's question about these three healthcare stocks.

Keith Speights: It looks like our top question is from John B. "Can I get your thesis on," and he lists several stocks. Teladoc Health, which ticker there's TDOC, Exelixis, the ticker there is EXEL. He asks about DermTech, ticker there is DMTK, and GoodRx, ticker there is GDRX. Brian, any thoughts on any of those stocks?

Brian Orelli: Maybe I'll take Exelixis and DermTech and you can get the other two.

Exelixis, I think the thing that you want to look at is its pipeline. It had to restart its pipeline, and all of its drugs are really in early stages. It has in-license quite a few drugs and it's ramping up its discovery efforts again, and so I think that's really where we should be focused. Cabometyx is its only drug on the market. It goes by different names, but it's the same underlying active ingredient. That allows the company to bring in a lot of cash, so that will help them not have to dilute themselves.

On DermTech, the company is developing or has a test for the melanoma skin cancer. I think the biggest thing is doctors tend to be creatures of habit, and this is the new technology, and so they're going to have to spend a lot of time and money to get doctors to actually try the product. They're giving away the product a lot for free. Then the other thing you want to watch there is that the company is able to get the coverage by insurance companies.

Speights: I'm a shareholder of DermTech, I think you are, too, Brian.

Orelli: Yes.

Speights: My thesis for DermTech is when a company has a product that's better, faster, and cheaper than the current standard of care, it's certainly one worth watching, and if you feel inclined to invest in one, it's certainly one that's worth having on your radar screen. I think DermTech has a product that's better, faster, and cheaper than the current biopsy approach for melanoma diagnosis. I like the stock, it's been really volatile.

The stock is down a lot over the last couple of months, but I don't think that's really related to the company itself, I think it's just more market trends of some transition out of high-growth stocks. I like the long-term prospects for DermTech. I don't have a huge position in it, but I think the company, as it gains traction with payers and gets in front of dermatologists more, I think that DermTech could be a big winner over the long run.

Let me talk about Teladoc Health. It's another one in our last minute. I won't be able to get to GoodRx, but we'll try to talk more about GoodRx next week maybe. But Teladoc Health is another stock that I own. It's another stock that's been beaten down a lot. I really like the long-term prospects for virtual care in Telehealth chronic disease management. Teladoc is a leader in those areas. It has the widest range of services. It has over 40% of the Fortune 500 as its customers.

I think Teladoc Health is a great stock to buy at a discount right now. I think the long-term prospects are still very, very good. They're going to be other big players get into this market, but I think Teladoc Health is definitely a stock if you don't own, you might want to check out and really look at its prospects for how it could grow, both in the U.S. and internationally.

Brian Orelli, PhD owns shares of DermTech, Inc. and has the following options: short May 2021 $55 calls on DermTech, Inc. Keith Speights owns shares of DermTech, Inc. and Teladoc Health. The Motley Fool owns shares of and recommends DermTech, Inc. and Teladoc Health. The Motley Fool recommends Exelixis and GoodRx Holdings, Inc. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Teladoc Health, Inc. Stock Quote
Teladoc Health, Inc.
$37.26 (-3.94%) $-1.53
Exelixis, Inc. Stock Quote
Exelixis, Inc.
$21.67 (0.56%) $0.12
GoodRx Holdings, Inc. Stock Quote
GoodRx Holdings, Inc.
$9.44 (21.69%) $1.68
DermTech, Inc. Stock Quote
DermTech, Inc.
$5.99 (-28.94%) $-2.44

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

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