In the stock market, successful past performance isn't a guarantee of future success. That said, a company's track record can reveal clues as to whether it is likely to outpace the market moving forward. When a company has historically performed well, it might be worth looking more deeply into why that is and whether it can continue.
With that in mind, let's turn our attention to two healthcare giants with excellent track records -- Medtronic (MDT -1.41%) and Novo Nordisk (NVO -0.29%) -- and see why both companies may be well worth holding onto for the years ahead.
1. Medtronic
Like many other medical-device specialists, Medtronic had a rough go of it at the peak of the pandemic. Healthcare facilities swamped with COVID-19 patients postponed elective surgeries, leading to lower sales volume for some of Medtronic's products used by physicians. For the nine-month period ended Jan. 29, 2021 -- which includes much of the worst of the pandemic -- Medtronic's net sales dropped 4.3% year over year to $21.9 billion.
The company may face similar headwinds if the outbreak drags on, but Medtronic is a solid business to invest in for the long run. The sheer breadth of the company's services is impressive. It develops and markets devices across four major segments: diabetes care, neuroscience, cardiovascular, and medical surgical. Medtronic's dozens of products benefit from more than 49,000 patents, which confer strong protection against the competition.
The company continues to innovate too with a solid pipeline. It earned more than 190 regulatory approvals in the U.S., Europe, Japan, and other major markets in the past 12 months alone. This dynamic helps explain why the company has increased its quarterly revenue and profits over time and why it will likely continue to do so.
Image source: Getty Images.
One promising growth area Medtronic could benefit from is the robotic-assisted surgery (RAS) market. The company developed its Hugo RAS platform to compete with Intuitive Surgical's market-leading da Vinci surgical system. The Hugo system recently earned approval to be marketed in Europe after debuting in South America. It also earned an investigational-device exemption approval from the U.S. Food and Drug Administration (FDA) in May. This approval will allow the company to use its Hugo system in clinical studies in the U.S. to collect safety and effectiveness data.
The opportunities in the RAS market are enormous. Only about 3% of surgeries are performed using these nifty systems despite their benefits, including shorter hospital stays and faster recovery times for patients. Medtronic is still in the very early innings of its growth story in this market. While it will have to compete with Intuitive Surgical, there is surely enough space here for more than one winner.
This and other opportunities should help the company perform well, making it a solid stock to buy and hold for the next decade.
2. Novo Nordisk
There's a straightforward reason to invest in Denmark-based Novo Nordisk: The company is one of the leaders in the market for diabetes medicine. It has been a major player in this space for several decades. As of the end of the second quarter, the company's share of the diabetes drug market was 29.6%. Novo Nordisk's leadership in this market bodes well for its future. The proportion of the U.S. population with diabetes is unfortunately projected to continue growing rapidly.
And the need for effective drugs to help with this chronic illness will only increase over time. Novo Nordisk boasts several drugs with fast-growing sales. These include Rybelsus and Ozempic, both for patients with type-2 diabetes. Combined sales of these two products for the first six months of this year totaled 15.8 billion Danish Kroner (DKK) --or roughly $2.5 billion -- representing a 55% year-over-year increase.
Both drugs have significant room to increase their sales -- with combined annual revenue possibly reaching $15 billion in 2026, by some estimates. New approvals for drugs like Wegovy (currently prescribed for obesity) should also meaningfully contribute to the bottom line moving forward. Wegovy earned the regulatory nod in the U.S. back in June, and its launch has been very successful, according to management.
Further, Novo Nordisk has a rich pipeline of promising programs. One of the most exciting of the bunch is Icodec, a potential once-a-week insulin product for diabetes patients. Many of those who have diabetes take insulin daily, and so if Icodec is approved, it could be a big deal. Icodec is currently in a phase 3 clinical trial.
That's just the tip of the iceberg for Novo Nordisk's innovative, new medical products. Coupled with its already robust lineup, it looks poised to post strong financial results regularly. That's why I expect this pharma stock to beat the market over the next 10 years just as it did in the past decade.
