It's time for some holiday shopping. And I'm not just talking about gifts for friends and family. You may also want to buy yourself the gift of a few bargain stocks. These are players that have strong fundamentals, but for one reason or another the share price has stumbled.
I've found three in the healthcare sector that fit the bill. They have products on the market and are growing revenue -- and prospects for revenue in the future are strong too. So if you happen to have $1,000 and are looking for opportunities, check out these promising players.
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1. Exelixis
Exelixis' (EXEL -0.45%) star molecule is cabozantinib. It's the basis of two Exelixis drugs: cabometyx, which treats renal cell carcinoma and hepatocellular carcinoma (HCC), and Cometriq, which treats medullary thyroid cancer. Exelixis has also benefited from label expansions. For instance, regulators this fall gave the nod to Cabometyx in locally advanced or metastatic differentiated thyroid cancer. These products are pushing revenue higher.
EXEL Revenue (Annual) data by YCharts
And that's not the end of the story. Exelixis is investigating cabozantinib in more than 70 different indications in cancers ranging from gynecologic to pediatric. If even a few make it to commercialization, Exelixis could be looking at a significant increase in revenue in the coming years.
Exelixis stock has dropped nearly 17% this year and is trading at only 19 times forward earnings estimates. That's down from more than 28 earlier this year. Why the decline? Analyses of a phase 3 study of cabozantinib combined with another drug to treat HCC showed it may miss one of its primary endpoints. This is disappointing, but it's also a normal part of clinical development. And it doesn't tarnish the overall shine of Exelixis' cabozantinib program.
2. Vertex
Vertex Pharmaceuticals (VRTX 0.29%) has also suffered due to a clinical trial disappointment. Two candidates for alpha-1 antitrypsin deficiency failed in trials -- one last fall, another this spring. Vertex shares are heading for a 12% loss this year as investors worry about the company's future beyond its core cystic fibrosis (CF) treatment business.
I think the worries are overdone. First, Vertex is the leader in CF treatment. The closest potential competitor to its star drug Trikafta is... a potential Vertex drug. The company launched that candidate in phase 3 trials recently, and Vertex has said it expects to maintain CF market leadership until at least the late 2030s. That's a long while to benefit from billion-dollar revenue.
That doesn't mean Vertex is resting on its laurels. The company is advancing non-CF candidates in the pipeline, and two of them could become major blockbusters -- a potential one-time curative treatment for blood disorders and a candidate for type 1 diabetes. Vertex aims to submit the former for regulatory approval as soon as next year.
All of these points mean that Vertex trading at 15 times forward earnings estimates looks pretty cheap.
3. Seagen
Seagen (SGEN) has multiplied regulatory approvals in a short time. Back in 2019, the company sold only Adcetris for Hodgkin lymphoma. Since then, regulators have approved Padcev for the most common form of bladder cancer, Tukysa for a form of breast cancer, and just recently, Tivdak for recurrent or metastatic cervical cancer. As a result, revenue has surged.
SGEN Revenue (Annual) data by YCharts
In the third quarter, product revenue climbed 37% to about $366 million, and revenue for each drug increased in the double or triple digits. The company lifted its annual revenue guidance for each product.
And Seagen may grow revenue even further in the future. The company is investigating Padcev and Tivdak in combination with Merck's blockbuster oncology drug Keytruda. Potential use along with Keytruda could significantly broaden Seagen's market opportunity. And Seagen's pipeline includes nearly 20 potential label expansions for currently approved drugs -- and nine new candidates with several potential indications. Seagen's shares have slipped about 14% since the start of the year, so this may be the perfect time to get in on a company with major revenue opportunities in the years ahead.
