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2 Top Healthcare Stocks Ready for a Bull Run in 2022

By Alex Carchidi – Dec 20, 2021 at 1:23AM

Key Points

  • Buying shares of stock in advance of major developments is one way to invest for the long term.
  • Catalyst Pharmaceuticals is working to access a larger group of patients with its commercialized drug.
  • Vaxart's coronavirus vaccine trial will soon report key results.

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They've strongly outperformed the market in the past, and they could easily do it again.

There's nothing more exciting for me as an investor than when I notice that one of my stocks is surging after finally getting its value recognized by the market. While there's no way to know for sure if a given stock has what it takes to outperform, looking at a company's upcoming catalysts is one trick that can help to stack the deck in your favor.

In that vein, today I'll be discussing two healthcare businesses that have a few high-impact events coming in the near future. Assuming things break the way shareholders are hoping for, both could be off to a bull run next year.

A scientist examines a vial while sitting at a laboratory bench.

Image source: Getty Images.

1. Catalyst Pharmaceuticals

Catalyst Pharmaceuticals (CPRX 3.02%) makes a drug called Firdapse for Lambert-Eaton myasthenic syndrome (LEMS), a rare autoimmune disorder. Since the drug's first sales in 2019, the company's quarterly revenue has exploded by a shocking 7,090%. And in the coming years, that revenue could grow even more. 

Now, Catalyst is focused on expanding Firdapse's approved indications to cover more populations of patients with LEMS, starting with children. At the same time, the company is developing an extended-release version of Firdapse, which will be preferable for patients and potentially command a higher selling price too. It's also working to commercialize Firdapse in Japan, starting early next year with a small registrational clinical trial that'll pave the way for larger investigations. 

Opening up new markets outside of the U.S. and Canada could be huge, as LEMS is so rare that only one in 100,000 people has it -- and Catalyst is the only company working on treatments. The main challenge will be finding markets where the disease is known enough to be consistently diagnosed. So, Catalyst's decision to target Japan is a good one, as the country has a high concentration of healthcare resources which should ensure that people with LEMS are both findable and treatable with Firdapse. Eventually, scaling the business to reach all of the LEMS patients in the entire world isn't something that's too far-fetched.

Aside from its soon-to-be-expanding indications and its foray into foreign markets, the stock is priced to perfection. Its trailing price-to-earnings (PE) ratio is 18, which is vastly lower than the wider market's average near 30. 

The only question is: When will investors notice that this quiet stock is secretly a monster in the making?

Chart showing Catalyst's and Vaxart's total returns outperforming the S&P 500 in 2021.

^SPX data by YCharts

2. Vaxart

Vaxart (VXRT -8.68%) is a small biotech that hasn't commercialized a product yet, but its oral coronavirus vaccine candidate just might be its first. And while the clinical trial process to evaluate the candidate takes place, there's still enough going on to push the stock into a bull run

The advantage of Vaxart's vaccine is that it's a pill rather than a jab. It's also shelf-stable and doesn't require an experienced healthcare worker to administer. As such, the pill could be a great fit for healthcare systems in resource-strapped areas, and it could even be sent to people by mail to reduce the care burden. Of course, that's assuming the candidate can make it through the rest of its clinical trials and be proven safe and effective. 

A favorable result from the vaccine pill's phase 2 trial would help to prove that its headliner oral vaccine technology is workable in the real world. As of now, the company's next planned data update is in the first quarter of 2022. Data derived from animal models in earlier experiments were largely positive, so a confirmation of those results in human subjects would be huge for shareholders.

Vaxart is also advancing its pill for seasonal influenza, which concluded and reported its phase 2 trial results in January of 2020. Per the trial, its flu vaccine pill appears to be 39% effective at preventing symptoms, which is significantly better than the 27% effectiveness of one of the existing flu jabs on the market, Fluzone. Once Vaxart decides to move forward with its influenza pill, investors will have a chance to realize some upside upon the initiation and conclusion of its next clinical trials.

It's important to remember that Vaxart is still a highly risky biotech stock, even if it could go on a tear in 2022. Clinical trials don't always go as planned, especially when there's a new technology in the mix.

Alex Carchidi owns Catalyst Pharmaceuticals. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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