COVID-19 has created a lot of volatility in the stock market. The whole market crashed in 2020, but many stocks quickly recovered. Indeed, there have been some high-flying pharmaceutical stocks that have skyrocketed as the biotech industry has fought back against the virus. And there are also some really interesting healthcare stocks that are flying under the radar.
Here's why three Motley Fool contributors, in this roundtable discussion, think you might want to discover NRx Pharmaceuticals (NRXP -2.79%), FIGS (FIGS 1.07%), and OptimizeRx (OPRX -4.32%).
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Multiple shots on goal
George Budwell (NRx Pharmaceuticals): Although NRx Pharmaceuticals has gotten a fair amount of ink from several media outlets in recent months, the biotech's investing thesis has yet to resonate with the broader investing community. As proof, the drugmaker is currently being valued at a mere $238 million at the time of this writing. What's particularly noteworthy about this small-cap biotech stock is that NRx Pharmaceuticals sports two potential blockbuster COVID-19 products in its pipeline. What's more, both of these product candidates may hit the market this year. So there's a real chance that NRx Pharmaceuticals stock might be incredibly undervalued right now.
What's the backstory? NRx Pharmaceuticals recently filed an Emergency Use Authorization application with the Food and Drug Administration (FDA) for its COVID-19 drug known as zyesami. The goal is to get zyesami approved as a treatment for critically ill patients who are at immediate risk of death from respiratory failure despite treatment with Gilead Sciences' Veklury (remdesivir) and who are ineligible for enrollment into the ongoing ACTIV-3b trial sponsored by the National Institutes of Health (NIH). If approved, zyesami could quite possibly rake in over $1 billion in sales during its first 12 months on the market.
NRx Pharmaceuticals is also developing a promising COVID-19 vaccine called briLife. BriLife has so far shown encouraging signs of efficacy against both the delta and omicron strains of the virus. The company thinks this experimental vaccine could achieve peak sales in the area of $5 billion if approved before year's end. NRx Pharmaceuticals hopes to have this vaccine under regulatory review sometime in the second half of 2022, depending on the outcome of its ongoing phase 2/3 trial.
What's the risk? There's no guarantee that the FDA will approve zyesami or that briLife's late-stage trial results will warrant a regulatory filing. That being said, this unloved COVID-19 stock should still intrigue the risk-tolerant crowd. If all the stars align, so to speak, NRx Pharmaceuticals stock should soar.
Getting figgy with it
Patrick Bafuma (FIGS): Thus far, each new COVID-19 variant has caused a wave of hospitalizations, and healthcare workers often find themselves working 12-hour shifts. If you are going to spend at least half a day in scrubs, you might as well splurge on an anti-wrinkle, breathable, odor-resistant, ridiculously soft pair of FIGS scrubs.
Sure, the healthcare apparel company is expensive at a price-to-sales (P/S) ratio of 9.3, especially when you compare it to Lululemon's 7.5 P/S ratio. But FIGS saw 62% revenue growth in fiscal year 2021 versus 2020, whereas the athleisure company experienced 42% revenue growth. The scrubs company also has enviable gross margins of 72.3%, trouncing the 57.2% margins of Lululemon. With growth and margins like these, FIGS' current valuation is quite justified.
The market is huge, too. FIGS estimates a $79 billion global healthcare apparel market. By expanding its offerings to outerwear and "underscrubs" (essentially, a fitted, long-sleeved shirt), the company is creating its own markets. The designer healthcare clothing brand keeps its customers happy too, with 68% of net revenues in 2021 coming from repeat buyers, a number that has steadily increased every year since 2018. With higher growth and better margins than Lululemon, not to mention a mission statement of celebrating, empowering, and serving those who serve others, FIGS and its $3.7 billion market cap may not be an under-the-radar stock much longer.
Replacing the pharmaceutical sales call
Taylor Carmichael (OptimizeRx): Drug companies have been sending sales reps into hospitals for a long time. It's long been thought a necessary inconvenience as doctors have to be educated about new remedies and treatments. This job, however, has been getting more and more difficult. Doctors are generally averse to having these conversations. Roughly half of all doctors limit access to salespeople. COVID-19 has just made this situation worse.
The lockdown accelerated a development that was already underway. The $20 billion-dollar pharmaceutical marketing industry is shifting to digital. Roughly $4 billion of healthcare ad spend is now reserved for internet marketing. This has opened the door to OptimizeRx, which has introduced a new way for drug companies to reach physicians in the middle of their busy working day.
The average doctor spends almost six hours a day looking at patients' electronic health records (EHR) over the internet. And this is a highly fragmented market, with over 500 companies providing EHR software. Contracting with multiple EHR providers, Optimize has put together a marketing network that reaches over 700,000 healthcare professionals. That makes this tiny company the largest point-of-care communications network for doctors in the U.S.
A healthcare company that uses the OptimizeRx solution can reach a doctor while they are looking at a patient's records online. Thus, a salesperson can target a doctor with relevant information in the course of their ordinary workflow. So the OptimizeRx customer list is a who's who of Big Pharma: AbbVie, Amgen, AstraZeneca, Pfizer, Merck, Glaxo, Sanofi, Novartis, Medtronic, and more.
OptimizeRx delivered a 1,300% return on investment to its healthcare partners last year. The company's revenues jumped 53% in the most recent quarter, and OptimizeRx has already achieved profitability. Investors looking for a stock that is flying high under-the-radar ought to check out OptimizeRx.
