July is a great month for investing. We've seen how companies have fared in the first half of the year -- from business and share-performance perspectives. And we often have a few clues about what may lie ahead in the second half. Of course, it's important to consider how this fits into the long-term picture. After all, ideally, it's best to hold onto a stock for at least five years.
Healthcare is a sector brimming with opportunities right now. Here, I'll talk about a vaccine stock on the rise, a biotech company with a catalyst on the horizon, and a surgical company that leads the market. Let's take a closer look.
Novavax (NVAX -1.36%) has reached an exciting moment. The company has brought its coronavirus vaccine to market in various countries and in the first quarter began generating revenue and profit. The company still is waiting for the U.S. Food and Drug Administration (FDA) to OK an Emergency Use Authorization (EUA). Recently, an FDA advisory committee voted in favor. So it's likely an official nod will follow.
Most Americans already have been vaccinated. But some have been waiting for more of a traditional vaccine -- like Novavax's -- so the company still could gain some market share in the U.S. Novavax's vaccine works well against omicron and its subvariants. Still, the company is working on a strain-specific candidate and expects it to be ready in the fourth quarter.
And further down the road, Novavax aims to bring a combined coronavirus/flu shot to market. It plans to launch a phase-2 trial for that candidate by the end of the year.
Novavax shares have dropped about 60% this year. And today, they're trading at only about 2.5 times forward earnings estimates. This looks cheap considering Novavax is just at the beginning of its earnings story.
2. Vertex Pharmaceuticals
Vertex Pharmaceuticals (VRTX 0.04%) has been generating billion-dollar revenues and profits for quite some time. That's thanks to its booming cystic fibrosis (CF) business. The company is the global leader in this treatment market. It's top drug, Trikafta, has the potential to treat 90% of CF patients. And the company should continue to sign on patients as countries approve reimbursements and regulators approve use in younger age groups.
The biotech company is also working on a candidate that may eventually beat Trikafta. That potential product is in phase-3 studies. And Vertex has joined forces with Moderna to develop a treatment for the 10% of CF patients who can't be treated with its current drugs.
All of this spells a bright future for Vertex. But there's more. Vertex may soon be on its way to success in an area beyond CF. The company and its partner CRISPR Therapeutics aim to submit their gene-editing candidate for blood disorders for regulatory approval by the end of this year. Today, treatment options for blood disorders beta thalassemia and sickle cell disease are limited. Vertex's eventual product could become a blockbuster.
Vertex shares are already on the rise this year. They've gained about 30%. But a regulatory filing and potential approval could drive them much higher.
3. Intuitive Surgical
Intuitive Surgical (ISRG -0.56%) is the leader in the global robotic surgery market. The company has installed more than 6,900 of its flagship da Vinci systems around the world.
One of Intuitive's strengths is this leadership. The systems cost more than $1 million, so it's unlikely hospitals will switch to a competitor once they've invested. And surgeons train on the da Vinci. So they will probably want to stick with this robotic system, too.
Intuitive struggled at certain points during the pandemic as surgeries were postponed. That could happen again if coronavirus cases surge. This is a risk for Intuitive. But the good news is this sort of movement is temporary. Overall, demand for the da Vinci is strong. Procedures increased 19% in Q1 year over year. And da Vinci installations grew 4%.
Another positive point: Intuitive makes most of its revenue through sales of the disposable tools needed for each da Vinci procedure -- not through the one-time sale of a system. So each installed robot represents recurrent revenue.
Today's general economic environment and concerns about a rise in coronavirus cases are weighing on Intuitive shares right now. And that's hurt valuation. The stock is trading at 41 times forward earnings estimates. That's down from more than 70 at the start of the year. Considering Intuitive's leadership and long-term prospects, right now looks like a great time to buy.