Three Motley Fool contributors have joined this roundtable to scour the market for some exciting initial public offerings (IPOs) in the healthcare field. The trio likes Amylyx Pharmaceuticals (AMLX -5.56%), a biotech with a treatment for Lou Gehrig's disease; HilleVax (HLVX 3.71%), a recent spinout from a Japanese pharmaceutical giant; and DocGo (DCGO 4.39%), a busted special purpose acquisition company (SPAC) from 2021 that's already making money.
Here's why our roundtable is excited about these three names.
This biotech is ready for blastoff
Alex Carchidi (Amylyx Pharmaceuticals): Amylyx is worth owning because there's a solid chance it'll soon commercialize the first treatment for amyotrophic lateral sclerosis (ALS) that prolongs survival time while also slowing the disease's progression. Its medicine, AMX0035, has been approved for sale in Canada since late July, and regulators at the U.S. Food and Drug Administration will weigh in on the company's application for commercialization on Sept. 29. It's also in the final stages of preparing to launch the drug in the European Union, pending the green light from regulators, which could come in the first half of 2023.
Since its IPO in early January of this year, its shares are up by nearly 61.6%, and it'll likely rise even higher. Right now, its revenue is negligible, as there hasn't been an earnings report since the approval of its drug in Canada. But next year, analysts estimate on average that it'll bring in around $174 million if AMX0035 launches in the U.S. as planned, and that'll mean the company's top revenue growth rate should accelerate dramatically.
Furthermore, there aren't any other ALS medicines, so Amylyx will have free rein of the global market, and that could power shareholder returns for years. And, as it already has its foot in the door thanks to its approval in Canada, it isn't as risky as other biotech stocks, though it's still not exactly a great pick for investors with a low risk tolerance.
A newcomer to the vaccine space
George Budwell (HilleVax): HilleVax officially went public on April 29, 2022. The clinical-stage vaccine company is the product of the latest collaboration between Japanese pharma titan Takeda Pharmaceutical (TAK 0.61%) and the venture capital firm Frazier Healthcare Partners. The duo previously teamed up to form Phathom Pharmaceuticals, which culminated in the successful clinical development of the acid blocker vonoprazan.
HilleVax's entire value proposition is tied up in the midstage norovirus infection vaccine HIL-214 (formerly TAK-214). HIL-214 is a virus-like particle based vaccine designed to prevent moderate-to-severe acute gastroenteritis caused by norovirus infection. There are currently no approved vaccines for norovirus infection, an ailment estimated to cause 200,000 deaths worldwide every year. According to the company's latest update, the vaccine's ongoing trials should yield several key data updates over the next 12 months.
What's the investing thesis with this small-cap vaccine stock? The crux of the situation is that HIL-214 would likely achieve near-blockbuster status -- defined as $1 billion a year in annual sales -- as the first vaccine approved for norovirus infection. As a next step, HilleVax seems intent on using HIL-214's revenue stream to build a multiproduct vaccine juggernaut. Now, what's important to bear in mind is that HIL-214 is unlikely to hit the market before 2025, which means that this multiproduct value proposition will almost certainly take the better part of the decade to realize.
That doesn't mean that HilleVax stock isn't worth checking out. Takeda and Frazier have a strong track record of success in the clinic, and HIL-214's first batch of midstage data did deliver some rather encouraging results. But investors will need to take the long view with this fledgling vaccine company.
My family is buying shares of this one
Taylor Carmichael (DocGo): DocGo is a very well-named healthcare start-up that is competing with Uber in providing "last mile" healthcare services (i.e., bringing doctors to your house). Of course, these are not medical doctors, but CMAs (certified medical assistants), EMTs (emergency medical technicians), paramedics, LPNs (licensed practical nurses), and RNs (registered nurses).
It's not hard to imagine a future where you speak to a doctor on your computer or smartphone, via Doximity or Teladoc Health, and while you're having that conversation, the nurse or medical assistant shows up to check your blood pressure, perform a physical examination, and maybe do a sonogram using a mobile device from Butterfly Network.
Humanity loves services that are delivered to our house. We love pizza from Domino's and books from Amazon, and we will love healthcare professionals from DocGo. I think mobile healthcare is going to be a major trend over the next couple of decades. Patients will love it because of ease of use. And health insurance companies will love it because it can keep nonemergency cases out of the hospital. It's just a no-brainer idea, and I want to invest in it.
The company came public via SPAC last year, and so far the stock's been a bit of a stinker. That doesn't scare me -- I like being able to get in cheaper than the original price. Added bonus: DocGo has already achieved profitability and it's still growing like gangbusters. DocGo enjoys 11% profit margins and 76% revenue growth. It's got $200 million in cash and $14 million in debt, and it's still tiny with a $1 billion market cap.
The downside is there's not much of a moat here. Other competitors can and will show up. So it's kind of a mindshare grab as the company seeks to expand as fast as possible. DocGo is acquiring smaller operators around the nation as that's the fastest way to break into new markets. I'm very bullish on this new entry to healthcare.
