As we kick off 2023, there are a few signs that select stocks might be in ling for a great year. The stocks for healthcare companies IQVIA Holdings (IQV 0.77%) and Vertex Pharmaceuticals (VRTX 0.43%), for example, have been on the upswing recently thanks to reports of increased revenues, rising earnings, and management outlooks that point to more growth on the way.

IQVIA's shares were down more than 18% over the past year, but they're up more than 18% over the past three months. The company is starting to see volumes get back to normal now that the worst effects of the pandemic are fading. Meanwhile, Vertex's shares were up more than 30% over the past year, and the biotech company's pipeline could soon deliver a blockbuster treatment that will help it build on last year's success.

Let's take a deeper dive into why these two unstoppable growth stocks are buys in 2023.

1. IQVIA solves a complex problem for pharmaceutical companies

IQVIA Holdings is one of the world's largest contract research organizations, with more than 82,000 employees and a market cap of $38.1 billion. It helps other healthcare companies develop their products by running clinical trials for them while providing associated laboratory and analytical services.

It makes sense for many companies, particularly smaller biotech start-ups, to outsource their clinical trials to contract research organizations, taking advantage of their experience while avoiding the expenses involved with adding staff, particularly given that there are shortages of many types of skilled workers. Clinical trials have become more complex and expensive, and contract research organizations enjoy certain advantages in speed and efficiency compared to some pharmaceutical companies' in-house clinical trial teams.

The addressable market for contract research organizations is also growing because the number of clinical trials being conducted keeps increasing. At the end of 2022, there were more than 437,000 ongoing clinical trials, up 9.5% from a year earlier, according to the National Library of Medicine. A report by MarketsandMarkets said the global clinical research market was $63.6 billion in 2022, and with a forecast for a compound annual growth rate of 11%, it is expected to be a $115.1 billion market within five years.

IQVIA is on track for its third consecutive year of earnings growth and its 12th consecutive year of revenue growth. In its third-quarter report, management said it expects annual revenue in 2022 to be between $14.33 billion and $14.43 billion, compared to $13.87 billion in 2021. Through the first nine months of the year, the company reported net income of $864 million, up 33.3% year over year, and earnings per share of $4.52, up 36.1%.

The company's size, experience (with more than 300 clinical trials performed in more than 50 countries), and large database of 1.2 billion non-identified patient records give it an edge over competitors. IQVIA was created via the 2016 merger of Quintiles, a contract research organization, and IMS Health, a healthcare data and analytics provider. With the growing use of analytics in developing drugs, its combined expertise often makes IQVIA the go-to contract research organization for pharmaceutical companies.

IQV Revenue (Quarterly) Chart

IQV Revenue (Quarterly) data by YCharts.

2. Vertex making a big step up

Vertex Pharmaceuticals is a dominant player in cystic fibrosis therapies, and it is continuing to build on that advantage. On Dec. 12, it announced that it had presented an Investigational New Drug application for VX-522, a messenger RNA therapy to treat cystic fibrosis. It plans to start trials for the therapy within weeks. 

Vertex already has four approved therapies to treat cystic fibrosis: Trikafta, Kalydeco; Orkambi; and Symdeko, but it's the triple-drug combo Trikafta that is the blockbuster, supplying $2 billion of the company's total third-quarter revenue of $2.33 billion. That figure was up 18% year over year, and the company reported quarterly earnings per share of $3.59, up from $3.28 in the same period a year earlier.

Vertex has used some of its cystic fibrosis profits to develop -- in partnership with CRISPR Therapeutics -- what could be its next blockbuster: exa-cel. The ex vivo CRISPR/Cas9 gene-editing therapy was successful in early trials to end the need for blood transfusions for patients with two genetic blood disorders: sickle cell disease and transfusion-dependent beta-thalassemia. 

The company said it expects to complete its rolling biologics license application for exa-cel with the Food and Drug Administration (FDA) this quarter. According to Vertex research, there are 32,000 patients in the United States and Europe with severe cases of sickle cell disease or beta-thalassemia. The lifetime cost per patient to treat those conditions in the U.S. is estimated by Vertex to be between $4.2 million to $6.2 million for severe sickle cell disease and between $4.2 million and $5.7 million for beta-thalassemia. That makes the potential of a one-time curative therapy more enticing for payers.

Vertex's pipeline also includes the non-opioid painkiller VX-548. After a successful phase 2 trial, that drug was given a Breakthrough Therapy designation by the FDA, and is now in phase 3 clinical trials.