The healthcare industry has proven to be a remarkably resilient place to put capital to work in a wide range of environments. From life-saving medicines and therapies to vaccines, these are just a few examples of the essential products that healthcare companies make that render them particularly defensive investments in a bearish environment.
With that, let's take a look at two surefire healthcare stocks you may want to consider hitting the "buy" button on to kick the new year off on a high note.
1. AbbVie
AbbVie (ABBV 0.98%) is a pharmaceutical giant. It's known for products like Humira, which had been the No. 1 selling drug in the world for nearly a decade until 2021 when it was knocked from the top due to record-breaking sales of Pfizer's Comirnaty. Humira is approved for a wide range of indications, from rheumatoid arthritis to Crohn's disease to plaque psoriasis. With 2023 as the year when U.S. patent exclusivity for Humira comes to an end, biosimilar competition will inevitably heat up in the period ahead.
However, investors who might be concerned about these developments should take a step back and look at the bigger picture, which is altogether brighter than it might appear at first glance. For one, it's worth noting that the company already lost patent exclusivity for the drug several years ago in international markets. Even as international sales of Humira have declined, the company has remained profitable. It continues to be acquisitive and to ramp up research and development initiatives.
AbbVie also has top-selling products like Skyrizi, Rinvoq, Botox Therapeutic, and Botox Cosmetic in its portfolio, which helped to drive the $15 billion in net revenue and $4 billion in net income the company reported in the third quarter of 2022 alone. At the J.P. Morgan conference in January, while CEO Richard Gonzalez forecast a deceleration in overall sales from Humira biosimilar competition this year and next, he noted that the company does not plan to lower its 2024 sales guidance, due to the strength of its remaining portfolio.
Gonzalez also said that management expects AbbVie to get back to steady upward growth in 2025. He noted that Skyrizi and Rinvoq alone are on track to eclipse Humira sales by the year 2027. It's also important to emphasize that while increased competition to Humira could affect AbbVie's top and bottom line as it recalibrates to other sources of growth, a number of the drug's manufacturing patents are still in force until 2034, which should continue to pose challenges to companies wishing to launch Humira biosimilars.
For long-term healthcare investors, AbbVie's robust portfolio of products and established track record of profitability (its annual net earnings have risen by more than 100% over the trailing five years alone) are all green flags for the company's future, even after the star power of Humira begins to recede. For income investors, it's also worth mentioning that the healthcare stock pays a dividend that currently yields 4% and which has risen more than 50% in the last five years alone.
2. Vertex Pharmaceuticals
Vertex Pharmaceuticals (VRTX 1.25%) is another rock-solid healthcare stock for long-term investors to consider buying in 2023 and holding for many years. The biopharmaceutical company has built its business around a portfolio of four top-selling products, all of which treat the rare genetic disease cystic fibrosis.
These drugs are all CFTR modulators, a class of drugs that has had a revolutionary impact on what a diagnosis of cystic fibrosis means for patients, as well as the longevity and quality of life that patients can experience. Simply put, the goal of CFTR modulators is to correct and manage the underlying protein malfunction that causes someone to have cystic fibrosis in the first place. And since it owns the only approved CFTR modulators on the market, Vertex Pharmaceuticals has retained a distinct competitive edge in this multibillion-dollar segment of the rare disease drug market.
Over the past decade, the strength of Vertex's small but top-selling portfolio has enabled it to grow its revenue by more than 200%. Meanwhile, the company's net earnings have skyrocketed to the tune of about 790% over the trailing decade. And the company's cash position has also soared more than 300% in the past 10 years.
Now, Vertex is looking toward to the future as it seeks to launch itself to future growth from the established successes of its lucrative portfolio.
The company could soon witness its first non-cystic fibrosis product approval. Vertex and its partner CRISPR Therapeutics are awaiting regulatory review of exa-cel, a therapy that could be a one-time functional cure for the rare blood disorders sickle cell disease and transfusion-dependent beta thalassemia. VX-522 is another promising candidate from Vertex's pipeline that it's developing with Moderna. It's an mRNA therapy for cystic fibrosis patients who don't benefit from CFTR modulators.
Then there's the the company's acute pain disorder candidate VX-548, which is in phase 3 clinical testing. CEO Reshma Kewalramani noted in the Q3 earnings call that the drug "offers the potential of highly effective pain relief without the side effects or addictive potential of opioids." Investors could be witnessing just the beginning of the long-term growth runway that Vertex Pharmaceuticals could achieve over the next decade, creating a tempting buying proposition in the current market and well beyond.
