Winning stocks have a tendency to keep on winning. As a result, it's never a bad idea to consider buying equities with strong forward momentum.
That being said, investors should always make sure these types of equities are moving northward for good reason. Here are two healthcare stocks that have been breaking out this year in response to clear-cut catalysts, making them worth considering as long-term buy and holds.
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A precision cancer drugmaker
Acrivon Therapeutics (ACRV 4.38%) is a relative newcomer to the publicly traded biopharma scene, with the drugmaker's shares debuting on the Nasdaq stock exchange last November. Nonetheless, Acrivon's share price has already risen by a noteworthy 84% since its IPO three months ago.
What's all the fuss about? Acrivon recently advanced its lead candidate, ACR-368, into a phase 1/2 trial as a treatment for multiple solid tumor types. Specifically, the small molecule drug is being evaluated as both a monotherapy and as part of a combo regimen, in patients with platinum-resistant ovarian, endometrial, or bladder cancer. The study is expected to yield top-line data around the middle of 2026, according to clinicaltrials.gov.
What's noteworthy about this trial is Acrivon's predictive gene signature test known as OncoSignature. This companion diagnostic, in theory, should tilt the odds of success in favor of ACR-368 in this mid-stage basket trial. That's a big deal because these initial indications represent multibillion-dollar markets, which is an enormous commercial opportunity for a company with a sub-$500 million market cap at the time of this writing.
Even with this novel diagnostic, though, Acrivon isn't a slam-dunk investment. Experimental cancer drugs are always a high-risk proposition due to a host of risk factors such as clinical/regulatory setbacks, patent issues, fierce competition, and market adoption post-approval. As a result, potential investors may want to keep their initial position on the small side.
A turnaround play
Verrica Pharmaceuticals (VRCA 3.19%) stock has jumped by a stately 162% through the first month and a half of 2023. Investors have bid the dermatology drugmaker's shares up this year in response to the recent resubmission of its lead product candidate, VP-102, for regulatory approval to the Food and Drug Administration (FDA). VP-102 is a drug-device combination containing cantharidin. It is intended as a topical treatment for the viral skin condition known as molluscum contagiosum.
Last year, the FDA rejected the experimental molluscum contagiosum treatment over manufacturing issues. Verrica has since transferred bulk material production to another contract manufacturer, a move management believes should resolve this single outstanding deficiency in its U.S. regulatory filing.
And Wall Street analysts seem to be on board with this take. Since the start of the year, the company's stock has received a handful of upgrades from analysts, with its most recent consensus price target implying a healthy 65% upside potential from current levels.
Why is this stock worth buying and holding for the long term? VP-102 has the potential to generate upwards of $300 million in peak sales, per analysts' estimates. That amount should allow Verrica to fund its other value-creating pipeline assets in high-value indications like basal cell carcinoma without having to constantly dilute shareholders. This small-cap healthcare stock, in turn, could deliver market-beating returns over the balance of the decade.