The healthcare sector is unlikely to become obsolete anytime soon, but individual companies can very much get left behind if they fail to keep up with the changing dynamics of the industry. That's one of the things investors looking for companies within this sector should watch out for on a regular basis.
Let's look at three healthcare stocks that are leaders or innovators in their respective niches and could provide excellent returns in the next 10 years: Vertex Pharmaceuticals (VRTX -0.06%), Moderna (MRNA 1.69%), and Gilead Sciences (GILD 0.23%).
1. Vertex Pharmaceuticals
Vertex Pharmaceuticals has soundly beaten the market in the past 10 years, and the company is in an excellent position to do so in the next decade. Here are two reasons why. First, Vertex's core cystic fibrosis franchise should continue to perform well. The company's most important product is Trikafta, which can treat up to 90% of CF patients.
Trikafta won't run into a patent cliff until 2037. And as history has proven, developing CF therapies is extremely complicated. Vertex has consistently succeeded where others have failed. That's why it has held a monopoly in this area for over 10 years. Second, Vertex is well on its way to earning brand-new non-CF approvals, which will help diversify its lineup and provide other growth drivers.
It is currently waiting for exa-cel to earn the green light in the U.S. and Europe. This rare blood disease gene-editing therapy, which Vertex Pharmaceuticals developed with CRISPR Therapeutics, boasts blockbuster potential. But it is just one of the several promising programs in Vertex's pipeline. The company is working on a few others to achieve management's stated goal of launching five new products in the next five years.
With its CF business still making headway and several other products in its portfolio, Vertex Pharmaceuticals' revenue and earnings growth should increase, and the company should remain a market-beater for a while. The stock isn't far from its 52-week high, but it is a buy even at these levels.
2. Moderna
Like many other relatively unknown (at the time) biotechs, Moderna rose to prominence during the early days of the pandemic as it entered the race to develop an effective coronavirus vaccine. Unlike most of these other biotechs, however, Moderna has remained relevant since then, mainly for two reasons. First, its COVID-19 vaccine was a smashing success, allowing the company to generate impressive sales over the past two years.
Second, Moderna has a rich pipeline and has made meaningful progress beyond its coronavirus work. That puts the company in an excellent position to succeed in the next decade. The company recently filed an application in the U.S. and Europe for its RSV vaccine, which could earn approval within the next year.
Moderna has several other candidates in phase 3 studies, including a potential influenza vaccine, and another that targets the cytomegalovirus. Further, Moderna's personalized cancer vaccine, mRNA-4157, showed positive results in a phase 2 clinical trial in combination with Merck's blockbuster cancer drug, Keytruda.
The company's mRNA approach will be important since mRNA-based vaccines are much faster to develop, which results in less time in the clinic, faster launches, lower costs, and higher profits. These advantages will work wonders for the company's stock market performance in the next decade.
3. Gilead Sciences
Gilead Sciences has been innovating for a long time, especially in the market for HIV medicines. The company's current portfolio in that therapeutic area includes Biktarvy, the top-prescribed HIV regimen in the U.S. There is also Descovy for PrEP, a leading medicine that helps reduce the risk of contracting HIV.
Last year, Gilead earned approval for another innovative HIV medicine, Sunlenca. The great thing about this new treatment is that it is a six-month long-acting regimen, the first of its kind. It is significantly easier and more convenient for eligible patients, so it should become a successful therapy. Gilead's pipeline features many potential HIV medicines.
And given the company's track record, there will likely be many more approvals. Gilead Sciences isn't just an HIV company, though, as it also has a respectable cancer portfolio that is growing in prominence.
Along with its innovative potential, Gilead Sciences is also an excellent dividend stock. The company currently offers a yield of 3.93%, compared to the S&P 500's average of 1.54%. The company has raised its payouts by a decent 31.6% in the past five years. Gilead Sciences can offer investors looking for stable dividend-paying companies precisely what they want in the next 10 years.
