Smart investors are continually looking for new investment ideas. Sometimes, those ideas are so good that they're hard to pass up.
Three Motley Fool contributors think they've picked some stocks that fit the bill. Here's why they believe that Eli Lilly (LLY 1.19%), Novo Nordisk (NVO 0.84%), and Vertex Pharmaceuticals (VRTX -0.06%) are no-brainer growth stocks to buy in October.
This stock is crushing the market for a reason
Prosper Junior Bakiny (Eli Lilly): Stock performance isn't always a reliable proxy for a company's financial results and prospects. But in the case of Eli Lilly, it most certainly is.
In recent quarters, the biopharma's underlying business (not including its fluctuating and hard-to-predict coronavirus portfolio) has been performing well. The company's total revenue in the second quarter grew by 28% year over year to $8.3 billion.
Eli Lilly's lineup, spearheaded by products such as diabetes medicines Jardiance and Mounjaro, cancer drug Verzenio, and plaque psoriasis therapy Taltz, is only getting started. Mounjaro should earn plenty of label approvals and could go on to become one of the most successful medicines in the history of the industry.
That's to say nothing of Eli Lilly's clinical progress. It delivered excellent results in a phase 3 clinical trial for its Alzheimer's therapy donanemab. An approval in this area, where progress has been extremely difficult to come by, would be yet another milestone for Eli Lilly.
The rest of the drugmaker's pipeline is also impressive. It has promising candidates, including a potential once-weekly insulin product. Expect the company's lineup to become even stronger than it already is in the coming years. Analysts predict that Lilly's top line will grow at an annual average of 24% in the next five years, which is outstanding for a biopharma giant.
For growth-oriented investors, there is little to think about: Eli Lilly is an excellent stock to buy this month.
Novo Nordisk's stock is just getting warmed up
David Jagielski (Novo Nordisk): One of the best growth stocks to buy in healthcare right is Novo Nordisk. It's up 36% this year, and although the stock trades at more than 40 times its trailing earnings, this could be a huge moneymaker for investors in the long run given its tremendous growth potential.
The company isn't overly diverse: Its focus is mainly on obesity management and diabetes. But those are good areas to focus on, as there are significant growth opportunities there. Fortune Business Insights projects that the anti-obesity drug market will have a compound annual growth rate (CAGR) of 26% until the end of the decade.
Diabetes drugs don't offer nearly the same opportunities, but Fortune Business Insights also projects that until 2026, they will have a CAGR of 6%. Novo Nordisk already has two highly successful and popular products that can meet the needs of patients in those two areas: Ozempic for diabetes and Wegovy for weight loss.
Through the first half of 2023, Ozempic generated 58% revenue growth, with sales totaling 41.7 billion Danish kroner ($5.8 billion). Wegovy, which is in the earlier stages of its growth, rose at a rate of 367% as it brought in revenue totaling $1.7 billion.
Novo Nordisk has begun rolling out Wegovy to more international markets in recent months, including the U.K. and Germany. Investors should expect much more growth from the company in the near future.
What's also promising is that it generates a net profit margin of over 33%. As revenue rolls in, the company's bottom line will also show significant improvement, bringing down its earnings multiple in the process. That's why despite the stock's high valuation, it's still not too late to buy shares of Novo Nordisk.
Major catalysts on the way
Keith Speights (Vertex Pharmaceuticals): For most of its history, the central story for Vertex Pharmaceuticals has been its cystic fibrosis (CF) franchise. And it's a very good story. Vertex is highly profitable with continued solid revenue growth. Its shares perform well in down markets (jumping nearly 32% last year while the overall market sank) and up markets (climbing close to 23% so far in 2023).
CF will almost certainly remain important for Vertex for a long time to come. The company's nearest rival in treating the underlying cause of the genetic disease is years away from even the possibility of launching a drug.
In the meantime, Vertex is advancing its own pipeline. It expects to report results from a late-stage study of a vanzacaftor-based combo by year-end. This combo seems likely to become the big biotech's most profitable CF therapy yet because it has much lower royalties than Vertex's other CF drugs.
However, Vertex is also branching out beyond CF. The U.S. Food and Drug Administration (FDA) plans to announce its decision on approvals of exa-cel in treating sickle cell disease by Dec. 8. Another FDA approval decision in treating transfusion-dependent beta-thalassemia should be on the way by March 30, 2024. Vertex and its partner, CRISPR Therapeutics, are also pursuing regulatory approvals in the E.U. and U.K. for the same two indications.
The company plans to wrap up late-stage studies of VX-548 in treating acute pain by the end of 2023 as well. VX-548 should have a tremendous market opportunity if approved because it doesn't have the addictive potential and negative side effects of opioids.
Even more good news could be on the way looking a little farther into the future. Vertex is evaluating inaxaplin in a pivotal clinical trial targeting APOL1-mediated kidney disease. This genetic disease affects more patients than CF does but has no approved therapy to treat the underlying cause.
In addition, the company has several programs in early-stage development that could hold the potential to cure type 1 diabetes.
Despite its promising pipeline, Vertex stock remains cheap. Its price/earnings-to-growth (PEG) ratio is only 0.5. Any stock with a PEG ratio below 1 is typically viewed as attractively valued.
