Healthcare businesses may not be receiving the same level of attention from investors that certain other stock sectors do (did someone say tech stocks?), but they also don't cause nearly as much stress over the potential for volatility. These companies deliver the medicines, therapies, devices, and services consumers require year-round regardless of what is happening with the economy or stock market. That suggests an opportunity for a certain type of investor.
If you're someone looking for a generally resilient industry to put cash into, healthcare stocks may just be your best bet. Let's take a closer look at two intriguing healthcare companies that could make you richer and maybe even help you worry less about your investment portfolio.
1. Teladoc Health
Teladoc Health (TDOC -2.40%) first caught the attention of investors when the coronavirus pandemic reared its ugly head in 2020. However, this business is hardly the new kid on the block. The company was actually one of the first-to-market leaders in the telehealth space and has been in business for more than two decades. Over that time, Teladoc's operations evolved significantly.
Today, Teladoc is one of the largest telehealth providers in the world and points out that more than half of the Fortune 500 use one or all of its various services. Its integrated care business, which features a range of digital health services from general medical to chronic-condition management used by large organizations and individuals, closed the first half of 2023 with more than 86 million members.
The company's acquisitions over the years fueled its ability to provide a platform that facilitates a broad spectrum of digital healthcare services. But those acquisitions weren't cheap, and Teladoc was hit with profitability issues in the last several quarters. Still, almost all of its net losses in these financial reports have been paper-only losses, a point that is important to emphasize.
On the flip side, these acquisitions helped the company boost its annual revenue by nearly 500% over the last five years. Over the last three years, revenue is up roughly 120%.
Revenue climbed 11% year over year to $1.3 billion in the first half of 2023. Teladoc also reported adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $125 million, up 23% year over year. Importantly, its net loss in the six-month period was just a fraction of what it was during the same time last year: $134 million instead of $10 billion (a big part of this figure was a write-down of its 2020 Livongo acquisition). That lower net loss was a roughly 100% improvement on the bottom line, and again, most of that net loss figure was noncash related.
More growth could be in the offing as the global telehealth market is on track to be worth about $451 billion by 2032, a nearly 20% compound annual growth rate from its current valuation. The telehealth boom continues.
Teladoc's full-service platform is increasingly targeting almost every aspect of the healthcare consumer's journey while seamlessly connecting them with the appropriate medical provider. It benefits from demand on both sides of the doctor-patient relationship. Investors shouldn't give up on this stock, as there could be much more to this growth story in the years ahead.
2. Vertex Pharmaceuticals
Vertex Pharmaceuticals (VRTX -0.06%) only has four approved products on the market right now, but it's built a highly profitable, cash-producing business on the back of this small but mighty drug franchise. All four drugs belong to a class of medicines called cystic fibrosis transmembrane conductance regulator (CFTR) modulators. Importantly, they are the only medicines approved to treat the underlying cause of the genetic disease cystic fibrosis.
Vertex's CFTR modulators serve a large (and growing) total addressable market that could be worth as much as $25 billion before the end of the decade. With the only approved CFTR modulators in its arsenal, Vertex retained a first-to-market advantage that continues to serve it well while continuing to tap into revenue and profit opportunities from new and existing patient populations.
For one, its medicines continue to gain approval for younger and younger cohorts of patients. For example, its top-selling drug, Trikafta, was recently approved for cystic fibrosis patients as young as age 2 in the U.S. CFTR modulators aren't just improving quality of life but, in many cases, are helping patients live longer. This creates a dynamic in which demand for its medicines is steady and growing.
Late last year, management estimated there were 20,000 patients in North America, Europe, and Australia who could take CFTR modulators but aren't doing so yet. Thousands of cystic fibrosis patients can't take these drugs due to the nature of their underlying genetic mutation. For this patient population, Vertex is partnering with Moderna to develop an mRNA-based drug.
The company is planning multiple product launches -- all of which would target underserved, multibillion-dollar addressable markets -- in the next several years alone. These could include a potential functional cure for two rare blood disorders and a non-opioid drug for a variety of acute pain ailments, including diabetic peripheral neuropathy, a condition estimated to impact up to 50% of all people with diabetes.
While the cystic fibrosis franchise may be the whole pie for Vertex Pharmaceuticals now, it's just a slice of the long-term vision management has laid out for the business. Investors looking for a profitable healthcare company with plenty of room left to run may want to consider this growth stock now.
