Growth stocks were back in style in 2023 after a disappointing year in 2022. However, not every growth-oriented company kept pace with the broader indexes. Here are two that didn't: Sarepta Therapeutics (SRPT 1.08%) and DexCom (DXCM -9.90%). These two healthcare companies certainly have their share of issues. But despite their relatively poor performances, both are worth buying and holding onto. Here is why.
1. Sarepta Therapeutics
Last year, Sarepta Therapeutics faced challenging clinical and regulatory issues. In late October, the company reported somewhat disappointing phase 3 trial results for a key medicine, Elevidys, leading to doubts regarding a label expansion for the Duchenne muscular dystrophy (DMD) therapy. And that was after the first approval of Elevidys was delayed by the U.S. Food and Drug Administration earlier in the year.
Sarepta Therapeutics has done fantastic work developing medicines for DMD, a progressive neurodegenerative medicine that affects patients' muscles. The approval of Elevidys, though delayed, was also a significant milestone for the biotech. It was the first gene therapy approved for DMD, and unlike Sarepta's other medicines that merely target the symptoms of the disease, Elevidys is a one-time treatment that addresses the underlying genetic conditions of DMD.
That's what makes Sarepta Therapeutics attractive: the company's proven innovative capabilities. It has also partnered with larger drugmakers, which should help with funding. For instance, it developed Elevidys in collaboration with Switzerland-based pharma giant Roche. The two companies will still seek label expansions for Elevidys, something that doesn't seem that far-fetched considering there aren't very many treatment options for DMD.
Meanwhile, Sarepta Therapeutics' financial results have been strong. In the third quarter, the company's revenue of $331.8 million jumped by 44% year over year. Sarepta Therapeutics is still unprofitable, but it is also improving on that front. Its third-quarter loss per share was $0.46, compared to a net loss per share of $2.94 in the prior-year period.
Elevidys has yet to boost the company's sales significantly, so top-line growth could improve this year. Over the long run, the company has more than 40 pipeline candidates that should yield important new approvals. That's why, despite lagging behind the market last year, this biotech stock looks attractive for patient investors willing to stay the course.
2. DexCom
DexCom develops and markets continuous glucose monitoring (CGM) devices for people with diabetes. These products allow patients to stay on top of their blood glucose levels by continuously tracking them throughout the day, as opposed to doing it at a specific time the way blood glucose meters do. Furthermore, CGMs often don't need painful finger sticks. The adoption of CGMs has been the driving force behind DexCom's results, but last year, it hit a rough patch in the market.
It wasn't due to anything DexCom did, though. Instead, the rise in popularity of weight loss medicines such as Zepbound and Ozempic is causing some investors to become skeptical about the company's future. However, management isn't worried. As DexCom Chief Executive Officer Kevin Sayer argued, physicians use weight loss medicines in combination with other means, such as CGM devices, to help patients better manage their health.
So these drugs can and should coexist with DexCom's products. Meanwhile, the company continues to deliver solid financial results. In the third quarter, revenue of $975 million increased by 27% year over year. DexCom earnings per share rose from $0.24 in Q3 2022 to $0.29. Importantly, the medical device specialist should maintain its momentum this year.
DexCom earned approval for its latest device, the G7, in Canada late last year. It has been on the U.S. market for only about a year, too, so it likely hasn't reached full penetration yet. Elsewhere, the business recently earned national reimbursement for another one of its devices, the DexCom ONE, in France, thereby expanding its reimbursed market in the country.
Furthermore, the company still sees vast opportunities both in the U.S. and abroad. In short, despite a slump last year, DexCom should be able to bounce back and deliver solid returns for a while.
