The healthcare industry is chock-full of compelling buying opportunities for investors of all ages, trading styles, and risk tolerance levels. No stock is a 100% guaranteed winner, and investing is not a perfect science.
However, if you put your money into quality businesses with sustainable paths to growth ahead, with strong leadership and compelling financials, you can build a portfolio that compounds meaningful returns with time.
On that note, here are two healthcare stocks to consider for your portfolio right now.
1. DexCom
DexCom (DXCM -9.90%) is one of the major players in diabetes care with a lineup of continuous glucose monitoring (CGM) devices used by diabetics around the world. A significant needle-mover for this business over the last year has been the launch of its latest generation CGM, the G7.
The G7 is marketed as having the fastest warm-up time of any CGM on the market. DexCom also says it is the most accurate of any such commercialized device, according to internal data, with a size that is 60% smaller than its predecessor, the G6. The G7 is also the most reimbursed of these devices on the market, thanks to vigilant efforts by DexCom to partner with public and private payers. As a result, the average DexCom user pays just $20 a month to use this potentially life-saving device, which has a 10-day wear time per sensor.
The market for CGM wearers is massive and growing. There are use cases for these devices for both type 1 and type 2 diabetics, but adoption among the latter population has historically been much slower. These trends are changing, a reality that DexCom is capitalizing on with its current lineup of products as well as a new CGM called Stelo that it plans to launch in 2024. The Stelo is designed specifically for type 2 wearers who do not use insulin.
There are roughly 40 million individuals with diabetes in the U.S. alone. However, it's estimated that only about 2.4 million Americans use a CGM. DexCom isn't the only big player in this space, but with the rising incidence of diabetes and continued adoption of these devices among patients, there's plenty of room for multiple parties to snag market share. Moreover, there is growing interest in the use of CGMs for pre-diabetics, as there are an estimated 75 million individuals in the U.S. alone who fit into this category.
DexCom has raked in revenue of $3.4 billion over the trailing 12 months, while profits for that period have totaled $377 million. And looking at trailing-12-month operating cash flow, DexCom has accumulated just shy of $750 million on that front. Investing doesn't have to be complicated, and mainstay businesses that serve an essential consumer need can prove highly resilient. DexCom is certainly worth a second look for the long-term investor searching for a steadily growing healthcare business with a considerable runway ahead.
2. Vertex Pharmaceuticals
Vertex Pharmaceuticals (VRTX -0.06%) has had a banner year, fueled by its flagship portfolio of cystic fibrosis therapies, approval for the world's first CRISPR-based therapy, and promising results from multiple studies of upcoming potential blockbuster drugs. The biopharmaceutical company is the only maker of drugs that treat the underlying cause of cystic fibrosis (CF), a genetic disease that is characterized by a mutation of the cystic fibrosis transmembrane conductance regulator (CFTR) gene.
Cystic fibrosis can be life-threatening, but the introduction of a class of drugs called CFTR modulators has changed the outlook for both quality and length of life for patients. All of Vertex's CF drugs are CFTR modulators. Despite having a significant footprint in the CF treatment market, its total addressable market is growing as more therapeutic options become available to patients and it garners label expansions for younger cohorts of patients.
Vertex is currently working on additional CF drugs, including a new triple-combination therapy that it expects to file regulatory paperwork for in mid-2024. The company is also on track to submit regulatory filings for VX-548, its non-opioid drug candidate for moderate to severe acute pain ailments around the same time. Both of these drugs have blockbuster potential for the business.
In 2023, Vertex reported revenue of $9.9 billion, up 11% from 2022. It also brought in profits of $3.6 billion for the 12-month period, a 9% increase from the prior year. The company had a considerable stash of cash and investments on its balance sheet at the end of the year, to the tune of approximately $14 billion.
Late last year, the first wave of approvals began for Vertex's gene-editing therapy Casgevy, which it co-developed with CRISPR Therapeutics and is a one-time functional cure for sickle cell disease (SCD) and transfusion-dependent beta thalassemia (TDT). Casgevy is now approved in the U.S., Great Britain, Bahrain, and the Kingdom of Saudi Arabia for SCD and TDT. While gene-editing therapies take considerable time to administer for each patient, some analysts think Casgevy's revenue potential will help it achieve blockbuster status for Vertex before the end of the decade.
There's a lot for investors to like about this stock, and the years ahead could bring even more enviable growth.
