Some growth stocks on the market are grabbing much of the attention and seeing their share prices soar, perhaps thanks to their work in an exciting field like artificial intelligence. Others haven't had that kind of luck this year. Intuitive Surgical (ISRG 2.70%) and Vertex Pharmaceuticals (VRTX 2.13%) belong to the latter group. Both healthcare leaders have lagged the market this year. However, they remain excellent growth stocks to put your hard-earned money into right now, given their prospects.
1. Intuitive Surgical
Intuitive Surgical, the maker of the da Vinci surgical system, is down 16% this year as tariffs are only just beginning to affect the company's financial results. But this could represent a great opportunity to buy a stock that usually beats the market on the dip, provided it can bounce back, of course. And there are great reasons to believe it can. Intuitive Surgical's innovations in surgical robotics have made it one of the undisputed leaders in the field.
The company's installed base continues to grow and got a nice boost last year when it launched the fifth generation of its da Vinci system. Intuitive Surgical's procedure volume presents an even more important growth opportunity than selling robot systems. Performing surgeries with the company's devices requires specialized instruments and accessories that need to be replaced fairly regularly. In other words, as procedure volume grows, the sale of accessories practically creates a recurring, predictable source of revenue for the company. And considering robot systems help improve health outcomes, there is plenty of whitespace here.
Will increased competition in this market disrupt Intuitive Surgical's prospects? Not significantly. The healthcare specialist has a significant first-mover advantage and an existing ecosystem of clients. Intuitive Surgical's business also benefits from high switching costs, given the investment in money and staff training time required for healthcare facilities to operate the da Vinci system. The company's economic moat is difficult to penetrate. What about tariffs?
The company can address this issue in several ways, such as negotiating with the White House (a strategy that is proving successful for some drugmakers), relocating its manufacturing sites, or taking advantage of its pricing power by passing cost increases on to its customers, which would help offset the impact. In short, despite some obstacles, Intuitive Surgical remains an attractive investment option due to significant opportunities in its industry and its ability to navigate obstacles. With $1,000, investors can buy two of the company's shares.
2. Vertex Pharmaceuticals
Vertex Pharmaceuticals has faced some clinical setbacks over the past year, an important reason its shares are down significantly. However, the company's core business remains strong. Vertex Pharmaceuticals' franchise of cystic fibrosis (CF) products continues to generate increasing sales and profits. The best part is that the company is slowly expanding its pipeline, an effort that should help it accelerate top-line growth in the next few years. Vertex Pharmaceuticals earned approval for Journavx earlier this year.
The medicine treats acute pain. There is plenty of competition here, but Journavx is a non-opioid-based therapy. Given the significant side effects that come with opioid-based medicines and the large number of patients who suffer from acute pain, Journavx could find tremendous success. The medicine has already gained significant traction with third-party payers in the U.S.
Vertex Pharmaceuticals is working on other pipeline candidates that could lead to brand-new approvals in the next couple of years. The company's investigational therapy for type 1 diabetes (T1D), zimislecel, could be its next launch. In an ongoing clinical trial, zimislecel is showing that it can restore most patients' ability to produce their own insulin, while significantly decreasing or even eliminating severe hypoglycemia events.
Zimislecel will initially target only a small number of T1D patients, but the medicine could be a major breakthrough in the field and eventually contribute significantly to Vertex Pharmaceuticals' results. The company boasts several other mid- and late-stage pipeline candidates, as well as another approved therapy, Casgevy, which treats a pair of rare blood diseases. Between its expanding lineup and strong financial results, Vertex should be able to bounce back. At current levels, the stock is a buy, and $1,000 can afford two shares.
