Michael Taylor
Michael Taylor is a manager director of health-care investment firm Critical Mass Partners, Hoboken, New Jersey, and manager of the Simplify Health Care ETF (PINK). Simplify.us
Obesity drugs have mesmerized Wall Street, but the rest of the health-care sector is stuck in the sickbed. Since the beginning of 2023, stock in Ozempic maker Novo Nordisk is up around 75% versus about 40% for the S&P 500 index. Health-care stocks? A little more than 10%. That has created opportunities because weight loss is not the only big deal in medicine. Drug approvals from the FDA, scientific breakthroughs, and the fast-aging population means the prognosis for beaten-down or ignored medical companies is bright.
Bottom Line Personal asked top health-care stock experts which areas of medicine and companies they are excited about. The panelists expect the health-care sector to get a boost in 2025 as interest rates decline and the political issue of drug costs in the election recedes.
Smart pills. A drawback of certain medications is that they have to be injected into the bloodstream. This is true of biologics—drugs derived from living organisms instead of those that are chemically synthesized. Vaccines and insulin are biologics, as well as some best-selling drugs, including the anti-inflammatory Humira and Remicade for rheumatoid arthritis and Crohn’s disease. Problem: Biologics are sensitive to the conditions in the gastrointestinal system. If delivered with a pill, they can break down before they are absorbed into the bloodstream. Replacing a painful injection with a smart pill could increase patient compliance and improve the medication’s efficacy. My pick now…
Rani Therapeutics (RANI), a biotherapeutics firm, has developed a smart pill for oral delivery of biologics. The RaniPill has a proprietary coating that protects the capsule and its biologic contents in the stomach. When it reaches the small intestine, the coating dissolves and a balloon inflates to deliver the drug into the intestinal wall via a tiny “microneedle.” The remains of the pill are excreted through the gastrointestinal tract. RaniPill is being tested in Phase I clinical trials of biologics to treat osteoporosis, psoriasis and psoriatic arthritis. While the firm does not expect FDA approval until 2027, the RaniPill could become a blockbuster in the $400-billion-a-year biologics market. Rani Therapeutics entered a partnership with South Korean biotech firm ProGen to develop an oral version of glucagon-like peptides, the new treatment for obesity. Recent share price: $2.16.*
John Vandermosten, CFA, is a senior biotechnology researcher at Zacks Small Cap Research, Chicago. SCR.Zacks.com
Nonaddictive pain medication. Pain management is a challenge for many Americans. Doctors have prescribed prescription painkillers such as hydrocodone and fentanyl. Such opioids are expected to grow to $110 billion annually by 2028. But opioids are highly addictive and easy to misuse. Many states have passed laws limiting prescriptions. Non-opioid treatments such as acetaminophen and ibuprofen aren’t strong enough to manage high pain levels and can cause side effects such as liver toxicity. My pick now…
Vertex Pharmaceuticals (VRTX). This biotech firm, best known for treatment of cystic fibrosis, generates $10 billion in annual revenue. It has developed a pipeline of non-opioid medications. Vertex’s lead candidate, suzetrigine, formerly known as VX-548, interrups pain signals in the nervous system before they reach the brain. Suzetrigine showed success in clinical trials in reducing pain after abdominoplasty and bunionectomy surgery…and another trial that helped patients with nerve pain caused by diabetes. Vertex is conducting a Phase 2 trial for pain management of lumbosacral radiculopathy, caused by compression of the lower back’s nerve roots. Vertex expects to get an initial FDA approval by mid-to-late 2025, then use its manufacturing, logistics and sales infrastructure to bring the pain medication to market. Recent share price: $465.08.
Rachel Elfman is an equity analyst specializing in health care for Morningstar Research Services, LLC, Chicago. Morningstar.com
Spinal medtech. Each year, more than 15 million patients suffer from spine issues, including osteoporosis or bone degeneration, fractures and abnormalities such as herniated disks. While the spine market itself is only a modest grower, it does reward innovators, which can gain share rapidly and grow multiples above the market. My picks now…
Alphatec Holdings (ATEC). This fast-growing firm is reinventing minimally invasive approaches to spine surgery—specifically spinal fusions—and is on its way to $1 billion annual revenue. It has grown well above market rates of 2% to 4% and should grow above 25% for 2024. The company is looking to apply its technology to redesigning spinal-deformity cases, which potentially doubles its market opportunity. This stock is appropriate for aggressive investors as Alphatec has used a fair amount of debt to finance growth and is just approaching cash-flow breakeven. Recent share price: $5.56
Globus Medical (GMED) offers products for musculoskeletal disorders, including implantable devices and instruments for neurosurgical procedures such as fusion surgery. Globus merged with NuVasive to create a powerhouse in the spine space. Investors have been concerned about the ability to integrate the two companies, but this has not been an issue. There also is a cost-cutting opportunity as Globus runs a tighter ship than NuVasive, and investors can expect free-cash-flow generation to reach $500 million in the next few years. Recent share price: $71.54.
Jason Wittes is a managing director and senior research analyst for health care at Roth Capital Partners, an investment bank and equity research firm, Newport Beach, California. Roth.com
Robotic surgery allows operations to be done with small tools guided by tiny cameras and with small incisions. Such procedures result in shorter, less painful recovery and better outcomes. The annual robotic surgery market, now about $3.3 billion, is projected to grow to $18.4 billion a year by 2027. Reason: The evolution of sophisticated robotics using artificial intelligence and 10,000 times the computing power of its predecessors. My pick now…
Intuitive Surgical (ISRG). The company’s da Vinci surgical system is the world’s leading robotic surgical tool, used in more than 2.2 million procedures in 2023. The company continues to expand the operations for which the da Vinci system is used. In addition to cardiac, colorectal, gynecological, lung and chest surgeries, the FDA has cleared da Vinci for prostate surgery. This past March, the FDA gave the green light for da Vinci 5 with upgrades including realistic 3D imaging and more than 150 design innovations. Recent share price: $491.27.
Michael Taylor is a manager director of health-care investment firm Critical Mass Partners, Hoboken, New Jersey, and manager of the Simplify Health Care ETF (PINK). Simplify.us
New drug indications. It typically takes a manufacturer 10 to 15 years to shepherd a drug from discovery stages through to FDA approval and commercial sales. Finding new indications for already-approved drugs is a lucrative way to maximize their therapeutic utility, broaden the spectrum of potential patients and/or extend patents. My pick now…
Sarepta Therapeutics (SRPT). The biotech firm’s lead product Elevidys is a gene therapy for Duchenne Muscular Dystrophy (DMD), a genetic condition that affects about one in every 3,500 boys and leads to weakness and wasting away of muscles. Sarepta earned about $200 million in revenue this past year despite a very limited niche market for Elevidys—ambulatory patients between ages four and five. In June 2024, the FDA expanded its approval for older DMD patients who are both ambulatory and non-ambulatory. That enlarges the potential population of patients for Elevidys by a factor of 10. The treatment could earn annual revenues of $5 billion for Sarepta over the next several years. Recent share price: $124.89.
