Have you ever worried about clicking the last button to buy a stock? Some investors worry about their decisions. However, if you find the right stocks, this doesn’t have to be the case.
Three Motley Fool contributors think they’ve found good picks — and they’re all big biotech stocks. This is why they think Eli Lilly (NYSE: LLY), Novo Nordisk (NYSE: NVO)And Vertex Pharmaceutica (NASDAQ: VRTX) are growth stocks that you can buy now without any hesitation.
The first trillion-dollar healthcare stock?
Prosper Junior Bakiny (Eli Lilly): The group of companies with a market capitalization of more than $1 trillion is very exclusive. There is no health care supply available, but that could change relatively quickly.
Eli Lilly currently holds the title of the largest healthcare stock on the market, with a market cap of $830 billion. The drugmaker should become a billion-dollar stock within a few years and continue to grow long afterward. Why? Eli Lilly is an incredibly innovative company, and it has a wealth of drugs to prove it.
The portfolio of new brands includes Zepbound for weight loss, Mounjaro for obesity, cancer drug Jaypirca and ulcerative colitis therapy Omvoh. Every single product could surpass a billion dollar sales level. Mounjaro is already there.
The company’s pipeline also looks promising. The potential Alzheimer’s drug, donanemab, should get the green light despite the regulatory hurdles it has faced. A panel of experts convened by the U.S. Food and Drug Administration recently unanimously endorsed its approval.
Elsewhere, Eli Lilly’s insulin efsitora alfa, a potential once-a-week insulin product, has passed Phase 3 trials. Earlier-stage programs also look promising, such as the company’s gene therapy for hearing loss, which showed encouraging results in a Phase 1/2 trial. Eli Lilly’s top line is growing rapidly. In the first quarter, revenue rose 26% year over year to $8.8 billion. New additions to the lineup and new indications will only accelerate the pace.
Eli Lilly is definitely a growth stock without a doubt, even though the company’s shares have significantly outperformed the market in recent years.
Novo Nordisk is the best GLP-1 stock to buy
David Jagielski (Novo Nordisk): Many healthcare companies are developing glucagon-like peptide 1 (GLP-1) treatments in an attempt to join the Ozempic craze. Novo Nordisk not only owns Ozempic (approved for diabetes), but also has a fast-growing GLP-1 drug in Wegovy, which is approved for weight loss. Earlier this year, the Food and Drug Administration also approved Wegovy as a treatment to reduce cardiovascular risk in obese and overweight adults.
While there are other GLP-1 drugs on the market that Novo Nordisk may face, its main rival is Eli Lilly, which has Mounjaro (diabetes) and Zepbound (weight loss) in its portfolio. But with a much more favorable earnings multiple of 49 versus Lilly’s 125, Novo Nordisk is a much cheaper option for investors. This is important because it means there is also a greater margin of safety with the shares.
Novo Nordisk is also a more focused company, with its main segments being diabetes and weight loss, while Eli Lilly is more diversified, which may lead to more disappointing growth overall. Novo Nordisk expects its sales to increase by as much as 27% this year (at constant exchange rates).
But there is even more potential in the future once more capacity is built, which is currently the biggest obstacle. Its parent company, Novo Holdings, plans to acquire a drug manufacturer Catalent for $16.5 billion, which will pave the way for Novo Nordisk to acquire multiple manufacturing sites to help with capacity constraints.
Although the stock is already up about 40% this year, Novo Nordisk could still be an excellent GLP-1 stock to buy in the long term because its valuation is cheaper than Eli Lilly and the demand for its products are likely to remain robust.
Growth at a more than reasonable price
Keith Speights (Vertex Pharmaceuticals): If the thought of paying a nosebleed premium to buy a growth stock makes you hesitate, then you definitely want to check out Vertex Pharmaceuticals. The price-to-earnings-growth ratio (PEG) is a low 0.64.
This valuation measure is based on analysts’ five-year projections. Why does Wall Street think the company will achieve exceptional growth? Analysts understand the potential for Vertex’s current products and pipeline.
Vertex markets the only therapies that treat the underlying cause of the rare genetic disease cystic fibrosis (CF). The company is also in the process of launching Casgevy, the first-ever CRISPR gene-editing therapy. Casgevy is widely expected to be a new blockbuster drug for Vertex in treating (actually curing) two blood disorders: sickle cell disease and transfusion-dependent beta-thalassemia.
But Vertex’s pipeline holds the company’s keys to even more impressive growth in the coming years. The major biotech innovator recently filed regulatory applications in the US and Europe for its triple drug combination vanzacaftor. The company also initiated a rolling filing in the US for suzetrigine (VX-548) in the treatment of acute pain. Both drugs should have blockbuster potential.
Vertex is evaluating inaxaplin in a Phase 3 study targeting APOL1-mediated kidney disease (AMKD). There are currently no approved treatments for AMKD. The disease affects approximately 100,000 patients worldwide (a larger patient population than CF).
The company could soon add another late-stage program to its pipeline. In April, Vertex announced plans for an acquisition Alpine Immunosciences for $4.9 billion. Alpine’s Porvetacicept should enter phase 3 testing later this year for the treatment of the rare kidney disease IgA nephropathy. Vertex calls the experimental drug a “pipeline-within-a-product” because of its potential in treating multiple diseases.
Should you invest $1,000 in Vertex Pharmaceuticals now?
Consider the following before purchasing shares in Vertex Pharmaceuticals:
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David Jagielski has no position in any of the stocks mentioned. Keith Speights holds positions at Vertex Pharmaceuticals. Prosper Junior Bakiny holds positions at Vertex Pharmaceuticals. The Motley Fool holds and recommends Vertex Pharmaceuticals. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
3 Growth Stocks to Buy Now Without Hesitation was originally published by The Motley Fool
