Want peace of mind about your investments? Consider these great stocks.
Have you ever felt anxiety about clicking the final button to buy a stock? Some investors agonize over their decisions. It doesn’t have to be that way, though, if you find the right stocks.
Three Motley Fool contributors believe they’ve identified good picks — and they’re all big biotech stocks. Here’s why they think Eli Lilly (LLY -0.55%), Novo Nordisk (NVO 0.01%), and Vertex Pharmaceuticals (VRTX 0.35%) are growth stocks you can buy right now without any hesitation.
The first trillion-dollar healthcare stock?
Prosper Junior Bakiny (Eli Lilly): The group of companies whose market cap exceeds $1 trillion is very exclusive. It features no healthcare stock, but that might change relatively soon.
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 trillion-dollar stock within a few years and continue growing long after. Why? Eli Lilly is an incredibly innovative company, and it has a wealth of drugs to prove it.
Its portfolio of new brands includes Zepbound for weight loss, Mounjaro for obesity, cancer medicine Jaypirca, and ulcerative colitis therapy Omvoh. Every single one of these products could surpass the billion-dollar sales level. Mounjaro is already there.
The company’s pipeline also looks promising. Its potential Alzheimer’s disease medicine, donanemab, should earn 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-weekly insulin product, aced phase 3 studies. Earlier-stage programs look promising, too, such as the company’s gene therapy for hearing loss that showed encouraging results in a phase 1/2 study. Eli Lilly’s top line is already growing rapidly. In the first quarter, revenue was up 26% year over year to $8.8 billion. New additions to the lineup, and new indications, will only speed up the pace.
Eli Lilly is definitely a no-brainer growth stock, even considering the company’s shares have soundly 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 effort to get in on the Ozempic craze. Novo Nordisk not only owns Ozempic (which is approved for diabetes) but it 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 out there that Novo Nordisk may need to contend with, for now, its main rival is Eli Lilly, which has Mounjaro (diabetes) and Zepbound (weight loss) in its portfolio. But at a much more favorable earnings multiple of 49 versus Lilly’s 125, Novo Nordisk is a vastly cheaper option for investors. That’s important because it means there’s also a greater margin of safety with the stock.
Novo Nordisk is also a more focused operation, with its key segments being diabetes and weight loss, whereas Eli Lilly is more diversified, which can lead to more underwhelming growth overall. Novo Nordisk expects its sales to rise by as much as 27% this year (at constant exchange rates).
But there is even more potential in the future once it builds out more capacity, which today is its biggest obstacle. Its parent company, Novo Holdings, plans to buy drug manufacturer Catalent for $16.5 billion, which will pave the way for Novo Nordisk to acquire multiple manufacturing sites to help with its capacity constraints.
Although it’s already up around 40% this year, Novo Nordisk can still be an excellent GLP-1 stock to buy for the long haul because its valuation is cheaper than Eli Lilly’s and demand for its products is 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 gives you pause, you’ll definitely want to check out Vertex Pharmaceuticals. Its price-to-earnings-to-growth (PEG) ratio is a low 0.64.
That valuation metric is based on analysts’ five-year projections. Why does Wall Street think the company will deliver exceptional growth? Analysts understand the potential for Vertex’s current products and its pipeline.
Vertex markets the only therapies that treat the underlying cause of the rare genetic disease cystic fibrosis (CF). It also is in the process of launching Casgevy, the first CRISPR gene-editing therapy ever. Casgevy is widely expected to become another 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 years ahead. The big biotech innovator recently submitted regulatory filings in the U.S. and Europe for its vanzacaftor triple-drug combo. It also initiated a rolling submission in the U.S. for suzetrigine (VX-548) in treating 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 around 100,000 patients worldwide (a bigger patient population than CF).
The company could soon add another late-stage program to its pipeline. In April, Vertex announced plans to acquire Alpine Immune Sciences for $4.9 billion. Alpine’s porvetacicept should advance into phase 3 testing for treating the rare kidney disease IgA nephropathy later this year. Vertex refers to the experimental drug as a “pipeline-in-a-product” because of its potential in treating multiple diseases.