Growth. It's what most investors want more than anything else from their stocks. Some stocks can deliver more of it than others.
Three Motley Fool contributors think they've identified no-brainer growth stocks in the healthcare sector to buy in December. Here's why they picked Eli Lilly(NYSE: LLY), Novo Nordisk(NYSE: NVO), and Vertex Pharmaceuticals(NASDAQ: VRTX).
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The slump might not last too long
Prosper Junior Bakiny (Eli Lilly): The unstoppable Eli Lilly isn't so invincible after all; the drugmaker's shares are down by 14% in the past three months. Minor slumps like these have been rare for the company in the past few years. It's been a mostly northbound trajectory for Eli Lilly thanks to strong regulatory progress and excellent financial results.
On the positive side, though, the company's recent dip presents an opportunity for investors to scoop up its shares, provided there have been no changes to its prospects. On that front, investors have nothing to worry about here. Eli Lilly's third-quarter financial results did not quite meet expectations, but its so-called poor results were not that bad.
The company's biggest growth drivers, Mounjaro and Zepbound, which treat diabetes and obesity, respectively, could receive plenty of label expansions that will push their sales even higher. Eli Lilly has several other products in its pipeline, which continue to grow at a good clip despite being overshadowed by Mounjaro and Zepbound. Verzenio, a medicine for breast cancer, is a good example.
Lastly, Eli Lilly's pipeline is full of exciting products. It is getting closer to earning approval for a once-weekly insulin medicine thanks to recent solid phase 3 clinical trial results, while its weight-loss pipeline features several programs, including retatrutide and orforglipron.
There is a whole lot going Eli Lilly's way. Despite its poor performance in the past three months, it remains one of the best stocks in the pharmaceutical industry. Investors might not want to wait too long, though. The company's slump won't last forever.
Novo Nordisk looks like a bargain buy right now
David Jagielski(Novo Nordisk): If there's one growth stock I'd buy this month, it would be Novo Nordisk. The company's focus on weight-loss and diabetes drugs makes it a no-brainer buy if you're looking at the long term.
The unfortunate reality is that obesity is a massive problem, with the World Health Organization estimating that 1 in 8 people in the world live with obesity. It's a massive strain on the healthcare system, and that means drugs that Novo Nordisk makes, including Ozempic for diabetes and Wegovy for weight loss, could remain in high demand for years to come.
The company has been experiencing significant growth over the years, and what's promising is that it's still in the early stages of rolling out Wegovy to international markets. Through the first nine months of 2024, Novo Nordisk has grown its sales by 23% while its net profit has risen by 18%.
Shares of Novo Nordisk have fallen by around 20% over the past six months as investors worry about growing competition, the pharma stock's rising valuation, and perhaps even a new government in the U.S. which may impact coverage for weight-loss drugs.
But those aren't problems that should concern investors over the long run, as Novo Nordisk is a growth beast with many opportunities still out there, especially if its weight-loss and diabetes treatments obtain approval for more indications and the company comes out with a weight-loss pill, which could appeal to a wider range of patients.
Due to its falling share price, Novo Nordisk is now trading at 36 times trailing earnings, and that drops to a multiple of 27 when you're basing it on next year's estimated profits. Given how much growth potential is still out there for the Danish healthcare company, it's hard not to like owning the stock for the long haul. Buying it on the dip could prove to be a brilliant move years from now.
Seven paths to growth
Keith Speights (Vertex Pharmaceuticals): How can Vertex Pharmaceuticals grow over the next few years? Let me count the ways.
First, the big biotech company could continue to secure reimbursement deals and additional regulatory approvals for its existing cystic fibrosis (CF) drugs. Trikafta is the most important of this group. It generated nearly $2.6 billion in sales for Vertex in the third quarter of 2024, representing over 93% of the company's total revenue.
Second, Vertex's commercial ramp-up of Casgevy should reap greater rewards in the new year. Administration of the gene-editing therapy is complicated, but it cures two rare blood disorders -- sickle cell disease and transfusion-dependent beta thalassemia.
Third, the U.S. Food and Drug Administration (FDA) set a PDUFA date of Jan. 2, 2025 for potential approval of Vertex's vanzacaftor triple-drug combo. I expect an easy approval. And I look for the drug to become the company's biggest-selling CF therapy yet.
Fourth, I also anticipate FDA approval of suzetrigine in treating acute pain in early 2025. The FDA should make its decision by Jan. 30. With 88% of healthcare providers concerned about the risks of side effects of current pain medications and 78% concerned about the risk of opioid addiction, suzetrigine should have a huge commercial opportunity as an effective non-opioid pain treatment.
Vertex's late-stage pipeline provides the fifth, sixth, and seventh paths potentially for the business to grow. The company is evaluating inaxaplin in phase 3 studies in treating APOL1-mediated kidney disease. Povetacicept is in phase 3 testing as a treatment for IgA nephropathy, a chronic kidney disease. VX-880 is Vertex's most advanced candidate that holds the potential to cure type 1 diabetes.
Is Vertex Pharmaceuticals a no-brainer growth stock to buy in December? Not just yes, but seven times yes.
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David Jagielski has no position in any of the stocks mentioned. Keith Speights has positions in Vertex Pharmaceuticals. Prosper Junior Bakiny has positions in Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Vertex Pharmaceuticals. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
