If you're content with market-level returns, investing in an exchange-traded fund (ETF) is the way to go. But if not, you'll need to find stocks that hold the potential to pack more punch.
Three Fool.com contributors believe they've identified just such stocks in the healthcare sector. Here's why they think Eli Lilly(NYSE: LLY), Summit Therapeutics(NASDAQ: SMMT), and Vertex Pharmaceuticals(NASDAQ: VRTX) could trounce the market in 2025.
Eli Lilly should easily beat the market, again
David Jagielski(Eli Lilly): For years, Eli Lilly has been a fairly safe bet to outperform the market. Last year, the pharma stock rose by more than 32%, generating better returns than the S&P 500's gains of 23%. And over a five-year stretch, the delta is even more significant, with Eli Lilly's stock climbing nearly 500% while the broad index has risen by 82%.
The past doesn't predict the future, but in the case of Eli Lilly, investors shouldn't be surprised to see the trend continue this year. The healthcare company posted another strong quarter of growth recently, with sales rising by 45% to $13.5 billion for the last three months of 2024.
Its GLP-1 diabetes drug Mounjaro led the way with $3.5 billion in revenue and a year-over-year growth rate of 60%. Zepbound, which is its GLP-1 weight loss treatment, brought in more than $1.9 billion. It hasn't been on the market as long as Mounjaro has, and it wouldn't be surprising for it to eventually be the company's top-selling product.
But beyond that, there could be yet another hot drug to watch: retatrutide. It isn't approved yet, but the company believes it may help patients achieve even more weight loss than its current GLP-1 drugs. The company plans to release clinical trial data on the drug later this year, which, if the results look strong, could ignite this already hot growth stock even higher.
Between its strong financial results from its current mix of products, plus possibly solid data from retatrutide coming as well, 2025 could easily be yet another year when Eli Lilly dwarfs the S&P 500.
A potentially huge catalyst on the way
Keith Speights (Summit Therapeutics): To say that Summit Therapeutics stock trounced the market last year is an understatement. The biotech stock skyrocketed 584% and was up as much as 1,120% year to date at one point.
I expect Summit will beat the market again in 2025 for a simple reason: It has a potentially huge catalyst on the way. I'm referring to the company's planned announcement of top-line data midyear from its phase 3 Harmoni clinical trial evaluating ivonescimab combined with chemotherapy as a second-line treatment of non-small cell lung cancer (NSCLC).
Summit's chances of success with this clinical study appear to be very good. In May 2024, the company's partner, Akeso, reported overwhelmingly positive results from a late-stage study of ivonescimab as a first-line NSCLC treatment. This clinical trial pitted ivonescimab in a head-to-head matchup with Merck's immunotherapy Keytruda, which ranked as the world's top-selling medication last year. And David felled Goliath, with ivonescimab achieving significantly better progression-free survival than Merck's blockbuster drug.
Assuming Summit's late-stage results are also positive, it should set the stage for the company to file for U.S. regulatory approval of ivonescimab as a second-line treatment for NSCLC. But Summit won't stop there. It's also evaluating the promising immunotherapy combined with chemotherapy in another phase 3 study as first-line NSCLC therapy. The drugmaker is advancing ivonescimab into a third late-stage study as a monotherapy in the first-line setting as well.
Into a new era of diversification
Prosper Junior Bakiny (Vertex Pharmaceuticals): Biotech giant Vertex Pharmaceuticals has performed well in the past decade because of its work in cystic fibrosis (CF), a rare disease that damages internal organs. The company is famously the only game in town for CF patients, at least if they want medicines that address the condition's underlying causes.
However, things are changing for Vertex Pharmaceuticals. In late 2023 and early 2024, the biotech earned approvals for Casgevy in treating sickle cell disease and beta-thalassemia, two rare blood diseases.
In January 2025, Vertex Pharmaceuticals got the regulatory nod for Journavx, a non-opioid medicine for acute pain, the first of its kind to earn the green light. These mark the beginning of a new era for the drugmaker, one in which it no longer relies solely on its CF franchise. Vertex Pharmaceuticals could make significant pipeline progress in the next 11 months and beyond on programs across several areas, including type 1 diabetes, Iga nephropathy (a kidney disease), APOL-1 mediated kidney disease, autosomal dominant polycystic kidney disease, and more.
Vertex Pharmaceuticals has, so far, performed well this year. It could keep that momentum going as it delivers strong financial results and makes exciting clinical progress.
Beyond the next 11 months, though, Vertex Pharmaceuticals is an attractive biotech stock to buy and hold thanks to its impeccable track record, strong innovative capabilities, and consistent financial results. So although Vertex could beat the market this year, investors should focus more on what will happen beyond 2025. Things look great for the biotech on that front.
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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 Eli Lilly and Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Merck, Summit Therapeutics, and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.
