While investors may be hoping for a full-throttled bull market to appear in the new year, some great companies with long-term competitive advantages and robust financials remain at reasonable valuations. A stock price can tell you a lot, but it doesn’t tell you everything.
Before committing your cash, it’s important to look beyond recent share performance and at the underlying business you want to buy. With that in mind, here are two remarkable healthcare companies to consider now.
1. Vertex Pharmaceuticals
Vertex Pharmaceuticals (VRTX) is trading up by about 42% over the trailing 12 months. The company is riding on the wave of multiple business successes, the most recent being the earliest slate of approvals for the first-ever gene-editing therapy to garner the regulatory green light. The therapy, called by its brand name of Casgevy (also known as exa-cel), was developed in partnership with CRISPR Therapeutics.
Casgevy is being marketed as a potential one-time functional cure for two rare blood disorders: sickle cell disease and transfusion-dependent beta thalassemia (TDT). Under the terms of the deal, Vertex takes on 60% of the program costs and will garner 60% of the profits from Casgevy. Casgevy is expected to commercialize for $2.2 million a treatment.
The therapy has just been approved in the U.K. for qualifying patients with sickle cell disease and TDT aged 12 and up, while the U.S. Food and Drug Administration just gave its seal of approval for the former indication in early December. The FDA’s decision to indicate the drug for TDT is expected in early 2024. The European Commission’s decision to approve Casgevy is also anticipated in the first quarter of next year.
Vertex cut its teeth on the rare disease drug market with a focus on disorders that have historically been underserved by the medical community at large. Its business, which produces billions in revenue and profits annually, currently revolves around a lineup of four products, which are the only drugs on the market that treat the rare genetic illness cystic fibrosis. The company is also working on therapies for other disease areas, including a non-opioid drug for acute pain and two stem cell therapies for diabetes.
This first wave of Casgevy approvals is initially expected to open up the therapy to close to 20,000 patients. However, just looking at the incidence of sickle cell disease, it’s estimated that there are close to 100,000 individuals living with the disease in the U.S. alone and 20 million globally. In short, this could be the beginning of a new era of growth for Vertex’s business, which is already coming from a position of strength.
Now looks like it could be a good time to scoop up some shares of this healthcare business before it rockets higher.
2. Airbnb
Airbnb (ABNB) has seen shares soar by about 66% over the past year. The platform has become a one-stop shop for travel enthusiasts with a range of needs and interests, from business travelers to leisure travelers to individuals capitalizing on the remote work revolution.
The proof is in the pudding. Airbnb brought in revenue of $3.4 billion in the third quarter of 2022 alone, while profits totaled $4.4 billion for the three-month period. That revenue figure was up 18% from one year ago and 107% from four years ago.
The company also saw nights and experiences booked reach the 113 million mark, 14% higher than one year ago and 32% higher than in the same quarter in 2019. Airbnb is also proving to be a free-cash-flow machine: That figure totaled $4.2 billion in the trailing 12 months ending on Sept. 30.
The company’s business model is inherently capital-light, because Airbnb doesn’t actually own or operate the properties on its platform. Instead, it provides a two-sided travel solution to connect hosts around the world to guests looking for everything from a one-night stay to a months-long booking.
Not only can hosts generate primary or secondary streams of income on Airbnb, but guests can find the stay that best aligns with their travel needs and preferences. The concept is simple, but effective. Business continues to boom in the period following the pandemic era, as travelers are continuing to spend cash even as wallets are more tightly constrained than in past periods. Investors may want to snag a piece of the action to start off 2024.
— Rachel Warren
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Source: The Motley Fool