S2022 has been pretty brutal in the market so far. Rising interest rates, the invasion of Ukraine, and COVID-19 caused a bear rage in the first two months of 2022. But you can still find winners, even in depressed markets. This is especially true in health, always a solid defensive game.
Here’s why we think Inspires medical systems (NYSE: INSP), Vertex Pharmaceuticals (NASDAQ: VRTX)and Astra Zeneca (NASDAQ:AZN) will continue to outperform the market in 2022.
A new treatment for sleep apnea
Taylor Carmichael (Inspire Medical Systems): A very large number of people do not sleep very well. According to Johns Hopkins, 45% of adults snore occasionally and 25% snore all the time. Often this snoring is indicative of sleep apnea – you are not breathing properly while you sleep. When this happens, your body gives you a shot of adrenaline so you can start breathing again. And it keeps you from getting deep, restful sleep.
Traditionally, sleep apnea was treated with a CPAP (continuous positive airway pressure) machine. This is a very bulky mask that you wear at night to keep the air circulating in your lungs. An estimated 35% to 65% of patients on CPAP do not use the device. This high failure rate has led to a new form of therapy from Inspire – a tiny neurotransmitter implanted under the skin that automatically keeps your airways open. According to a study, 91% of users are satisfied with Inspire, and 94% say it is better than CPAP and would recommend it to others.
The dangers of untreated sleep apnea are significant – they double the risk of stroke and sudden cardiac death. That’s probably why Medicare pays for the Inspire device in all 50 states. The company reports that 260 million Americans can access the Inspire procedure through their insurance plans.
The stock has absolutely crushed the market since Inspire’s IPO in 2018. The stock has posted a fierce nine sacks in less than four years, and it shows no signs of slowing down.
Inspire estimates a $10 billion market opportunity in the United States alone. And the company has just started expanding internationally, with the first implants in the UK and Japan earlier this year. With $6 billion market capitalization, this young company has plenty of room to grow as it eliminates sleep apnea for more and more people. I am confident that Inspire will continue to beat the market for years to come.
This pharma is gearing up for another year to beat the market
Patrick Bafuma (Vertex Pharmaceuticals): While the S&P500 is down more than 10% since the start of the year, investments in biotechnology have performed much worse. With the S&P SPDR Biotech ETFs down 18% over the same period, biotech investors should look to build on strong Vertex Pharmaceuticals. Up 3% in 2022, this cystic fibrosis (CF) fighter has proven itself beating the market. Over the past five years, Vertex has beaten the S&P 500, up 155% from 80%, and over the past decade, Vertex has risen just under 500%, more than doubling the gains of 214 % of the S&P 500.
In the field of CF, Vertex is literally in a class of its own. There is no significant competition on the horizon and the company continues to see an increase in adoption of its CF treatments. Add to that recent label expansions and this lung-saving company expects to see continued growth in the CF market. The CF leader forecasts a 12% to 15% increase in product revenue for fiscal year 2022 to $8.4 billion to $8.6 billion, and it has $7.5 billion in cash for shopping in this volatile market.
The future also looks bright at Vertex. Management is dedicated to advancing the pipeline beyond just the cystic fibrosis market. And it starts with plans to file for regulatory approval for a potentially curative treatment. genetical therapy for sickle cell disease by the end of 2022. This represents a multi-billion dollar market with collaborator CRISPR therapeutics, in which Vertex claims 60% of the profits and costs. If anyone has demonstrated the ability to deliver transformative medicine while successfully navigating the approval and commercialization process, it’s Vertex. With the first 25,000 patient candidates for gene therapy in the US and Europe if approved, this is likely an addressable market north of $20 billion. Put it all together, and it’s easy to see why Vertex outpaced the market in 2022, and why it could continue to do so.
Stay stable in a turbulent market
George Budwell (AstraZeneca): British pharma giant AstraZeneca hasn’t exactly set the world on fire this year. However, the drugmaker’s shares have been flat year-to-date at the time of this writing. And in a raging bear market where several of its big pharma peers are currently down double digits so far this year, this sideways move definitely looks like a win. Shares of the drugmaker were able to weather the 2022 bear market for two main reasons.
First, the company’s oncology and rare disease portfolios have performed extremely well of late. At this point, Astra’s non-COVID-19 product sales were up 26% in the fourth quarter of 2021, compared to the same period a year ago. Much of this meteoric revenue growth can be attributed to its recent acquisition of rare disease specialist Alexion, as well as the continued upward trajectory of the best-selling cancer drugs Calquence, Lynparza and Tagrisso. Its oncology and rare disease portfolios should also continue to generate class-leading levels of revenue growth for the remainder of the decade.
Second, Astra’s proven commitment to its dividend program has probably calmed more than a few nerves in this tough market. Although Astra has lost exclusivity for several blockbuster products over the past decade, its shares are still returning a respectable 2.47% on an annualized basis at current levels. That’s an impressive feat in light of the fact that the drugmaker’s payout ratio eclipsed 300% at one point during this latest fight with the patent cliff. Indeed, investors probably wouldn’t have blamed the company if it had suspended dividend payments altogether. Astra’s decision to maintain its dividend program during this difficult time demonstrates management’s dedication to rewarding loyal shareholders.
All told, Astra’s strong fundamentals and rock-solid dividend program should keep its shares poised in this bear market.
10 stocks we prefer to Inspire Medical Systems
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Taylor Carmichael has no position in the stocks mentioned. Patrick Bafuma has no position in the stocks mentioned. George Budwell has no position in the stocks mentioned. The Motley Fool owns and recommends Inspire Medical Systems and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.