Now in the seventh year of the bull market, stock market returns have been decidedly unimpressive in 2015. With the S&P 500 up about 1% and the Dow Jones Industrial Average down about 1%, only the Nasdaq‘s 7% year-to-date returns are remotely noteworthy.
At least as far as the major indices go.
When it comes to individual stocks, 2015 has seen more than its fair share of movers and shakers. But one of the best-performing sectors has been healthcare. For instance, the Vanguard Health Care ETF (VHT) — a good proxy for the healthcare realm — is up nearly 14% to-date.
Here are seven high-growth healthcare stocks — with gains ranging from about 50% to upward of 500% — helping to send the sector higher in 2015.
High-Growth Healthcare Stocks: #7, Sucampo (SCMP)
Market Cap: $970 million
YTD Return: +51%
Although Sucampo (SCMP) has been an absolutely stellar performer in 2015, it’s still just the seventh-best performer on today’s list.
Who cares? Anyone who’s been holding SCMP stock this year has enjoyed gains more than 20 times more impressive than the S&P 500. Not too shabby.
Although Sucampo has just two approved products on the market, Amitiza and Rescula, sometimes that’s all you need. Amitiza is the company’s main breadwinner, approved in the U.S. and Japan for gastrointestinal indications, including several types of constipation, as well as irritable bowel syndrome with constipation in women older than 18.
Not only is the company hopeful that Amitiza will be approved in China and Europe, but it’s got another promising drug in its portfolio, cobiprostone, a treatment for oral mucositis. SCMP was given fast-track status by the FDA for cobiprostone back in May, allowing it to speed up the FDA review process.
High-Growth Healthcare Stocks: #6, Insys (INSY)
Market Cap: $3.2 billion
YTD Return: +112%
Insys (INSY) was already worth more than $1 billion at the start of 2015, and still managed to more than double some seven months into the year.
Like Sucampo, Insys officially has two drugs on the market, but only one of them is generating any meaningful revenue.
In 2014, Subsys — a sublingual spray intended to treat pain in cancer patients with a high opioid tolerance — accounted for $219.5 million of the company’s $222.1 million in revenue. That’s an increase of 123% from the year before.
Analysts expect sales to jump another 36% this fiscal year, and with a drug targeting chemotherapy-related vomiting and AIDS-related anorexia in the pipeline that could generate revenues of $200 million, you can understand why Wall Street has been stoked about INSY stock this year.
Potential investors should know, however, that Insys has twice been subpoenaed by the feds, who were investigating Subsys’ marketing practices.
High-Growth Healthcare Stocks: #5, Intrexon (XON)
Market Cap: $7.2 billion
YTD Return: +135%
Synthetic biology company Intrexon (XON) is crushing it in 2015 as revenue shoots through the roof. Synthetic biology is a fascinating, emerging field; the goal is to alter various facets of natural biology like gene sequences to achieve a desired result.
For example, XON is having success with its solutions in cattle breeding, which helps ranchers breed bigger and bigger cows. Last year, Intrexon acquired a company called Trans Ova, a bovine reproductive technology company, and the acquisition is paying off.
Although Intrexon revenue is supposed to jump 144% to $176 million this year, the stock is getting more than a little bit bloated. It currently trades at 70 times sales and isn’t expected to turn a profit this year or next, so don’t be surprised if this bad boy pulls back with a vengeance at some point soon.
High-Growth Healthcare Stocks: #4, Cambrex (CBM)
Market Cap: $1.6 billion
YTD Return: +143%
Even after more than doubling thus far in 2015, Cambrex (CBM) remains a reasonably priced stock. It trades at 26 times trailing earnings — a relatively tame premium to the S&P 500 as a whole, which goes for 22 times earnings.
CBM really caught Wall Street’s eye in February, when it reported blowout fourth-quarter results. The company specializes in research and development for pharmaceutical companies, which outsource some of those processes to companies like Cambrex to speed up the development process.
With both branded and generic drugmakers among its clientele, CBM is well-poised to benefit from the booming drug industry. Gilead Sciences (GILD) — a biopharmaceutical company expected to generate revenue upward of $31 billion this year — is CBM’s biggest client, accounting for 24% of its revenue in 2014.
High-Growth Healthcare Stocks: #3, Supernus (SUPN)
Market Cap: $1 billion
YTD Return: +156%
Specialty pharmaceutical developer Supernus (SUPN) is also roasting the market in 2015. The company focuses on central nervous system diseases, and it has two epilepsy drugs — Oxtellar XR and Trokendi XR — currently on the market.
Both Oxtellar XR and Trokendi XR were approved in 2013, which sent revenue soaring from $1.5 million to $12 million. But SUPN wasn’t done yet; sales soared to $122 million in 2014, and part of the stock’s outperformance in 2015 was driven by stronger than expected Q4 2014 results.
Although sales growth is expected to cool off significantly this year, management has said Oxtellar XR and Trokendi XR have the potential to drive revenue of $500 million annually. Wall Street is looking for revenue of $200 million in 2016, and with two Phase 2 ADHD-related drugs in its pipeline, you can understand why investors have been sending shares higher.
SUPN reports second-quarter results after the bell today, Aug. 4, with analysts expecting $34.27 million in revenue and EPS of 2 cents.
High-Growth Healthcare Stocks: #2, Horizon Pharma (HZNP)
Market Cap: $5.5 billion
YTD Return: +175%
What other company can you think of that has routinely doubled (and sometimes tripled) revenue like clockwork for years now? Horizon Pharma (HZNP) is just such a company, which explains why investors are waking up to its potential in 2015, when revenue is yet again expected to more than double from $296 million to $648 million.
The secret to blowout growth? A series of savvy acquisitions.
In the last two years, HZNP has acquired the rights to at least four different drugs through acquisition, the most important of them being Vimovo, an arthritis symptom and gastro drug that HZNP bought from AstraZeneca (AZN) in November 2013 for $35 million and a 10% royalty on net sales. The very next year, Vimovo was HZNP’s flagship drug, hauling in $163 million in revenue.
Horizon raised its second-quarter and full-year 2015 guidance on July 20, now expecting revenue between $660 million and $680 million for the year, up from the $590 million to $610 million range previously given.
HZNP reports second-quarter results on Friday, Aug. 7.
High-Growth Healthcare Stocks: #1, Eagle Pharmaceuticals (EGRX)
Market Cap: $1.5 billion
YTD Return: +534%
Shares of Eagle Pharmaceuticals (EGRX) have soared this year, driven by a blockbuster drug and a crucial licensing agreement with Teva Pharmaceuticals (TEVA) that should give the company a steady stream of robust revenues going forward.
EGRX has an interesting business: It chooses to focus on existing drugs that it views as inefficient in one way or another, then improves on those inefficiencies and goes to market.
That’s what Eagle tried to do with Teva’s Treanda, which treats certain types of hematologic cancer. TEVA took Eagle to court before it could go to market, but on Feb. 17 the two companies struck a licensing deal and now Eagle more or less just gets to sit back and watch as TEVA promotes and distributes the product, bendamustine hydrochloride.
Although the product is still pending FDA approval, the future looks bright for Eagle. It earned a $30 million upfront payment from TEVA in the first quarter with the possibility for as much as $90 million more given certain milestone achievements. It will also get double-digit royalties on the product from TEVA.
Analysts expect revenue to jump 245% next year to $256 million, and for 2016 EPS to jump more than 700% to $6.68.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at firstname.lastname@example.org.
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