Though coronavirus-related stocks have been climbing, the path hasn't been smooth for all healthcare shares this year. Many crashed along with the market, even if their revenue prospects were bright. That means buying opportunities for the long-term investor. Of course, the coronavirus health crisis isn't over and may continue to weigh on companies. But now is the time to pick up stocks of healthcare companies that have shown signs of rebounding and have revenue-generating products and strong pipelines.
Here, I've chosen three stocks that are demonstrating all of that -- and they each trade for about 20 times earnings or less.
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1. AbbVie
AbbVie (ABBV -1.07%) completed its acquisition of Allergan this spring. Prior to the purchase, AbbVie relied heavily on revenue from one drug. Humira, a blockbuster approved for several indications including rheumatoid arthritis and Crohn's disease, generated 57% of revenue last year. With biosimilar competition gaining ground outside of the U.S., Humira's international sales have been declining. And the entrance of biosimilars in the U.S. in 2023 is set to further weigh on revenue.
The Allergan deal broadens AbbVie's revenue prospects with growing neuroscience drugs, such as Vraylar, and a strong aesthetics portfolio including Botox and Juvederm. In the second quarter, sales of Vraylar surged 70%. AbbVie also is studying Vraylar, now approved for bipolar disorder and schizophrenia, for major depressive disorder in two phase 3 trials. The company said Vraylar is on track to bring in more than $1 billion in annual revenue.
AbbVie's quarterly report wasn't all positive. The aesthetics business didn't shine in recent weeks -- most likely because patients and doctors postponed nonessential procedures. Net revenue from aesthetics slid 47.9% in the period. Once the current health crisis abates, though, I'm optimistic this portfolio will become a solid asset in the long term.
AbbVie shares are up 8.4% for the year after rebounding from March lows. The shares are reasonably priced at 21 times trailing 12-month earnings -- especially considering the growth potential ahead.
2. Amgen
Amgen (AMGN 0.00%) has struggled with sales declines in older products amid biosimilar and generic competition. But good news is here now and ahead on the horizon. Newer products are picking up the slack, and that meant a 6% increase in total revenue in the second quarter.
Amgen acquired psoriasis drug Otezla last year. Otezla sales climbed 14% in the quarter to $561 million. Cholesterol drug Repatha also contributed to gains with a 32% increase in sales to $200 million. Amgen still faces declining sales in its older -- and biggest -- drugs. For instance, sales of blockbuster rheumatoid arthritis drug Enbrel fell 9% in the quarter. But the company has more than 20 products in phase 3 studies, which is a positive sign as we look ahead. One example is omecamtiv mecarbil. The U.S. Food and Drug Administration recently granted the drug candidate fast-track designation for chronic heart failure with reduced ejection fraction. Amgen expects to report results from a phase 3 study in the fourth quarter.
Amgen shares have rebounded from March lows and are little changed this year so far. The stock traded as low as about 15 times trailing 12-month earnings when the market crashed. But at 20 times earnings today, the price is still right for the long-term investor.
3. Boston Scientific
The coronavirus outbreak has been particularly difficult for Boston Scientific (BSX 4.76%). As procedures using its medical devices were postponed, the company posted sales declines across every product segment and region. That doesn't stir up much inspiration to buy the shares, you might say.
But here's what makes me optimistic about Boston Scientific as a long-term holding to buy right now: Regulators have granted the company 23 product approvals so far this year. And the company expects seven more approvals in the near term. That should offer Boston Scientific even more fuel for growth once regular procedures are back on the agenda in hospitals and clinics.
In light of the pandemic's impact on procedures, it's useful to look at Boston Scientific's earnings and revenue prior to the outbreak. For the 2019 full year, Boston Scientific posted a 9.3% increase in sales to more than $10 billion. The company also reported growth in sales across all business segments and regions for the year. And annual revenue has been climbing since 2015.
Boston Scientific shares have rebounded 47% since a March low but still are down 16% for the year. The shares are trading at 13 times trailing 12-month earnings. I don't expect the company to recover quickly. But considering revenue potential and the current price, now is a good time for the long-term investor to add Boston Scientific to healthcare holdings.
