Are you looking for stocks that could make you rich? If so, there are a few names in the healthcare sector that deserve your attention.
1. Clover Health
Technology industry titans that try to fix America's woefully inefficient healthcare system with smart solutions have a lousy track record. It's still early, but it looks like a promising new insurer called Clover Health could be the first to actually lower costs and deliver profits to investors.
Clover Health contracts with primary care physicians (PCPs) who agree to use a web-based application called Clover Assistant to facilitate patient visits. Today's healthcare administrators hire electronic health record (EHR) vendors to track treatment decisions, but EHR services are usually geared toward billing activity without much thought given to the PCPs who have to input all the data.
The Clover Assistant asks PCPs many questions and makes many suggestions, but the company has enough sense to design the app for its end users and pays them to input valuable data. Physicians who use Clover Assistant to facilitate patient visits receive a flat reimbursement rate that's roughly double the industry average.
Despite giving PCPs a larger share of reimbursement than most insurance companies, Clover Health reported medical care costs that worked out to just 82% of premiums earned during the first nine months of 2020. This fast-growing insurer boasted just 57,500 Medicare Advantage members at the end of last September, but it was already enough to narrow the company's loss to just $10 million during the first nine months of last year. As millions of new members join its rolls, this company's bottom line and shares of the stock could soar by leaps and bounds.
2. Fulgent Genetics
The only thing more impressive than accelerating demand for COVID-19 testing solutions from this company has been its ability to quickly scale up and deliver outstanding results. During the third quarter of 2020, revenue exploded more than 1,000% higher year over year to about $102 million, while total operating expenses grew just 141% to a modest $12 million.
Fulgent delivered a $47 million profit in the third quarter, and we can expect a lot more in the fourth. In November, the company told investors top-line sales during the fourth quarter would probably come in around 70% higher than during the third. Fulgent Genetics more than tripled its employee base in 2020, but at around 500 employees last November, it's still a relatively tiny operation.
Many of Fulgent Genetics' new clients hadn't heard of the company at the beginning of 2020, but it's quickly making a name for itself with more than 90% of COVID-19 results delivered within 24 hours during the third quarter. Fulgent Genetics is so efficient that it's making turnaround times from established competitors look comparatively weak. For example, Quest Diagnostics, an industry giant with around 47,000 employees, recently reported an average turnaround time of one to two days for COVID-19 tests.
There's a chance that coronavirus testing levels will remain elevated in 2021. Even if they fall off a cliff, Fulgent Genetics offers an industry-leading array of products, including newborn screening, hereditary cancer tests to gauge healthy patients' risk levels, and tumor profiling to guide treatment decisions.
3. Ocular Therapeutix
This company markets Dextenza, a tiny tear duct insert that slowly dispenses an anti-inflammatory steroid to the surface of the eye for weeks at a time. While Dextenza's sales potential is a good enough reason to buy this stock on its own, Ocular Therapeutix is developing a new blindness-preventing treatment that could be even more valuable.
Age-related macular degeneration (AMD) is a progressive condition caused by aggressive blood vessel growth along the backs of people's eyeballs. It affects more than 12 million Americans at the moment, and this number is rising along with the country's aging population. There aren't any cures at the moment, but treatment with vascular endothelial growth factor (VEGF) inhibitors like Eylea can protect most patients from permanent vision loss.
Blindness preventing anti-VEGF injection sales are expected to reach around $13 billion in 2021, but available options only prevent the growth of extra blood vessels for about a month before patients need to get another jab in both eyes. Ocular Therapeutix is developing OTX-TKI, a long-lasting intraocular injection that wraps an anti-VEGF inhibitor into a hydrogel fiber that dissolves slowly.
Ocular Therapeutix recently presented interim clinical trial results from the first 17 patients treated with OTC-TKI, and so far it looks like a safe and effective way to prevent AMD from progressing for at least six months following an injection.
Know the risks
It's important to note that Ocular Therapeutix and Clover Health aren't earning any money yet. While Fulgent Genetics is profiting now, the diagnostics industry can be incredibly competitive.
The next several quarters will tell us a lot more about the paths that lie ahead of these three companies. Visible signs of success point in the right direction, but there are no guarantees that their recent progress will continue. If investors lose faith in their ability to quickly turn the profitability corner, their stock prices could fall hard.
All three of these healthcare stocks appear well worth the visible risks, but investors should only add them to a well-diversified portfolio.