Some stocks sizzle, then fizzle. Others, though, build long-lasting momentum thanks to strong underlying business fundamentals. Three Motley Fool contributors believe they've found stocks in the latter category. Here's why they think AstraZeneca (AZN -0.38%), Eli Lilly (LLY -1.40%), and Vertex Pharmaceuticals (VRTX -0.56%) are unstoppable healthcare stocks to buy right now.
An unstoppable stock at a great valuation
David Jagielski (AstraZeneca): If you're buying a top growth stock, you often have to pay a hefty premium for it, but that isn't the case with AstraZeneca. Despite having a wealth of products in its portfolio and a lot of growth ahead, the pharmaceutical giant trades at a fairly modest multiple of 15 times next year's estimated profits (based on analyst estimates). The average stock on the S&P 500, in comparison, trades at a multiple of nearly 23.
What's great about AstraZeneca is that the business is diverse. It has many different types of drugs that have generated more than $1 billion in revenue for its operations through the first nine months of 2024. Oncology is a big area of its business. Earlier this year, it acquired Fusion Pharmaceuticals, a company that's involved in developing radioconjugates. These are more targeted treatment options for patients than chemotherapy and can lead to better outcomes.
In July, AstraZeneca also acquired Amolyt Pharma, a company that develops treatments for rare endocrine diseases. Through these acquisitions, AstraZeneca has bolstered its pipeline, which now includes 199 projects, giving the company many potential growth opportunities to pursue in the long run.
AstraZeneca expects to grow both its revenue and core earnings per share in the high teens this year. Its solid financials and strong growth potential make this an ideal stock to buy and hold for the long haul, as the business looks unstoppable.
The biggest drugmaker on the planet
Keith Speights (Eli Lilly): Five years ago, Eli Lilly was a large pharmaceutical company, but certainly not the biggest. However, today Lilly ranks as the biggest drugmaker on the planet based on market capitalization, and it's not a close contest.
One drug has been the key catalyst for Lilly: Tirzepatide. It's marketed under the brand name Mounjaro in the U.S. for treating type 2 diabetes, and under the brand name Zepbound as a weight-loss therapy. So far in 2024, Lilly's tirzepatide franchise has raked in sales of $11 billion. Analysts at GlobalData predict annual sales of $34 billion by 2029.
Lilly awaits U.S. Food and Drug Administration approval of tirzepatide in treating obstructive sleep apnea. It's also evaluating the drug in clinical studies targeting improved cardiovascular outcomes, heart failure with preserved ejection fraction, and metabolic-associated steatohepatitis.
The company's lineup also includes other blockbuster drugs with strong momentum. Sales of autoimmune disease drug Taltz, breast cancer drug Verzenio, and fast-acting insulin Humalog soared by 17% or more year over year in the third quarter of 2024.
Lilly's pipeline makes it even more unstoppable. The drugmaker has 24 late-stage programs, notably including diabetes/obesity drugs orforglipron and retatrutide.
There are too many reasons to invest in this stock
Prosper Junior Bakiny (Vertex Pharmaceuticals): Various factors make a company worth investing in for the long run. Vertex Pharmaceuticals, a biotech leader, ticks many boxes.
Consider a corporation's moat that allows it to maintain an advantage in a market despite competitors, something Warren Buffett himself thinks is critical to a business' long-term success. Vertex has held a monopoly in the market for drugs that treat the underlying causes of cystic fibrosis (CF) for more than a decade. Moats hardly get any stronger than an actual monopoly.
Although many other companies have tried to develop competing CF drugs, they have failed so far. That points to another aspect of Vertex's operations that is key to long-term performance. The company is an innovative powerhouse. Vertex changed the standards of care in CF. It also helped develop Casgevy, a therapy for two rare blood diseases. Casgevy is the first approved gene editing medicine that uses the Nobel prize-winning CRISPR method.
The company could also earn approval for suzetrigine, a potential medicine for acute pain, next year. Pain medications are already a thing, but many come with severe potential side effects (think opioids). Vertex Pharmaceuticals is looking to change that situation.
Lastly, the company's pipeline looks attractive. That's another important asset for any drugmaker looking to succeed over long periods. Vertex's pipeline features exciting programs. Perhaps the most promising is a potential functional cure for type 1 diabetes.
We didn't even touch on Vertex's excellent financial results or its management team, which continues to prove its worth. At any rate, one thing is clear: Vertex Pharmaceuticals is an excellent stock that could continue to deliver market-beating returns for a while.
