3 Top Value Stocks in Healthcare

 When investors talk about value stocks, they are usually speaking of companies with cheap shares. But a comment from Warren Buffett may be a better guide when seeking out value. He said it is better to buy a wonderful business at a fair price than a fair company at a wonderful price. That's because great businesses continue rewarding owners over time. Buying cheap shares often only provide a short-term jump back to their fair value.

Vertex Pharmaceuticals (NASDAQ:VRTX), Align Technology (NASDAQ:ALGN), and ResMed (NYSE:RMD) each have a great track record and financial performance that easily justifies its current valuation. Breaking down the numbers, they could be the best value stocks in the healthcare sector right now.

1. Vertex Pharmaceuticals

Sixty years ago, the average life expectancy of someone born with cystic fibrosis (CF) -- a progressive, genetic disease associated with thick mucous building up in organs -- was 10 years. Today, a child diagnosed with CF can expect to live into their fifties. The drugs developed by Vertex are a significant contributor to that increased longevity. The company's goal is to one day cure the disease.

Vertex has clinical programs in seven different disease areas using small molecule drugs, gene editing, and cell therapy. Outside of CF, the farthest along are in phase 2 clinical trials. The company is partnered with gene-editing pioneer CRISPR Therapeutics (NASDAQ:CRSP) on sickle cell disease and beta thalassemia. It also has drugs for lung and liver disease, as well as one for kidney disease, in phase 2 trials expected to wrap up this year. Its cell therapy treatment for diabetes recently received a breakthrough designation from the U.S. Food and Drug Administration (FDA) but isn't expected to conclude its full trial until 2028.

Vertex has compounded sales 16% per year over the past decade, and is estimating $6.7 billion to $6.9 billion in revenue this year, which would amount to 10% growth. It produced $10.29 in earnings per share (EPS) last year, giving it a price-to-earnings (P/E) ratio of 21. That's about half of the average ratio for both pharmaceutical stocks and the S&P 500. For a company that hasn't grown slower than 22.5% in the past five years and has a successful history of treating rare diseases, any discount is an opportunity. Being half as expensive as the overall market could make Vertex one of the best value stocks to buy right now.

2. Align Technology

Align is known for its Invisalign clear teeth straighteners. But company has become much more than just a consumer product for those looking to straighten their teeth. Through hardware and software, the company has become a partner with orthodontists, helping them grow their business and improve the experience of their patients. The numbers tell the story.

Utilization by North American orthodontists -- measured as the number of cases shipped divided by the number of doctors to whom cases were shipped -- has dramatically risen in the past few years. This is indicative of both higher sales of aligners and increased productivity for orthodontists. It's a win-win situation that makes it hard for competitors to gain a foothold.

Year	Utilization	Growth
2016	36.6	N/A
2017	46.6	27%
2018	56.7	22%
2019	65	15%

DATA SOURCE: ALIGN TECHNOLOGY.

Management believes the opportunity for continued growth is immense. They cite 500 million people that could benefit from teeth straightening. With only 15 million starting treatment each year, growth could continue for decades.

Although the pandemic dented sales last year, Align grew revenue and profits from 2011 to 2019 by 22% and 24%, respectively. The company hasn't offered guidance for 2021, but committed to the long-term growth projection of 20% to 30%. If the fourth quarter is any indication, Align will have no problem delivering on the commitment. In the quarter ending Dec. 31, revenue came in 28% higher than the year ago period. If that holds up for this year, the stock will trade for about 15-times 2021 sales. That may not be cheap, but for a high quality company growing into an enormous addressable market, it could be the fair price for a wonderful business that investors should be willing to pay.

3. ResMed

Over the last few years, there has been a steady stream of research showing just how critical sleep is to our health. ResMed makes the continuous positive airway pressure (CPAP) devices and software that help patients address breathing problems during sleep. They are also necessary for patients with Chronic Obstructive Pulmonary Disease (COPD), another condition that results in difficulty breathing. As incentives in healthcare shift toward addressing underlying causes of problems rather than just symptoms, the company is well-positioned.

Roughly one in four adults in the U.S. have sleep apnea, yet 80% of them are undiagnosed, and it is often a comorbidity for patients with chronic conditions. That means healthcare providers and insurers have plenty of incentive to treat sleep apnea, because it is necessary to reduce the severity and cost of the primary disease.  

A recent 30-year study from the U.K. showed patients who were not longtime users of the breathing devices were five times more likely to die. There was even a direct relationship between using the devices and avoiding trips to the hospital. Those numbers highlight the importance of dealing with the condition, and make a strong case for the company with 32% market share for CPAP machines. 

Surprisingly, the stock is reasonably priced. Over the past few years, the stock has traded between 30 and 50 times cash flow from operations. That number currently stands at about 34. ResMed has grown revenue consistently above 10% over the past decade and EPS above 13%. It should be able to accelerate profits as its cloud software becomes a larger part of the business and it leverages the medical data from 8 billion nights of sleep and 13.5 million cloud-connectable devices. For investors trying to sleep well despite the stock market at record levels, ResMed could be just what the doctor ordered.

https://www.fool.com/investing/2021/04/21/3-top-value-stocks-in-healthcare-to-buy-right-now/

Applied DNA Estimates Prelim FQ2 Revenue Range; Business Update

 Anticipates Revenues in the Range of $2.5 Million to $2.7 Million Driven by COVID-19 Testing and Diagnostics Sales -

- Announces Full Loan Forgiveness under Paycheck Protection Program –

- NYS Department of Health Completes Re-Inspection of ADCL -

https://finance.yahoo.com/news/applied-dna-provides-preliminary-estimated-110000796.html

Roche COVID-19 Tests Boost Q1, CEO Sees Drug Demand Accelerating

 Swiss drugmaker Roche predicted on Wednesday that demand for its drugs would accelerate for the remainder of 2021, after first-quarter sales of COVID-19 tests offset a pandemic-influenced slump in its main pharmaceuticals business.

Chief Executive Severin Schwan's assessment of the pandemic-disrupted market has ranged from mid-2020 optimism that health care systems were learning to navigate the crisis, to later conceding improvements were taking longer as people skipped doctors visits, cutting demand for drugs.

Schwan now sees hope for the rest of 2021.

"We expect to accelerate the growth in pharma, in particular, for the remainder of the year as vaccinations progress and patients resume their doctor visits," Schwan told reporters on a call.

Roche shares rose 1.5% at 1018 GMT, the strongest performers on Switzerland's benchmark Swiss Market Index.

First-quarter sales were 14.9 billion Swiss francs ($16.3 billion), down 1% from 15.1 billion francs a year earlier, Roche said in a statement. The company did not report a quarterly profit.

Diagnostics sales, driven by demand for COVID-19 tests for everything from active infections to antibodies in people who have recovered, rose 55% to 4.3 billion francs. That contrasts with the drug business, where sales slipped 9% to 10.6 billion francs.

Schwan still sees current-year overall sales growth in the low- to mid-single-digit range at constant exchange rates, with similar core earnings per share growth, helped in part as COVID-19 testing demand remains robust in months to come.

PANDEMIC PORTFOLIO

Roche's pandemic portfolio was lifted by Actemra, an arthritis drug repurposed for COVID-19 pneumonia whose revenue rose 22% to 779 million francs, and an anti-COVID-19 antibody cocktail that reaped 166 million francs.

Some positive pandemic news actually resulted in a setback for Roche's trial aspirations.

The company delayed a study of its anti-COVID-19 oral pill in Britain, because rising vaccination rates have checked infections and made finding patients harder.

"You set up sites where there's a lot of COVID, and then by the time you're ready to enrol, the pandemic has moved somewhere else and you're sort of chasing it," Roche drugs division chief Bill Anderson said.

https://money.usnews.com/investing/news/articles/2021-04-21/roche-confirms-2021-outlook-as-diagnostics-sales-mitigate-covid-19-drug-slump

Will Blood Clot Issues Make J&J COVID Vaccine a Loser?

 Concerns about an extremely rare blood-clotting issue have sidelined Johnson & Johnson's (NYSE:JNJ) COVID-19 vaccine for now. An advisory committee is scheduled to meet again on Friday, April 23, to review the data for reported cases of blood clots. In this Motley Fool Live video recorded on April 14, 2021, Motley Fool contributors Keith Speights and Brian Orelli whether or not this possible side effect could make Johnson & Johnson's vaccine a loser over the longer term.

Keith Speights: Yesterday, here's the big story, the FDA and CDC jointly decided to recommend pausing the use of Johnson & Johnson's COVID-19 vaccine. They did this because of concerns about potential blood clots that could be caused by the vaccine. There's an advisory committee meeting today to review this situation, review the data and try to determine what's the best route forward. Brian, how serious is this issue first of all, and second of all, could it ultimately make Johnson & Johnson a longer-term loser in the COVID vaccine market?

Brian Orelli: We'll have to see what comes of the CDC meeting. It seems like it's probably the same issue that AstraZeneca (NASDAQ:AZN) is having with blood clots, since they use the same basic technology. Maybe it's less frequent. Perhaps that's because it's only one dose.

Right now, It sounds like the cases [are] about one in a million in the U.S. My guess is that rate is probably going to go up as you start looking through things. Not every side effect is actually reported to CDC or the FDA. So I think the cases might actually end up being higher than one in a million.

But I think though, for people who are most susceptible to having complications from COVID-19, this rate is way lower than that. So I think that the FDA and the CDC are most likely going to leave it on the market. But they may do something like what the EMA did for AstraZeneca, which is that they said, "For younger people, let's give them a different vaccine because it doesn't make sense."

Certainly, Johnson & Johnson, in terms of the actual company and how it could affect them, Johnson & Johnson's one dose regimen is helpful, especially in rural areas. In terms of the bigger picture, I don't know if it's really that big of a deal. They're not making a profit from their vaccine during the pandemic. And I think there's probably less opportunity in the variant booster market for Johnson & Johnson and AstraZeneca just because of the way their vaccine is designed and is delivered via virus, and we're going to develop the antibodies to that virus. So I think that booster shots are going to become less and less useful for that technology than compared to the mRNA technology.

Speights: It sounds like, Brian, you're saying Johnson & Johnson might not be one of the top players over the long run in this vaccine market anyway, and that this issue might not even be a factor in that, right?

Orelli: Right, yeah. I mean, I think that this would affect them if they were going to be a big player, I would say this is definitely a negative. But since they're not trying to make a profit off of the vaccine right now, and they probably weren't going to be a big player later, I think that it's not that big of a deal for them.

Speights: Just out of curiosity, Brian, I know there's some controversy in the scientific community about whether or not this vaccine should've been paused. What do you think? Was is it a smart move or do you think it was maybe overdone?

Orelli: I think they are trying to give the perception that they're doing as much as possible to keep people safe as possible, and so I think that helps. I think even that helps in the long run.

I don't think it probably needed to happen, but I think the perception of "we're trying to keep people safe as possible" -- that helps in the long run in terms of making people feel like the vaccines that are available and are given at the right age group or whatever are safe.

I think pausing it, it's not going to be that long, I mean, a couple of days, probably. The EMA did the same thing, they are actually waiting till next week to make their decision. But they didn't quite pause it, but Johnson & Johnson had already said they're going to do a slow rollout in the EU, and so I think the European regulators have said, "be careful," basically, and they are going to make a decision next week. I think that they took a similar stance -- maybe not a complete pause, but in effect the same thing. I think the result is going to be that people have more confidence in the vaccines that are available.

Speights: I hope you're right. I do hope that this does not undermine the American public's confidence in vaccines in general, and COVID vaccines particularly. I think you're right. This is going to be a very short pause. I think the FDA acting commissioner even said that this review will be a matter of days. I would expect probably next week, this Johnson & Johnson vaccine is going to be available again.

Orelli: I think that's right, although we'll have to see the results of the meeting today.

Speights: Exactly.

https://www.fool.com/investing/2021/04/21/will-blood-clot-issues-make-johnson-johnsons-covid/

Anthem reports Q1, ups full year guidance

 

• First quarter GAAP net income was $6.71 per share, including net negative adjustment items of $0.30 per share. Adjusted net income was $7.01* per share.

• Operating revenue grew by 9.0%, or 10.7% adjusted for the repeal of the health insurance tax, over the prior year quarter to $32.1 billion.

• Medical enrollment increased by 1.4 million members year over year and 596 thousand members sequentially to 43.5 million members.

• Second quarter 2021 dividend of $1.13 per share declared to shareholders.

• Raising full year adjusted net income outlook from greater than $24.50* per share to greater than $25.10* per share.

https://finance.yahoo.com/news/anthem-reports-first-quarter-2021-100000371.html

TG Therapeutics starts Phase 3 of leukemia combo trial

 TG Therapeutics, Inc. (NASDAQ: TGTX), today announced the initiation of patient enrollment into the ULTRA-V Phase 3 randomized trial, evaluating the time-limited triple combination of UKONIQ™ (umbralisib), the Company’s once-daily, inhibitor of PI3K-delta and CK1-epsilon, ublituximab, the Company’s investigational glycoengineered anti-CD20 monoclonal antibody, and venetoclax, compared to the continuous doublet combination of UKONIQ plus ublituximab (U2) in patients with both frontline and relapsed or refractory chronic lymphocytic leukemia (CLL). The primary endpoint for the ULTRA-V Phase 3 trial is Progression-free Survival (PFS), and the trial is designed support the full approval of the triple combination of U2 plus venetoclax.

The Company also announced completion of enrollment into the ULTRA-V Phase 2 global, single arm trial evaluating the triple combination of U2 plus venetoclax. This primary endpoint for this trial is overall response rate (ORR) and complete response (CR) rate, and the trial completed enrollment with approximately 165 patients enrolled. The trial enrolled patients with front line CLL, as well as relapsed or refractory CLL, including patients who were refractory to prior Bruton’s Kinase Inhibitor (BTK) therapy.

https://finance.yahoo.com/news/tg-therapeutics-announces-launch-ultra-110000388.html

UK Vaccine Taskforce head lifts lid on Novavax deal

 The UK’s unique offering as a life sciences research hub helped convince US biotech Novavax to develop its COVID-19 jab there, according to the head of the country’s Vaccines Taskforce. 

Last August the UK government finalised a deal with Novavax to purchase 60 million doses of the NVX-CoV2373 vaccine, which will also be manufactured in the country at a plant owned by FUJIFILM Diosynth Biotechnologies in Stockton-on-Tees.

That plant could produce up to 180 million doses annually and a GlaxoSmithKline facility 30 miles away in Barnard Castle will soon be ready to fill and finish the vaccines.

The vaccine is currently under review by the MHRA and could prove to be a vital part of the effort to vaccinate the whole UK population against the virus, providing enough shots to vaccinate a further 30 million people.

Clive Dix, head of the UK’s Vaccine Taskforce, told pharmaphorum in an interview that he was able to persuade Novavax to base research, development and manufacturing in the country because of its efficiency at getting trials up and running.

The vaccine has also been added to a “mix and match” study to see if it can be used as a follow-up shot in people who have already received the AstraZeneca or Pfizer vaccine.

Dix said: “I sat in the (virtual) room with them and said ‘we will help you develop the vaccine faster, help with manufacturing and get you faster regulatory approval’, that was our offer and we contracted with them.”

“If you look at the development, we signed 15,000 people in six weeks in a trial set up by the NHS. It spotlighted the UK as a place to do clinical development.”

“Speed is everything in clinical development. It is really important and we have seen a lot of pharma companies interested in the UK. We have highlighted how good it is – it always has been but not everyone has noticed it.”

https://pharmaphorum.com/news/novavax-developed-vaccine-in-uk-because-of-rd-opportunities/