Like most industries, healthcare has started leveraging automation and innovative technologies to combat staffing shortages and other pandemic-induced operational challenges. Technology is expected to play a big role in remote patient management (RPM) and in improving the overall patient experience this year.
Up to 80% of healthcare providers in the U.S. are planning to invest in technologies that include digital health, artificial intelligence (AI), and machine learning, as well as tools to support clinical staff and caregivers over the next five years. The global digital health market is expected to reach $881 billion by 2027, achieving a 20.1% CAGR during 2022 - 2027. In addition, U.S. healthcare spending is projected to reach $6.20 trillion by 2028 and account for almost 20% of the GDP.
Given this backdrop, Wall Street analysts expect large-cap healthcare stocks, Horizon Therapeutics Public Limited Company (HZNP), Catalent, Inc. (CTLT), and Exact Sciences Corporation (EXAS), to rally by more than 40% in price in the near term.
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Horizon Therapeutics Public Limited Company (HZNP)
With a market capitalization of $22.16 billion, HZNP in Dublin, Ireland, is a biotechnology company that focuses on discovering, developing, and commercializing medicines that address critical needs for people impacted by rare, autoimmune, and severe inflammatory diseases. The company operates in two segments–Orphan and Inflammation.
Last month, HZNP announced that it had signed a long-term, full-building lease with Alexandria Real Estate Equities, Inc. to be the first tenant at the Alexandria Center® at the Traville Gateway campus in Rockville, Md. The new facility should expand the company’s presence in the region. Maryland has one of the fastest-growing biotechnology communities in the country and thus should be beneficial for the company.
For the third quarter, ended September 30, HZNP’s net sales increased 62.9% year-over-year to $1.04 billion. Its non-GAAP net income stood at $413.80 million, up 5.5% from its year-ago value, while its EPS increased marginally year-over-year to $1.75. The company’s adjusted EBITDA grew 54.3% from the prior-year quarter to $509 million.
The $995.87 million consensus revenue estimate for its fiscal fourth quarter (ended December 2021) indicates a 33.6% increase year-over-year. The Street expects the company’s EPS to grow 4.7% from the same period in the prior year to $1.34. Furthermore, it surpassed the consensus EPS estimates in three of the trailing four quarters.
HZNP shares have gained 12.4% in price over the past year and 7.2% over the past month to close yesterday’s trading session at $97.70.
The six Wall Street analysts who rated HZNP have rated it Buy. The 12-month median price target of $143.83 indicates a 47.2% potential upside. The price targets range from a low of $133.00 to a high of $168.00.
Catalent, Inc. (CTLT)
CTLT in Somerset, N.J. develops and manufactures solutions for drugs, protein-based biologics, cell and gene therapies, and consumer health products worldwide. It operates through four segments: Biologics; Softgel and Oral Technologies; Oral and Specialty Delivery; and Clinical Supply Services. CTLT has a market capitalization of $17.90 billion.
On February 15, CTLT announced plans to expand its Waigaoqiao Free Trade Zone (FTZ) facility in Shanghai, China, to increase capacity for temperature-controlled storage and distribution of clinical supplies and additional secondary packaging capabilities. Also, last month, the company announced that it completed a $10 million expansion in state-of-the-art large-scale isolator units at its Malvern, Pa., and Dartford, U.K., facilities to provide advanced containment capabilities for the micronization of highly potent drug compounds. These capability expansions should enable the company to cater to the growing demand and boost its returns.
Its net revenues increased 33.6% year-over-year to $1.22 billion in its fiscal second quarter, ended December 31. Its operating earnings rose 26.8% from the prior-year quarter to $161 million. Its net earnings came in at $97 million, indicating a 10.2% increase year-over-year. And its EPS increased 15.6% from its year-ago value to $0.52.
The Street expects the company’s revenues to be $4.81 billion in its current fiscal year, indicating a 20.3% increase year-over-year. The company’s EPS is expected to increase 23.4% year-over-year to $3.75. Furthermore, CTLT has an impressive earnings surprise history; it beat the consensus EPS estimates in each out of the trailing four quarters.
The stock gained marginally in price intraday to close yesterday’s trading session at $99.93.
Of the seven Wall Street analysts who rated CTLT, six rated it Buy, while one rated it Hold. The 12-month median price target of $142.71 indicates a 42.8% potential upside. The price targets range from a low of $129.00 to a high of $155.00.
Exact Sciences Corporation (EXAS)
EXAS provides cancer screening and diagnostic test products in the United States and internationally. The Madison, Wisc., company focuses on the early detection and prevention of some forms of cancer. It offers a non-invasive screening test called Cologuard for the early detection of colorectal cancer and pre-cancer and Oncotype DX. It has a market capitalization of $13.61 billion.
Last month, EXAS announced that it acquired PreventionGenetics, a genetic testing laboratory, to complement its advanced cancer diagnostics portfolio and support its entrance into hereditary cancer testing (HCT). “PreventionGenetics is a natural fit with Exact Sciences, and we’re thrilled to have their talented team join in our mission to make earlier cancer detection a routine part of medical care,” said Kevin Conroy, Exact Sciences chairman, and CEO.
EXAS presented data showing improved accuracy of the second-generation Cologuard® test and progress toward an even better colorectal cancer screening solution for patients. This demonstrates its prowess in colorectal cancer screening.
EXAS’s revenues increased 11.8% year-over-year to $456.38 million in its fiscal third quarter, ended September 30. Its screening revenue came in at $280.40 million, indicating an increase of 31% year-over-year, while its precision oncology revenue rose 59% from the year-ago value to $145.40 million. Its gross profit stood at $319.43 million, up 9.1% year-over-year.
Analysts expect EXAS’s revenues to increase 16.9% year-over-year to $1.74 billion in its fiscal year ended Dec. 31, 2021. The company’s EPS is expected to improve 44.9% year-over-year.
EXAS shares have gained 0.7% in price year-to-date to close the last trading session at $78.38.
The five Wall Street analysts who rated EXAS rated it Buy. The 12-month median price target of $124.00 indicates a 58.2% potential upside. The price targets range from a low of $116.00 to a high of $140.00.
Click here to checkout our Healthcare Sector Report for 2022
HZNP shares were trading at $95.75 per share on Thursday afternoon, down $1.95 (-2.00%). Year-to-date, HZNP has declined -11.15%, versus a -7.05% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.3 Large-Cap Healthcare Stocks with More Than 40% Upside, According to Wall Street StockNews.com