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The 7 Hottest Healthcare Stocks to Own for 2023 and Beyond

Major indices such as the S&P 500 and the Nasdaq Composite may have plunged by double-digits during 2022, but certain areas of the stock market performed strongly throughout the year. One of those areas is among the hottest healthcare stocks.

With company-specific catalysts outweighing negative macro factors such as high inflation, rising interest rates, and slowing economic growth, scores of healthcare stocks have delivered strong returns in 2022. However, far from a “one and done” phenomenon, it’s not too late to dive in if you’ve yet to add these plays to your portfolio.

Although the market has caught on to the opportunity with these biotech, pharmaceutical, and medical device product stocks, several of them continue to have a material runway.

That’s the case here with these seven hottest healthcare stocks. As their respective catalysts (namely new treatments/products) continue to play out, each one has a strong chance of making another significant move higher in 2023 and in the years ahead. Consider now an ideal time to initiate or add to a position.

Ticker Company Price
BIIB Biogen $284.98
BNTX BioNTech $175.25
INCY Incyte $82.03
INSP Inspire Medical Systems $253.66
LLY Eli Lilly $359.87
VEEV Veeva Systems $168.26
VTRS Viatris $10.96

Biogen (BIIB)

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Trending lower for most of 2022, Biogen (NASDAQ:BIIB) ripped higher on Sep. 28, on the heels of game-changing news regarding one of the key drug candidates in its pipeline, Alzheimer’s treatment Lecanemab.

Trial data released on that date indicated that Lecanemab, which the company is developing with Japan-based pharmaceutical company Eisai (OTCMKTS:ESALY), helped to slow down the progress of the disease among early-stage patients. While it may seem as if the potential upside from Lecanemab is already priced-into BIIB stock, that’s not necessarily the case.

For one, while the stock has moved higher, its valuation hasn’t exactly gotten out of hand. Its shares today trade for 16.6 times forward earnings. More importantly, if this drug makes it to market, based on forecasts from analysts at JP Morgan (calling for as much as $10 billion in peak annual sales), commercialization could further boost both BIIB’s earnings and its stock price.

BioNTech (BNTX)

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The mass wave of Covid-19 vaccination may have long since passed, but that doesn’t mean BioNTech (NASDAQ:BNTX) has ceased to be one of the hottest healthcare stocks. Shares in this German-based biotech company, which co-developed widely-used Covid-19 vaccine Comirnaty with Pfizer (NYSE:PFE), have fallen around 20.5% since January.

However, even as the vaccination bonanza is coming to an end, this may be more than reflected in the valuation of BNTX stock. Shares sell for only five times estimated 2022 earnings and just 10.2 times 2023 earnings forecasts, which already take into account a massive drop off in Covid-19 vaccine sales.

That’s not all. Besides being a good value, BNTX has emerging growth catalysts in play as well. With a pipeline filled with promising mRNA-based vaccine candidates covering a wide variety of ailments, including malaria and tuberculosis, success with a few of them may be enough to spark a comeback.

Incyte (INCY)

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A developer of therapeutics, Incyte (NASDAQ:INCY) is an established biotech company generating billions in annual revenue. Jakafi, a treatment for myelofibrosis and polycythemia vera, is now Incyte’s flagship product. Last quarter, Jakafi’s net product and royalty revenues made up around 85.7% of overall sales.

That said, Jakafi may not make up the lion’s share of INCY’s top line for long. As a Seeking Alpha commentator argued last month, one of Incyte’s other treatments at the commercialization stage, Opzelura (a non-segmental vitiligo treatment), is poised to experience a massive jump in revenue. Sales doubled last quarter and could keep taking off in the coming quarters.

Furthermore, the company continues to make big progress with several promising treatments in its pipeline. Broadening its product pipeline and earnings growth, making its current forward earnings multiple (around 30) reasonable. There’s plenty of room for INCY stock to keep climbing.

Inspire Medical Systems (INSP)

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Based in Golden Valley, Minnesota, Inspire Medical Systems (NYSE:INSP) makes medical devices used to treat obstructive sleep apnea. Its namesake product, Inspire, is an implantable nerve stimulator. This is an alternative treatment to the traditional continuous positive airway pressure (or CPAP) therapies that are commonly used to treat this disorder.

With the commercialization of its technology, INSP’s revenue has increased well over tenfold over the past five years. On Dec 13, KeyBanc’s Matthew Mishan gave INSP stock the equivalent of a “buy” rating and a $287 per share price target. Per the analyst, Inspire is “well-positioned to meet or exceed revenue growth expectations.”

With its high operating leverage, further revenue growth may result in a big improvement in Inspire’s bottom line. Current losses could swing to high earnings down the road. This will likely enable INSP, currently sporting a $7.4 billion market cap, to sustain, then grow, its current valuation.

Eli Lilly (LLY)

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Eli Lilly (NYSE:LLY) has been one of the hottest healthcare stocks of 2022. Yet despite its big year-to-date run-up, don’t assume shares will soon lose their current “hot stock” status. Why?

As I argued earlier this month, the potential with Mounjaro, the company’s main drug candidate, is more than enough to send LLY stock even higher from here. Mounjaro initially developed as a treatment for Type 2 diabetes, is now in the running to become approved for use as a treatment for obesity.

If Eli Lilly obtains regulatory approval to market Mounjaro for this use, it could translate into impressive levels of revenue/earnings growth for this large, established pharmaceutical company. According to analysts at UBS, peak annual sales for Mounjaro could top $25 billion. Given that a mere $1 billion in annual sales makes a drug a “blockbuster,” this drug could ultimately become a “blockbuster among blockbusters.”

Veeva Systems (VEEV)

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After looking at biotech, medical device, and pharma plays, let’s look at a healthcare technology stock that’s among the hottest in the sector. Veeva Systems (NYSE:VEEV) is a provider of cloud-based software to the life sciences industry.

Sure, with the VEEV stock dropping 33.75% this year, amid the market sell-off that in particular knocked SaaS stocks like this one significantly lower, you may be doubting that it still holds “hot stock” status. However, VEEV differs from many SaaS stocks. Namely, while many other similarly-sized SaaS companies remain unprofitable, Veeva is already consistently-profitable.

Since it is operating in a sector more likely to stay resilient during an economic downturn, revenue and earnings growth could carry on in the years ahead. Analyst forecasts call for earnings of $5.33 per share by FY 2025 (fiscal year ending January 2025). That’s more than double the reported earnings from the preceding fiscal year.

Viatris (VTRS)

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Viatris (NASDAQ:VTRSwas formed in late 2020 when Pfizer merged its former Upjohn unit into Mylan N.V. Since that Reverse Morris Trust merger transaction, shares in this pharmaceutical company have struggled. Despite a low valuation, with high debt and low growth, investors have largely shied away from it until recently.

As Louis Navellier discussed late last month, a pair of pending transactions point to brighter prospects ahead, shifting sentiment for VTRS stock. The forthcoming purchases of Oyster Point Pharma (NASDAQ:OYST) and Famy Life Sciences could enable the company to wring out revenue and cost synergies.

Trading for just 3.3 times forward earnings, even if these acquisitions translate into modest operating improvements and a modest re-rating, it could still result in a big move higher ahead for VTRS. In the meantime, you can generate steady returns from the stock via its 4.31% dividend.

On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.

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