Stocks to buy

The Top 3 Healthcare Stocks to Buy on Weakness in 2024

Healthcare stocks have started the year off very strongly, propelled by excitement about weight loss drugs and investments by Nvidia (NASDAQ:NVDA). The sector is also getting a lift from the U.S. Federal Reserve’s decision to stop raising rates and its suggestions that it will cut rates later this year. Lower rates make it much easier for drug makers to obtain funds to finance the development of pharmaceuticals. Meanwhile, many pharmaceutical firms have rather low valuations because they dropped sharply in 2022 and much of 2023 due to overdone fears about the impact of rate hikes on the sector. For long-term investors who want to exploit the opportunities created by these trends, here are the three top healthcare stocks to buy on weakness.

vTv Therapeutics (VTVT)

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vTv therapeutics (NASDAQ:VTVT) has developed TTP399, a drug candidate which reduces hypoglycemic episodes among Type 1 diabetes patients. Its use saw a reduction of 40% in a Phase 1 study. Those impressive results led the U.S. Food and Drug Administration to grant the drug “breakthrough” status in 2021.

Since then, the firm has struggled to get a Phase 3 study of the drug off the ground. But that seems set to change, as VTVT announced on Feb. 28 that it had obtained $51 million through a private placement from a number of institutional investors, including Samsara BioCapital and the JDRF T1D Fund. The fact that those two very prestigious enterprises would invest in vTv bodes well for the firm’s flagship drug and for vTVT stock.

Moreover, vTv reported that the proceeds will fully fund the Phase 3 trial of TTP399. Consequently, I’m confident that the company will at long last get the Phase 3 trial of this extremely promising drug off the ground. vTv stated that it intends to launch the trial this year.

VTVT stock jumped 98% in the five days that ended on March 1, but it has sunk 49% in the last year and 88% since February 2020. Yet, the promising outlook of vTv’s drug makes it one of the top healthcare stocks to buy.

Exact Sciences (EXAS)

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Exact Sciences (NASDAQ:EXAS) develops cancer diagnostic tools. On Feb. 21, the firm reported strong fourth-quarter results as its top line jumped 17% year-over-year to $647 million. Meanwhile, its cash from operations came in at $69.5 million, up from $52 million in Q4 of 2022.

Also noteworthy is that the firm is well-positioned to rapidly grow its revenue from products other than its flagship Cologuard colon cancer test. The overseas revenue of Exact’s Oncoptype tests, which measure the likelihood of breast cancer and colon cancer recurring, climbed 48% last quarter compared with Q4 of 2022. Meanwhile, Exact expects the annual sales of its Precision Oncology business, of which Oncotype is a part, to climb to $1 billion from its annual run rate last quarter of about $640 million.

In order to accomplish that goal, the company plans to launch its Oncotype tests in new overseas markets while continuing to expand in its current markets, such as Japan, Germany and Italy. Exact also expects the sales generated by its OncoExTra cancer therapy selection test, which it launched in February 2023, to climb.

Moreover, Exact intends to launch MRD tests, which shows whether very few blood cancer cells are still present, along with Riskguard and OncoLiquid, which test individuals’ genes to determine how likely they are to contract certain cancers.

EXAS has fallen 11% in the last three months and 20% so far this year.

Excientia (EXAI)

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Nvidia’s decision to hike its stake in Recursion Pharmaceuticals (NASDAQ:RXRX) last quarter to $76 million from $50 million bodes well for the outlook of Exscientia (NASDAQ:EXAS). That’s because both firms use AI to accelerate the drug discovery process and make it more effective. If Nvidia, which can use significant parts of its huge cash hoard to research other firms, is upbeat on the use of AI to research drugs, I’m sure that it’s an extremely promising sector.

Additionally, Exscientia is already partnering with multiple, huge drugmakers. As a result of these alliances, I’m confident in the effectiveness of its technology.

EXAI stock has come under pressure in recent weeks because the company fired its CEO Andrew Hopkins due to inappropriate relationships. The firm’s Chief Science Officer, Dave Hallett, who presumably has more knowledge about its products and technology than Hopkins did, was chosen to become its interim CEO. Hallett can lean on other executives to help him make decisions about the business side of the company.

EXAI dropped 13% between Feb. 12 and March 1.

On the date of publication, Larry Ramer held long positions in VTVT and EXAS. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been SMCI, INTC, and MGM. You can reach him on Stocktwits at @larryramer.

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