2022 Roundtable: Our Favorite Picks Right Now

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What’s the best stock to buy right now? Our healthcare roundtable nominates our three favorites. Here’s why we like Novavax (NVAX -6.96%)OrthoPediatrics (KIDS -0.72%), and Pliant Therapeutics (PLRX -4.88%).

Novavax is officially a money machine

Taylor Carmichael (Novavax): Novavax is a vaccine biotech that shot to prominence when COVID-19 struck. The small biotech scored big wins in 2020 after receiving $388 million from the Coalition for Epidemic Preparedness and $1.6 billion from Operation Warp Speed. The stock took off that year, rising almost 3,000% from $4 a share in January to $117 in December. And then in February 2021 the stock saw another magnificent spike to over $300 a share, when the biotech reported its outstanding phase 3 data.

Over time the stock saw a severe fall as manufacturing delays kept its vaccine off the market. Finally in December 2021, Novavax received Emergency Use Authorization from the World Health Organization and the European Medicines Agency. In 2022, authorizations poured in from regulators around the world. In Q1, Novavax shipped 42 million doses of its vaccine.

Now the biotech is awash in cash. In Q1 the scrappy biotech pulled in $700 million in sales of its COVID-19 vaccine Nuvaxovid (and $200 million in profits). Novavax reports its Q2 numbers on Aug. 4. While the company did not give a specific estimate for the quarter, CEO Stan Erck did say the numbers would be higher than the $700 million in Q1. And the sales volume will likely spike in the winter months, when COVID-19 hospitalizations dramatically increase. Novavax projects a minimum of $4 billion in revenue for 2022.  

What’s really exciting is that Novavax now has data showing its original vaccine works against all the omicron variants. “The Novavax data was pretty significant,” one FDA advisor told The Washington Post. This suggests that Novavax could see significant revenue with a booster shot in the future. In May the company started a phase 3 trial testing Nuvaxovid as a booster shot, and comparing it with the company’s omicron-specific vaccine candidate, NVX-CoV2515. We’ll see initial data in the second half of this year.

At $55 a share, and a market cap of just $4 billion, Novavax stock is incredibly cheap right now. As winter hits and COVID-19 hospitalizations increase, the demand for Novavax vaccines will shoot higher. The company’s estimate of $4 billion in revenue is looking more and more likely. This stock has significant upside potential, in my opinion.

This stock has good bones

Patrick Bafuma (OrthoPediatrics): My favorite investment right now is a steady outperformer that has carved out a niche for itself in the healthcare world. OrthoPediatrics has been laser-focused on the children’s market for orthopedic surgery, and investors thus far have been rewarded. Shares have more than doubled the S&P 500 since the company’s IPO about five years ago. And since I do not think children are going to stop roughhousing anytime soon, I see no reason to believe this growing niche surgical company cannot continue its steady growth.

Giving the company a mulligan for stagnant sales in 2020 due to the coronavirus pandemic, it has posted at least 20% annual revenue growth every year since its inception in 2008. And there is still plenty of room for growth in current markets too. The company is projecting $120 million-$125 million in full-year 2022 revenue, yet believes its worldwide total addressable market is $3.9 billion a year, with $1.7 billion of that in the U.S. Clearly, there is plenty of opportunity ahead that the company continues to chip away at.

Management continues to be savvy and make smart acquisitions as well. In fact, it has already made two bolt-on acquisitions this year with a premium quite less than Stryker‘s acquisition earlier this year. Not to mention the two purchases the child-focused surgical company bought already have niche products on the market that will immediately start contributing to the bottom line.

OrthoPediatrics is operating in a market with steady demand for years to come, plus it is gradually consolidating a fragmented market and becoming an increasingly well-known name among pediatric orthopedic surgeons. The company’s combination of steady growth and smart management is exactly what the doctor ordered for market-beating performance for years to come, and why it’s one of my favorite core holdings.

A possible home run play

George Budwell (Pliant Therapeutics): If you are on the hunt for a stock that could double or triple in value within the next 12 months, the small-cap biotech Pliant Therapeutics ought to be on your radar right now. While this clinical-stage company is a risky play, its novel anti-fibrotic pipeline is starting to look like the real deal.

The backstory is that Pliant is developing an orally administered, anti-fibrotic molecule known as PLN-74809 for the lung disease idiopathic pulmonary fibrosis (IPF), as well as for the liver disorder primary sclerosing cholangitis (PSC). PLN-74809 recently hit the mark in a mid-stage trial for IPF, where it exhibited a favorable safety profile and encouraging signs of efficacy in this hard-to-treat lung disease.

What’s more, the Food and Drug Administration (FDA) also granted the drug Fast Track designation for PSC earlier this week. This highly coveted regulatory designation will allow the company to have more frequent meetings with the FDA and allow the drug to be reviewed on a rolling basis. 

Taken together, PLN-74809’s two lead indications may be worth over $2 billion in annual sales at their peak. To put this sales estimate into context, Pliant’s market cap currently stands at $945 million. So, if the drug continues to pan out in the clinic, this small-cap biotech ought to generate substantial returns for early investors.

What’s more, Pliant could very well fetch a sizable tender offer well before its lead candidate enters late-stage testing. IPF is an enormous commercial opportunity — one that big pharma has had trouble capitalizing on via the development of novel medications. Pliant’s recent success in this hard-to-drug indication surely hasn’t gone unnoticed by potential suitors.