In this article, we will discuss the 7 Best Mid-Cap Healthcare Stocks to Buy Now along with a detailed analysis of the healthcare industry.
Challenges in the Health Sector
The healthcare industry is considered to be a fairly defensive sector due to its need. According to a World Health Organization report from December 2023, global healthcare spending reached a new high in 2021 at $9.8 trillion or 10.3% of global gross domestic product (GDP). However, spending distribution remained highly unequal, with public health spending increasing worldwide, except in low-income countries where government health spending declined as it relied heavily on external health aid. In 2021, 11% of the global population lived in countries spending less than $50 per person annually on health, while high-income countries spent around $4,000 per capita. Additionally, low-income countries, despite having 8% of the global population, accounted for only 0.24% of global health expenditure. The report states that while there was a significant increase in public spending on health during the peak of the COVID-19 pandemic, this growth is unlikely to be sustained over the long term as countries now focus on economic challenges like slowing growth, high inflation, and increased debt servicing. Dr Bruce Aylward, WHO Assistant Director-General, Universal Health Coverage, Life Course said:
“Sustained public financing on health is urgently needed to progress towards universal health coverage. It is especially critical at this time when the world is confronted by the climate crisis, conflicts and other complex emergencies. People’s health and well-being need to be protected by resilient health systems that can also withstand these shocks.”
Apart from that, due to the residual effects of the COVID-19 pandemic, the healthcare industry has also been facing challenges such as labor shortages and high costs. To read about this in detail, check out our report on the 11 Best Healthcare ETFs to Buy Now.
Adversity Drives Innovation
While the broader market has outperformed the healthcare sector by a huge margin over the last year, healthcare companies have been putting in their work to drive innovation in the industry. AI and other technologies are the driving forces for these companies. However, some of the companies have been using these technologies for longer. For example, Pfizer has been using AI in pharmacovigilance since 2014. The company also uses AI to analyze vast datasets, predict treatment outcomes, and streamline clinical development processes. The company made the following comments in one of its reports:
“If the ultimate goal of a self-driving car is to navigate a busy city street, in pharmaceutical research, the goal is to navigate the connections between a potential treatment and its effectiveness in treating a disease.”
On May 21, AstraZeneca’s CFO Aradhana Sarin told CNBC that the healthcare company is in a “new era of growth.” The company is expected to generate a revenue of $80 billion by 2030. Sarin said in the interview that the company is expecting to launch 20 potential new drugs by that time, and a number of them could potentially be $5 billion drugs. The CFO mentioned several upcoming innovations for the company, such as replacing chemotherapy with antibody-drug-conjugates (ADCs) and radiation therapies with radiopharmaceuticals. At its Q1 2024 earnings call, the biopharmaceutical giant’s CEO, Pascal Soriot said:
“Today is what do we intend to deliver in terms of our financial progression in ’24, ’25, ’26. Tomorrow is what are the products we are going to launch that will drive our growth between 2025 and 2030, and what is our strategy there, what do we intend to do with our pipeline, and what other products we believe are growth drivers to 2030. And the day after tomorrow is really the sort of post-2030 period. And what are — what do we believe are the technologies that will shape the future of medicine in oncology and beyond, and how are we building some of those platforms that will help us shape — participate in shaping the future of medicine in the therapy areas where we are.”
AI is disrupting every industry today and has been a major force in driving innovation in healthcare. With that, let’s look at the 7 best mid-cap healthcare stocks to buy now.
7 Best Mid-cap Healthcare Stocks To Buy Now
Our Methodology
For this article, we used the Finviz stock screener to identify nearly 140 healthcare companies with market capitalizations between $2 billion and $10 billion. We narrowed down our list to 7 stocks that were most widely held by institutional investors. The best mid-cap healthcare stocks are listed in ascending order of their hedge fund sentiment.
The hedge fund data was taken from Insider Monkey’s database of 919 elite hedge funds as of the first quarter of 2024. Why are we interested in the stocks that hedge funds pile into? The reason is simple, our research has shown that we can outperform the market by imitating the top stock picks of best hedge funds. Our quarterly newsletter’s strategy picks 14 small and large-caps every quarter and it has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
7 Best Mid-cap Healthcare Stocks To Buy Now
7. Intra-Cellular Therapies, Inc. (NASDAQ:ITCI)
Number of Hedge Fund Holders: 45
Intra-Cellular Therapies, Inc. (NASDAQ:ITCI) is a New York-based company that discovers, clinically develops, and commercializes small molecule drugs for neuropsychiatric and neurological disorders. In the first quarter, 45 hedge funds had stakes in Intra-Cellular Therapies, Inc. (NASDAQ:ITCI), with total positions worth $830.295 million. As of Q1, VenBio Select Advisor is the largest shareholder in the company with a stake worth $171.270 million.
On May 8, Mizuho Securities analyst Graig Suvannavejh reiterated a Buy rating on Intra-Cellular Therapies, Inc. (NASDAQ:ITCI), with a price target of $96.00.
On May 7, Intra-Cellular Therapies, Inc. (NASDAQ:ITCI) announced first-quarter earnings. The GAAP EPS beat the estimates by $0.17 at -$0.16. The revenue surpassed the market consensus by $3.46 million at $144.9 million and grew by 52.0% year-over-year. For its fiscal 2024 financial outlook, the company reiterated its guidance for full-year 2024 CAPLYTA net product sales of $645 to $675 million.
6. Insmed Incorporated (NASDAQ:INSM)
Number of Hedge Fund Holders: 48
Insmed Incorporated (NASDAQ:INSM) is a New Jersey-based company engaged in the development and commercialization of therapies for people who have serious and rare diseases.
Insmed Incorporated (NASDAQ:INSM) has received Buy ratings from 12 Wall Street analysts. As of May 24, the average price target of $46.27 has an upside of 110.32% from the last price of $22.00. On May 13, Mizuho analyst Graig Suvannavejh raised the price target on the stock to $36 from $35 and kept a Buy rating on the shares.
In the first quarter, 48 hedge funds held positions in Insmed Incorporated (NASDAQ:INSM) and their stakes amounted to $690.103 million. As of March 31, Deep Track Capital is the biggest shareholder in the company and has a position worth $129.781 million.
ClearBridge Investments mentioned Insmed Incorporated (NASDAQ:INSM) in its first quarter 2024 investor letter:
“Encouragingly, we are seeing underlying improvements from companies we do own in the portfolio, with several being recent portfolio additions or subjects of repositioning work executed in 2023.
The first quarter represented another period of fruitful new idea generation with nine new investments. Consistent with historical practice, these initial investments represent modest position sizes that we intend to build over time.
Insmed Incorporated (NASDAQ:INSM) is a biopharmaceutical company focused primarily on rare pulmonary diseases. The company has an approved and marketed product still growing in domestic and international markets, along with opportunities to expand its initial indication. Moreover, the company has several late-stage clinical candidates with blockbuster sales potential.”
5. Exact Sciences Corporation (NASDAQ:EXAS)
Number of Hedge Fund Holders: 48
Exact Sciences Corporation (NASDAQ:EXAS) is a Wisconsin-based company that offers cancer screening and diagnostic test products. In the first quarter, 48 hedge funds held stakes in Exact Sciences Corporation (NASDAQ:EXAS), with stake value totaling $1.54 billion. As of the first quarter, Catherine D. Wood’s ARK Investment Management is the top shareholder in the company and has a position worth $225.66 million.
On May 8, Exact Sciences Corporation (NASDAQ:EXAS) reported Q1 2024 earnings and said its revenue of $637.52 million jumped 5.8% year-over-year and beat market estimates by $10.71 million. The company reiterated its revenue guidance for 2024 at $2.810-$2.850 billion with the assumption that the screening revenue will be between $2.155-$2.175 billion and precision oncology revenue will range between $655 million and $675 million.
Artisan Partners stated the following regarding Exact Sciences Corporation (NASDAQ:EXAS) in its first quarter 2024 investor letter:
“Among our top detractors were Atlassian, ON Semiconductor and Exact Sciences Corporation (NASDAQ:EXAS). Exact Sciences is a leading provider of diagnostic testing and a maker of the noninvasive colorectal cancer screening test Cologuard. The company reported another solid quarter with revenues growing 18% and, importantly, screening (Cologuard) revenues growing 21%. However, growing optimism around a competing blood-based test has led to competitive fears among investors and corresponding performance weakness. Our view has been that blood tests, while potentially more convenient, have historically been unable to match the accuracy of stool testing (especially when it comes to detecting early cancers). Shortly after the quarter entered, new blood test data from a private competitor (Freenome) supported our views. Its test demonstrated 79% sensitivity for detecting colorectal cancer versus Cologuard 2.0’s 94% sensitivity.”
4. Xenon Pharmaceuticals Inc. (NASDAQ:XENE)
Number of Hedge Fund Holders: 51
Xenon Pharmaceuticals Inc. (NASDAQ:XENE) is a Canada-based company that develops therapeutics to treat patients with neurological disorders. Xenon Pharmaceuticals Inc. (NASDAQ:XENE) ended the first quarter of 2024 with cash and cash equivalents and marketable securities of $885.4 million.
Based on 13 Wall Street analysts’ ratings in the last three months, Xenon Pharmaceuticals Inc. (NASDAQ:XENE) has a consensus rating of Strong Buy. The average price target of $57.92 represents an upside of 50.95% from the last price of $38.37, as of May 24.
In Q1 2024, 51 hedge funds had investments in Xenon Pharmaceuticals Inc. (NASDAQ:XENE), with positions worth $1.3 billion. VenBio Select Advisor is the most significant shareholder in the company as of March 31 and has a position worth $243.95 million.