Healthcare stocks performed well in 2022, driven by a number of factors. One of the main drivers was the ongoing COVID-19 pandemic, which continued to boost demand for healthcare products and services. That substantial success last year is leading investors to search for healthcare stocks that will be big winners in 2023.
The pandemic drove significant gains in the sector overall in 2022. The biotechnology industry saw substantial headways, with companies developing new treatments and vaccines for COVID-19. Pharmaceutical companies also did well, as the pandemic caused an increased demand for their products. The same is true for medical device firms, hospitals, and clinics, which all saw increased demand.
2023 promises to be another strong year for the healthcare sector, which tends to do well year in and year out due to the inelastic demand for its products and services.
| Ticker | Company | Price |
| MCK | McKesson | $378.69 |
| MRK | Merck | $106.09 |
| UNH | UnitedHealth Group | $485.79 |
| VIR | Vir Biotechnology | $29.08 |
| HRMY | Harmony Biosciences | $47.76 |
| NVO | Novo Nordisk | $139.06 |
| LLY | Eli Lilly | $340.50 |
McKesson (MCK)
McKesson (NYSE:MCK) stock represents a healthcare services and technology company that distributes pharmaceuticals, medical supplies, and technology solutions to healthcare providers, payers, and government agencies. The firm’s global footprint spans North America, Europe, Asia, and Latin America. With a market capitalization of more than $53 billion, McKesson is one of the largest healthcare companies in the world.
McKesson was also one of the best performers in 2022 and one of the year’s biggest winners, with shares that surged from $244 to $375 over the year. Those shares have continued to move upward in 2023, now trading at $384. Wall Street believes MCK stock can move even higher, assigning it a consensus price of almost $429.
McKesson released strong Q3 earnings that bolstered its forward outlook. The company saw revenues increase by 5% to $70.2 billion in the period. It increased full fiscal year EPS guidance to a range between $24.45 and $24.95 from a range between $23.95 to $24.65. The company will release Q4 earnings on Feb. 1.
Merck (MRK)
Merck (NYSE:MRK) is a global pharmaceutical company known for its oncology, diabetes, and vaccine products. Its shares also performed strongly in 2022, and its stock remains attractive in 2023. Merck has a diverse product portfolio, with several blockbuster drugs that generate significant revenue for the company. The company also invests heavily in R&D to develop new treatments and therapies for patients.
Merck completed its tender offer to purchase Imago Biosciences (NASDAQ:IMGO) on Jan. 11. That deal is expected to close sometime this quarter. The acquisition will give Merck control over Imago’s bone-marrow diseases portfolio. Merck is seeking new revenue sources as its leading seller, Keytruda, is set to lose patent protection in 2028.
That said, Keytruda continues to prove its utility, recently showing efficacy in improving the survivability of biliary tract cancer in trials. Keytruda is also being investigated for potential efficacy in treating specific forms of prostate cancer, meaning it could see its revenues increase further prior to coming off patent in 2028.
UnitedHealth Group (UNH)
Purchasing UnitedHealth Group (NYSE:UNH) stock is an investment in a diversified healthcare company that provides a wide range of products and services to individuals, employers, and government agencies. Its market cap of over $460 billion makes it one of the largest healthcare companies in the world. UnitedHealth operates through several business segments, including UnitedHealthcare (health benefits), Optum (health services), and UnitedHealth Group (parent company).
UnitedHealth’s consistent revenue growth and strong returns on equity continue to make it a strong choice in 2023. It closed out the fiscal year 2022 with its fourth consecutive quarter of double-digit growth, at 12%.
Revenues reached $82.79 billion, eclipsing forecast revenues of $82.48 billion. The company is dealing with rising costs across its labor force but expects premiums to rise again this year, offsetting negative effects. The company remains a strong buy according to Wall Street and includes a modest but absolutely dependable dividend.
Vir Biotechnology (VIR)
Vir Biotechnology (NASDAQ:VIR) stock represents the clinical-stage biotechnology company that is focused on developing treatments for infectious diseases. The company is relatively small, with a market cap of $4.1 billion, but it remains promising. The company’s lead drug, sotrovimab, is a monoclonal antibody treatment for COVID-19 that has been authorized for use in more than 40 countries.
Sotrovimab was granted FDA in early 2022, only to lose authorization in April because it was found ineffective against the Omicron BA.2 variant.
That said, Vir Technology remains a key player working in concert with the U.S. government to prevent pandemics. In September, the U.S. Department of Health and Human Services (HHS) and Administration for Strategic Preparedness and Response (ASPR) awarded Vir a contract worth up to $1 billion to develop a portfolio of influenza and infectious disease therapeutics.
Vir Technologies is rapidly growing and saw $374.6 million in revenue through the first nine months of 2022. During the same period in 2021, the company reported $103.6 million in revenues, or less than one-third as much, which makes it among the top healthcare stocks to buy.
Harmony Biosciences (HRMY)
Harmony Biosciences (NASDAQ:HRMY) is a pharmaceutical company that specializes in developing and commercializing therapies for patients suffering from central nervous system disorders. The company’s primary focus is on developing and commercializing therapies for narcolepsy. Harmony Biosciences has a portfolio of approved and investigational products that aim to address the needs of patients living with narcolepsy and other disorders of the central nervous system.
The company’s leading drug, WAKIX, is growing quickly, making HRMY stock one of the top healthcare stocks to buy this year. WAKIX is FDA-approved in the treatment of excessive daytime sleepiness, or cataplexy, in patients with narcolepsy.
The drug accounted for all $117.2 million of the firm’s revenues in Q3, with revenues increasing 45% on a year-over-year basis. What’s also very interesting about the company is just how quickly it has improved fundamentally. In Q3 ’21, the company reported a net loss of $9.6 million on $80.7 million of revenues. This year it reported $87.9 million in net income from $117.2 million in revenues.
Novo Nordisk (NVO)
Novo Nordisk (NYSE:NVO) stock is absolutely one of the healthcare stocks to watch throughout 2023. The company’s FDA-approved weight loss drug, Wegovy, will remain a potent catalyst for share prices as demand remains high and supply remains low.
Demand for Novo Nordisk’s obesity drug was very high throughout 2021, the year it was granted FDA approval, but manufacturing issues plagued it. The company’s contract manufacturer of Wegovy pens fell short of good manufacturing practices for the syringes, choking supply. Novo Nordisk did not have any alternative manufacturer in its supply chain leading to demand backlogs and a missed opportunity for sales of Wegovy.
At the time, Novo Nordisk expected that it wouldn’t be able to meet demand until mid-2022. However, as late as December, Novo Nordisk stated that it expected “all Wegovy strengths back on before the year is out.”
The company saw massive 91% growth in obesity care sales during the first nine months of 2022, so the sooner it can ensure a steady supply of Wegovy and Ozempic, which are the same molecules at different dosages, the sooner it will grow even faster.
Eli Lilly (LLY)
Eli Lilly (NYSE:LLY) stock is a direct rival to NVO stock in an ongoing battle for weight loss drug dominance. The company’s drug Mounjaro is a direct competitor to Wegovy and Ozempic, although not yet approved for weight loss.
That hasn’t decreased demand for the drug, which is FDA-approved for the treatment of diabetes. Stories of weight loss have caused a spike in demand from patients seeking the drug who hope to lose weight.
Mounjaro is being studied for weight loss, and so far, the results suggest that it is more effective than Wegovy in promoting weight loss. Thus, LLY is among the top healthcare stocks to buy.
That has analysts at UBS (NYSE:UBS) predicting that peak sales could reach $25 billion, which is significantly higher than the $15 billion in peak sales earlier predicted. There is a legitimate reason to believe Mounjaro could be the biggest drug ever, as $25 billion in sales would eclipse Humira’s record $20.7 billion in sales last year.
Those same analysts see an expedited path to weight loss approval for Mounjaro as early as mid-2023. Eli Lilly also has an Alzheimer’s drug in its pipeline, donanemab, that could supercharge the company’s results in coming quarters.
On the date of publication, Alex Sirois did not have (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.