3 Healthcare Pathbreakers With Long-Term Tailwinds

Key Points

• Healthcare companies that thrive long-term typically offer unique, defensible innovations that can withstand competitive pressure.
• Top analysts are bullish on select firms leading high-growth market segments and maintaining strong R&D pipelines.
• Standout players like argenx, ICON, and Edwards Lifesciences are well-positioned for continued momentum.

In the world of healthcare stocks, a major innovation, new medical device, or successful drug treatment can cement a firm's position as a leader. Unfortunately, many firms chase after these goals and never achieve them. To truly achieve long-term success in this sector, a company must be able to provide a technology or group of products so compelling as to withstand competition, generic alternatives, and a host of other threats.

Predicting these firms—the pathbreakers with true staying power over the long term—is notoriously difficult. Analysts have homed in on three companies, based in the Netherlands, Ireland, and the United States, respectively, that may be positioned for extended success. We explore these firms—argenx SE NASDAQ: ARGX, ICON plc NASDAQ: ICLR, and Edwards Lifesciences Corp. NYSE: EW—more closely below.

Dominant Position in Unique Autoimmune Condition Treatment

Biotech firm argenx develops treatments for autoimmune diseases using a unique approach known as antibody fragment therapy. The company's main candidate is efgartigimod, also known as VYVGART, which aims to treat chronic autoimmune conditions such as myasthenia gravis. To this day, efgartigimod occupies a unique space as the first and only FDA-approved FcRn antagonist, which blocks a certain receptor to reduce antibody levels.

As argenx looks to expand VYVGART into a variety of other autoimmune indications, the company is aiming to solidify its position as the go-to firm for a fully unique and potent treatment option. However, argenx also has other promising assets in development, including multiple Phase III trials, helping to ensure that it's not overly reliant on a single drug product.

With autoimmune conditions on the rise globally—and many of those conditions currently without any effective treatment whatsoever—argenx may hold the key to dominating a fast-growing corner of the market. As the company's product sales increased by 97% year-over-year (YOY) in the latest quarter, it seems this work is already well underway. Analysts agree: shockingly, all 21 analysts rating ARGX shares have assigned a Buy rating to the stock.

Niche Service Provider ICON Has Revenue Resilience and a History of Buybacks

ICON is a contract research organization (CRO), a firm offering outsourced development and commercialization services to other healthcare industry companies. Since its $12-billion 2021 acquisition of PRA Health Sciences, ICON has become one of the very largest CROs in the world. The company is thus uniquely able to offer crucial services like decentralized clinical trials, an area in which ICON has become a global leader.

This type of clinical trial is increasingly in demand because it tends to be more cost-effective and to run over a shorter timeframe than other types of trials. This has manifested for ICON in strong long-term service contracts and resilient revenue despite external challenges to the industry; despite a slight YOY decline in revenue for the second quarter of the year, ICON still came out ahead of analyst predictions in this area, thanks in part to rising pass-through services.

The company has strong free cash flow, which has allowed it the flexibility to repurchase $250 million in shares in the latest quarter alone—and to authorize up to $1 billion in additional buybacks. This commitment to shareholder value, combined with ICON's advantageous position in the industry, has prompted 10 out of 16 analysts to rate the company a Buy and to assign it a consensus price target more than 25% higher than the current price point.

Strong Position in the TAVR Space With a Hefty Investment in Tech Development As Well

Edwards Lifesciences is an innovator in the area of medical devices related to structural heart disease and is known in particular for its transcatheter aortic valve replacement system (TAVR), a minimally invasive alternative to open-heart surgery.

Edwards remains dominant in the healthcare industry for TAVR and has a leading global market share. Surgeons are also increasingly favoring TAVR over other types of surgeries, a shift that bodes well for Edwards over the long term.

Edwards is coming off of solid earnings results for the second quarter, with both top- and bottom-line beats over expectations. However, EPS did decline by 3 cents per share YOY; analysts are not disturbed and still call for more than 12% earnings growth in the year to come, though.

Boosting this company's potential as a pathbreaker is its expansive R&D, including via its expansion into the transcatheter mitral and tricuspid therapies space. This addressable market is potentially larger than the one for TAVR, and Edwards' high margins and strong reinvestment of sales into R&D help to ensure that it will remain at the cutting edge technologically.