With many leading stocks in need of some repair, investors may want to seek medical attention. Eli Lilly, Novo Nordisk, Vertex Pharmaceuticals, Intuitive Surgical and Universal Health are all trading in or near buy zones. Medical stocks are often viewed as defensive growth stocks, because their growth is insulated from economic swings due to the government or insurance covering most of the costs.
Eli Lilly is in a buy zone while weight-loss drug rival and fellow IBD Leaderboard member Novo Nordisk is setting up. Big biotech Vertex has just reclaimed a buy point while robotic-surgery systems maker Intuitive Surgical is hovering just below one. Hospital operator Universal Health has broken out.
All of these medical stocks are in the S&P 500, except for Denmark-based Novo Nordisk.
Eli Lilly
Pharmaceutical giant Eli Lilly rallied to record highs in May on positive trial data for its Crohn's disease treatment and booming demand for its weight-loss drug, Zepbound.
Eli Lilly on April 30 reported a 59% increase in Q1 earnings, beating forecasts, but the 26% revenue jump came in short of estimates. Still, Eli Lilly hiked its full-year sales outlook by $2 billion, now expecting 2024 sales to range from $42.4 billion to $43.6 billion, ahead of Wall Street views.
Meanwhile, a Food and Drug Administration advisory panel on June 10 is scheduled to review Eli Lilly's Alzheimer's disease treatment. The company on May 3 announced that 47% of the participants in the Phase 3 study showed "significant" slowing in cognitive and functional declines while on the treatment.
LLY stock hit a fresh record high Friday as it climbs into a buy zone above a 795.50 buy point from a handle in a double-bottom base.
Eli Lilly has a near-perfect 98 Composite Rating out of a best-possible 99. The Composite Rating combines various technical indicators into one easy-to-read score. The stock has a 90 EPS Rating. Eli Lilly's relative strength line is trending near 52-week highs and it has a 93 RS Rating.
LLY stock leapt 40.7% so far this year.
Novo Nordisk
Novo Nordisk is also eying a fresh all-time high amid clamoring demand for Ozempic and Wegovy, its blockbuster treatments for diabetes and weight loss.
The company at the beginning of May reported that Wegovy sales nearly doubled from last year to $1.34 billion. Still, the massive increase was short of analyst forecasts of $1.49 billion.
Novo in February announced plans to acquire drug manufacturer Catalent for $16.5 billion to ramp up production of Ozempic and Wegovy to grapple with demand.
But an even more effective weight-loss pill could be coming. Novo Nordisk in March reported that its daily pill amycretin outperformed the Wegovy weekly injections in an early-stage trial.
IBD added NVO stock to SwingTrader on May 20. Novo Nordisk is on the IBD Sector Leaders list and the IBD 50.
NVO stock on Friday formed a handle for its 12-week cup base. The handle entry has a 137.22 buy point, MarketSurge charts show.
Novo Nordisk leads the Medical-Ethical Drugs Group, according to IBD Stock Checkup.
NVO stock has a 96 Composite Rating, a 97 EPS Rating and a 92 RS Rating.
Shares of the Danish drugmaker are up 30.8% in 2024.
Vertex Pharmaceuticals
Vertex Pharmaceuticals ranks on the IBD Big Cap 20 list and was added to SwingTrader Friday.
The Boston-based pharmaceuticals firm is working on a pain drug that it hopes will eventually serve as an alterative to opioids, which have risk for addiction and other side effects. Some analysts estimate sales of its new pain drug could peak at $11.4 billion in 2032.
Vertex plans to submit its treatment to the FDA for approval later this quarter. But the company won't have results from the current study until 2025.
VRTX stock rebounded modestly at the end of the week to trade back above a 448.40 buy point for a cup base. Shares initially climbed above the entry on May 24, hitting a record 457.66.
Vertex has gained nearly 12% this year.
VRTX stock has a 98 Composite Rating and a 96 EPS Rating. Vertex's relative strength line is trending back toward its January highs and it has an 86 RS Rating.
Intuitive Surgical
Intuitive Surgical stock has flirted with a 403.76 buy point for a cup base for over a week. ISRG stock climbed back above the entry multiple times since May 22, but it hasn't been able to score a definitive breakout.
Intuitive Surgical is rolling this year after the FDA in March approved its da Vinci 5 robotic surgery system. The da Vinci 5 is the latest iteration of Intuitive's flagship medical robot, which debuted in 2000. According to the company it has 10,000 times the processing power of its predecessor. The robot assists with long, complicated surgeries in a minimally-invasive fashion. The da Vinci has been used for cardiac, colorectal, gynecological, chest and head-and-neck procedures, which historically would have required open surgery.
The robotic surgery market is projected to be an $18 billion opportunity by 2027. Medtronic and Johnson & Johnson plan to launch their medical robots in the next few years.
ISRG stock jumped about 19.2% so far this year. Intuitive shares hit an all-time high 412.29 on Thursday.
Intuitive Surgical ranks third in the Medical-Systems/Equipment Group according to the IBD Stock Checkup.
ISRG has a 91 Composite Rating, a 92 EPS Rating and an 83 RS Rating.
Universal Health
Universal Health stock on Thursday broke out above a 182.92 buy point for a cup-with-handle base, extending gains on Friday to a record high.
UHS stock surged last week after rebounding off its 21-day exponential moving average.
Universal Health has a 95 Composite Rating and an 82 EPS Rating. The company's earnings growth accelerated the last two quarters, increasing 58% for its Q1 report in late April. UHS stock's relative strength line is at 52-week highs and it has a 90 RS Rating.
UnitedHealth on Wednesday sent a shock wave through the managed-care industry after CEO Andrew Witty said that Medicaid players are being squeezed by low state reimbursements, which could continue for some time.
That followed other concerns for insurers that their customers are stepping up their usage of medical benefits.
However, hospital operators, as well as medical products and systems makers like Intuitive Surgical, are seeing a boost from an increase in medical benefits usage, especially discretionary procedures
Rival hospital operator HCA Healthcare also broke out last week.
Meanwhile, Universal Health is still moving in the right direction, CFO Steve Filton said during an investor conference Thursday. The company has made progress in terms of net hires following a major decline in clinical staff during the pandemic. And Universal Health believes the redetermination and re-enrollment process will improve throughout the year.
JPMorgan in a Thursday research note lifted its price target on UHS stock to 186 from 182 and kept a neutral rating on the shares.
UHS stock is up 24.5% this year.
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