The healthcare industry is again in the headlines amid surging Delta coronavirus infections nationwide. Consequently, healthcare stocks are gaining momentum amid rising market volatility and the increasing possibility of a market correction. This is evident in the Health Care Select Sector SPDR Fund’s (XLV) 3.2% gains over the past month versus the broader SPDR S&P 500 Trust ETF’s (SPY) 0.9% returns.

The dominant role played by the healthcare industry in the global health crisis has propelled capital inflows from governments and private organizations. Also, the disruptive progress in the field of genomics and diagnostic testing achieved by leveraging technology is expected to revolutionize healthcare. In this regard, investor and founder of the world’s largest actively traded ETF company, Cathie Wood, said in a recent CNBC interview, “DNA sequencing is going to introduce science into healthcare decision making for the first time…We’re going to be able to cure diseases that we never thought it would be possible to cure, including cancer.”

Wall Street analysts expect the healthcare industry to emerge as one of the best performers in the coming months, given the innovative breakthroughs made so far and its boundless growth potential. As investors rotate toward the healthcare industry to hedge against market volatility, analysts expect Invitae Corporation (NVTA) and OPKO Health, Inc. (OPK) to rally more than 40% in the near term.

Click here to checkout our Healthcare Sector Report for 2021

Invitae Corporation (NVTA)

NVTA in San Francisco is an integrated medical genetics company with a global market presence. The company leverages a diversified portfolio of laboratory processes, software tools, and informatics capabilities to offer panels to detect hereditary conditions in cancer, cardiovascular diseases, neuromuscular and rare ailments.

For its fiscal first quarter, ended March 31, NVTA’s revenues increased 61.3% year-over-year to $103.62 million. This can be attributed to a 57.4% rise in Test revenues and a 271.4% rise in revenues from the ‘Other’ segment.

On July 22, NVTA partnered with global healthcare software leader Volpara Health to gain access to the latter’s extensive customer base. Under this agreement, Volpara’s U.S.-based customers are expected to access NVTA’s comprehensive genetic testing services. This should increase NVTA’s customer base and its revenues significantly.

Also in July, NVTA expanded its multi-year collaboration agreement with Pacific Biosciences of California, Inc. to develop a production-scale high-throughput HiFi sequencing platform. This partnership should improve the accuracy of genome testing and achieve economies of scale.

A $463.25 million consensus revenue estimate for its fiscal year 2021 indicates a 65.7% rise year-over-year. The company’s EPS is expected to improve 10.8% in the current year and at a rate of 8% per annum over the next five years.

Shares of NVTA have gained 2.5% over the past five days. Of the five Wall Street analysts that rated the stock, two rated it buy while three rated it Hold. The  $39.75 12-month median price target indicates a 40.5% potential upside from yesterday’s $28.29 closing price. The price targets range from a low of $33.00 to a high of $50.00.

OPKO Health, Inc. (OPK)

OPK is a diagnostic and pharmaceutical healthcare company that operates through three segments–Pharmaceutical; Diagnostics; and Corporate. The Miami, Fla., company offers laboratory testing services through its diagnostics segment, while its pharmaceutical segment develops drugs to treat various life-threatening diseases.

OPK’s total revenues increased 47.9% year-over-year to $442.40 million in its fiscal second quarter, ended June 30. This can be attributed to a 58.2% rise in revenues from its Services segment and a 21.8% rise in revenues from Products. Its BioReference Laboratories test volume increased 32% from the same period last year.

On July 12, the company agreed to an exclusive worldwide arrangement with CAMP4 Therapeutics Corporation to develop and manufacture AntagoNAT technology-based therapeutics. OPK is eligible to receive $93.50 million and additional shares provided the partnership yields promising results. This move should allow OPK to monetize and leverage its early-stage assets.

In June, OPK’s subsidiary EirGen Pharma partnered with Nicoya Macau Limited to develop and commercialize its drug RAYALDEE to treat hyperparathyroidism in Greater China. OPK received a $5 million upfront payment under this agreement and is eligible to receive an additional $120 million provided Nicoya achieves a predetermined milestone. This partnership should expand the company’s royalty income significantly.

The Street expects OPK’s revenues to rise 24.6% from its year-ago value to $1.79 billion in its fiscal year 2021. EPS is expected to come in $0.08 in the current year, indicating a 60% rise year-over-year.

OPK has gained 3.2% intraday to close yesterday’s trading session at $3.55. All  three Wall Street analysts that rated the stock have rated it Buy. The $6, 12-month median price target  indicates a 69% potential upside. The price targets range from a low of $5.00 to a high of $7.00.

Click here to checkout our Healthcare Sector Report for 2021

NVTA shares were trading at $28.13 per share on Tuesday morning, down $0.16 (-0.57%). Year-to-date, NVTA has declined -32.72%, versus a 18.00% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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