This Healthcare Stock Could Be the Best Investment of the Decade

Healthcare will always be around. But tech is just beginning. Why not mix them both together?

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published January 31, 2025 4:20 pm EST

In 2025, healthcare stocks are catching the eye of investors, and it’s not just because of their role in our well-being. The sector’s potential for growth and innovation makes it an attractive option for those looking to diversify their portfolios. Let’s delve into why healthcare stocks are shining this year and take a closer look at Cipher Pharmaceuticals (TSX:CPH) as a promising candidate.

A doctor takes a patient's blood pressure in a clinical office. — Source: Getty Images

A healthy buy

Firstly, the healthcare sector is experiencing a surge in innovation. Breakthroughs in biotechnology, personalized medicine, and medical devices are paving the way for new treatments and technologies. This wave of innovation is not only improving patient outcomes but also opening lucrative avenues for companies at the forefront of these advancements. Investors are keen to tap into the potential returns from these cutting-edge developments.

Moreover, the demographic shift towards an aging population is increasing the demand for healthcare services. As the baby boomer generation enters retirement, there’s a heightened need for medical care, pharmaceuticals, and supportive health services. This demographic trend ensures a steady and growing market for healthcare providers and related industries, making the sector a stable investment choice.

Now, why does Cipher belong at the top of your list?

Into earnings

Financially, many healthcare stock are displaying robust performance. For instance, Cipher Pharmaceuticals reported a significant increase in total revenue, reaching $10.4 million in the third quarter of 2024. A 71% rise compared to the same period the previous year. This growth was primarily driven by a 213% increase in product revenue, highlighting the company’s successful strategies and market demand for its products.

The acquisition of Natroba has been a game-changer for Cipher. This strategic move contributed $5.4 million in product revenue in the third quarter (Q3) of 2024 and enhanced the healthcare stock’s gross margin on product revenue to 79%, up from 64% in Q3 2023. Such strategic acquisitions not only expand product portfolios but also strengthen market position, making companies like Cipher more appealing to investors.

Epuris, another flagship product of Cipher, saw a 32% increase in revenue, totalling $3.4 million in Q3 2024 compared to $2.5 million in Q3 2023. This growth underscores the product’s strong market acceptance and the healthcare stock’s effective marketing strategies. Consistent performance of key products is a positive indicator for investors assessing the company’s long-term viability.

Future outlook

Looking ahead, Cipher’s strategy includes integrating the Natroba business and driving its growth in the U.S. market, where it currently holds a 23% market share. The healthcare stock also plans to out-license Natroba globally, targeting regions with high unmet needs, particularly in warmer climates. These initiatives demonstrate Cipher’s proactive approach to expansion and revenue diversification.

In terms of financial health, Cipher maintains a solid position with $9.5 million in cash as of the latest quarter. This financial stability provides the company with the flexibility to explore further acquisitions and invest in growth opportunities without overextending its resources. A strong balance sheet is a reassuring factor for investors considering long-term commitments.

The broader healthcare sector also benefits from favourable policy developments. Regulatory agencies are streamlining approval processes for innovative treatments, and there’s a growing emphasis on value-based care. These trends are creating an environment where healthcare stocks can thrive, bringing novel solutions to market more efficiently and effectively.

Foolish takeaway

The combination of demographic trends, technological innovation, strategic corporate actions, and supportive policy environments makes healthcare stocks an attractive option in 2025. Cipher Pharmaceuticals exemplifies these positive attributes with its recent performance and forward-looking strategies, positioning it as a compelling choice for investors seeking exposure to the healthcare sector’s growth potential.