Canadian investors should consider holding stocks in recession-resistant sectors such as utilities or healthcare to shield themselves from underlying market volatility. In this article, I have identified three top TSX healthcare stocks you can invest in right now. Let’s see why.
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Knight Therapeutics stock
Valued at a market cap of $600 million, Knight Therapeutics (TSX: GUD) is a specialty pharmaceutical company that develops, acquires, in-licenses, out-licenses, markets, and distributes pharmaceutical and consumer health products, and medical devices in Canada, Latin America, and internationally.
It has increased sales from $1 million in 2015 to $328.2 million in 2023. In the last 12 months, it has reported revenue of $348.6 million. Earlier this year, Knight Therapeutics disclosed plans to acquire Paladin Labs from Endo for $100 million plus $20 million for inventory, with potential milestone payments of up to $15 million. The transaction represents a symbolic reunion, as Knight was initially spun off from Paladin in 2014.
The acquisition adds $70 million in annual revenue from a diversified portfolio of over 40 pharmaceutical products. Knight’s management expects the deal to be immediately EBITDA (earnings before interest, tax, depreciation, and amortization)-accretive, with additional synergies anticipated in 2026.
Knight will fund the acquisition from its existing cash reserves, which stood at $151 million at the end of the third quarter (Q3) of 2024. Canada will account for 25% of Knight’s total business following the acquisition.
Kneat.com stock
Valued at a market cap of $571 million, Kneat.com (TSX: KSI) designs, develops, and supplies software for data and document management within regulated environments in the United States, Ireland, Canada, and internationally. It offers Kneat Gx platform, an application focused on validating lifecycle management and testing for biotechnology, pharmaceutical, and medical device manufacturing industries.
In Q4 of 2024, Kneat reported revenue growth of 40% year over year to $13.7 million, driven by a 41% increase in SaaS (software-as-a-service) revenue to $12.5 million. Annual recurring revenue (ARR) jumped 60% to $59.7 million, with an impressive $10 million in new ARR added in the quarter alone.
“We are pleased to report that we closed the year with fourth-quarter numbers that are in keeping with 2024 as a whole, with both the three-month and full-year period showing strong growth in revenue, growth and operating margins,” said Chief Executive Officer Eddie Ryan.
Since its last earnings call, Kneat.com announced four strategic customer wins across various life sciences segments, including pharmaceutical manufacturing, consumer products, medical devices, and engineering services. Notably, engineering firm Altan will use Kneat’s platform both internally and for its customers.
Gross profit for Q4 grew 48% year over year to $10.4 million, while gross margins expanded to 75%. Comparatively, operating expenses increased by just 10% year over year, showcasing a focus on operational efficiency.
Kneat continued to enhance its platform and expand its partner program, adding global systems integrator Capgemini. It is also incorporating artificial intelligence capabilities to drive efficiencies for both internal operations and customer workflows.
Andlauer Healthcare stock
The final TSX healthcare stock on the list is Andlauer Healthcare (TSX: AND), a profitable company valued at $1.5 billion by market cap. It is a supply chain management company that provides a platform of third-party logistics and specialized transportation solutions for the healthcare sector in the U.S. and Canada.
Andlauer Healthcare reported a record annual revenue of $650.5 million in fiscal 2024, maintaining a strong EBITDA margin of 25.3%. Its Canadian specialized transportation network grew 6.3% in Q4, driven by increased pharmaceutical and biologics client volumes.
While Canadian operations showed solid growth, the company’s U.S. truckload businesses faced headwinds from what management called “the Great Freight Recession,” with ground transportation revenue down 17% in Q4 year over year.
Andlauer raised its quarterly dividend to $0.12 per share and remains active in share repurchases, having repurchased 266,000 shares for $10.4 million under its current buyback program.
Priced at 21 times forward earnings, the TSX stock trades at a discount of almost 30% to consensus price targets.
