Those who invested in Intuitive Surgical ( ISRG -0.33%) or Vertex Pharmaceuticals ( VRTX -1.15%) two decades ago and held onto their shares are probably quite satisfied with their choices. Over the last twenty years, both companies have delivered returns that outperformed the overall market.
Although both stocks have faced considerable difficulties this year and have underperformed since January, their long-term growth potential remains strong, and their future returns could mirror previous successes.
Below are the reasons why Intuitive Surgical and Vertex Pharmaceuticals stand out as compelling long-term growth investments right now.
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1. Intuitive Surgical
Advancements in healthcare are contributing to longer lifespans, but with an aging population comes an increased demand for medical care. In the coming years, the proportion of people over 60 worldwide is expected to grow substantially, which will likely drive up the need for surgeries.
Intuitive Surgical, which dominates the robotic-assisted surgery (RAS) market, is well-suited to address this rising demand. Its flagship product, the da Vinci system, is approved for a broad range of surgical procedures. While the company does generate revenue from selling these sophisticated devices, this part of the business is not highly profitable, as designing and building advanced surgical robots requires significant investment.
However, the company’s expansive and expanding installed base enables it to earn stable revenue from selling the instruments and accessories needed for its da Vinci systems. Producing these items is less capital-intensive, and because they need frequent replacement, hospitals must restock regularly. As usage of the da Vinci system rises, so does the demand for these consumables.
The high upfront investment required for the da Vinci system discourages hospitals from switching to competitors, resulting in significant switching costs. These factors have fueled Intuitive Surgical's impressive performance over the last two decades—and with favorable long-term trends, further growth appears likely.
The company does encounter some challenges, such as tariffs and a more competitive landscape. Yet, Intuitive Surgical’s clear market leadership in RAS and the fact that the sector still has much room for growth support its strong outlook. It’s a stock worth keeping for the long haul.
2. Vertex Pharmaceuticals
Vertex Pharmaceuticals stands out as a top biotech firm, dedicated to developing treatments for diseases where few or no solutions exist—most notably cystic fibrosis (CF), a rare lung disorder. Since gaining approval for its first CF drug in 2012, Vertex remains the only company with therapies that address CF at its root cause.
This advantage won’t last forever, and Vertex is well aware. Recognizing that a decade-long monopoly in any new area is unlikely, the company has broadened its research efforts. Recent approvals include Casgevy, a groundbreaking gene-editing therapy for two blood disorders, as well as Journavx, an innovative non-opioid oral pain medication—marking a first in its category.
Vertex’s development pipeline contains multiple promising candidates. The company is close to submitting zimislecel for regulatory review as a potential treatment for type 1 diabetes (T1D). In clinical studies, zimislecel has helped the majority of participants regain their ability to generate insulin, a breakthrough for T1D patients. Several other mid- and late-stage pipeline drugs also target medical needs with few available therapies.
Vertex has certainly encountered obstacles, including the failure of another experimental T1D drug and disappointing results for VX-993 in a phase 2 pain trial. Such setbacks are not unusual for a biotech company of this size, and despite them, Vertex’s prospects should be even stronger in five years.
Furthermore, the company’s continued achievements in CF, its impressive drug pipeline, and a culture of innovation make Vertex Pharmaceuticals an appealing choice for long-term investors.
