These 3 Healthcare Stocks Have Crushed the Market This Year. Here's Why There's More Upside Ahead

If you had invested in Krystal Biotech (NASDAQ: KRYS), Exelixis (NASDAQ: EXEL), or CVS Health (NYSE: CVS) at the beginning of the year, you'd be sitting pretty. All three companies have outpaced the market, which has itself proved resilient amid macroeconomic problems, fears of a recession, and other problems. However, all three of these healthcare stocks have important catalysts ahead that may allow them to maintain their momentum for much longer and continue delivering market-beating returns. Here's why these stocks are still worth serious consideration.

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1. Krystal Biotech

Krystal Biotech, a drugmaker that focuses on developing medicines for rare diseases, is performing well thanks to its only approved product, Vyjuvek. This therapy treats a condition called dystrophic epidermolysis bullosa (DEB), which causes the skin to blister and tear very easily, often from minor rubbing or bumps. Vyjuvek, a topical gel applied directly onto wounds, helps patients' cells produce a protein that strengthens and repairs fragile skin. Krystal Biotech is posting strong financial results thanks to Vyjuvek, with the company's revenue and profits growing at a good clip in recent years.

KRYS Revenue (Quarterly) data by YCharts

Krystal Biotech has earned approval for Vyjuvek in other regions, notably Europe and Japan. The company making headway in these regions will help drive sales even higher. Krystal Biotech is also developing several pipeline candidates for other rare diseases, including cystic fibrosis. Clinical and regulatory progress over the next few years could jolt the stock.

Krystal Biotech could have a much larger portfolio of approved products by the end of the decade while still delivering consistent top and bottom-line growth. There is some risk, particularly if the company encounters commercial setbacks with Vyjuvek, as biotech stocks sometimes do. But given the medicine's position in this small, high-unmet-need area, the company should continue riding this tailwind over the medium term. That's why there may be plenty more upside potential.

2. Exelixis

Exelixis is on the verge of entering a new era. The company's current crown jewel, Cabometyx, a cancer medicine, has received approval across multiple indications and has been highly successful. But the biotech is close to launching a new therapy called zanzalintinib, which could earn approval by the end of the year for treating metastatic colorectal cancer. Once Cabometyx starts facing generic competition in the U.S., probably in 2030, zanzalintinib should be ready to take over.

Here are two reasons why. First, it targets an area with a significant need. Colorectal cancer is the second-leading cause of cancer death in the world, despite having high five-year survival rates when caught early. So, there should be a large market for patients with stage 4 colorectal cancer.

Second, zanzalintinib should earn important label expansions beyond this area. The medicine is being investigated across meningioma, some forms of kidney cancer, and more. Zanzalintinib appears to have pipeline-in-a-drug potential, just like Cabometyx. In the meantime, Exelixis' revenue and earnings should continue growing at a good clip. And beyond zanzalintinib, the company is also working on other oncology candidates that are in the early stages of development. The company's medium-term prospects look bright.

3. CVS Health

CVS Health's rebound continues. After lagging the market for a few years, it has been performing well since 2025. But the company may not be done yet. CVS Health has worked hard to stabilize expenses in its health insurance business, and we are still seeing the results of these efforts, which could continue to drive higher profits and margins for the company. It is also pursuing initiatives that could boost sales.

For instance, CVS Health recently announced a platform that will help patients access GLP-1 medicines more easily while benefiting from support from healthcare professionals on their weight-loss journey. Anti-obesity drugs have risen in popularity, but they remain hard to access for many patients because of their high prices and spotty insurance coverage. CVS Health could help fill this need, potentially leading to meaningfully higher sales within its pharmacy segment. The company has other projects that may also boost revenue and earnings over the medium term. And that's before we factor in its strong dividend program, all of which suggests that CVS Health could perform well over the next five years.

Prosper Junior Bakiny has positions in Exelixis. The Motley Fool has positions in and recommends Exelixis and Krystal Biotech. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.