GE Healthcare's quiet outperformance is becoming harder to ignore — and its new drug, used in radiology to improve diagnosis of heart disease, may help the club's stock generate even more buzz. In a note to clients on Sunday, Wells Fargo analysts said GE Healthcare's Flyrcado diagnostic drug “may be the most underrated asset” of major medical technology companies. Flyrcado — approved late Friday by the Food and Drug Administration for the detection of coronary heart disease — is expected to launch in some U.S. markets in early 2025 before availability increases. According to Wells Fargo, Flyrcado has peak annual sales potential of at least $1 billion and could increase earnings per share by about 80 cents by 2028. Wall Street currently expects GE Healthcare to earn $6.72 per share in 2028, up from the forecast $4.25 for this year, according to FactSet. “This is incredible,” Jim Cramer said Monday of Wells Fargo's optimism about Flyrcado. GE Healthcare is a stock we've struggled with since its sharp decline in the second quarter. The FDA approval and upcoming launch of Flyrcado improves the outlook for GE Healthcare's diagnostics business, a part of our investment thesis that has not been top of mind for investors recently. Instead, the market appeared to be focused on GE Healthcare's ability to benefit from the Federal Reserve's interest rate cuts, which will lower borrowing costs and make it easier for hospitals and other medical facilities to finance purchases of its expensive MRI and CT machines. This momentum – coupled with the positive economic announcements in China in recent days – made GE Healthcare one of our best-performing stocks in the third quarter. Shares rose another 1% on Monday, pushing July-September gains to over 19%, compared with about 5% gains for both the S&P 500 healthcare sector and the broader market index overall. After hitting a new all-time high on Friday, we reduced our position in GE Healthcare, locking in hard-fought gains in a stock that is prone to periods of underperformance. Still, the fundamentals of the business are looking increasingly attractive, and Friday's small sell-off in a series of overbought market days was not a statement of our conviction, according to the S&P Short Range Oscillator. “I didn't think – and I shouldn't have – that the equipment here is so expensive that it needs to be financed. So once the prices go down, you could get a refund,” Jim admitted on Monday. “We also now get the reasons why I thought it was important: diagnostics.” At the time of our launch in May 2023, Vizamyl appeared to be the most exciting diagnostic being used to detect Alzheimer's disease. Vizamyl's momentum in recent quarters should continue as Club's emerging class of Alzheimer's treatments – Leqembi from Biogen and Eisai and Kisunla from Eli Lilly – gains greater adoption. It is clear that Flyrcado also deserves attention. Flyrcado is a so-called radio tracer. It is given to patients via an intravenous injection before they undergo a positron emission tomography scan, called a PET scan. Flyrcado shows how blood flows through the heart muscle in patients with known or suspected coronary artery disease, the most common heart disease in the United States, according to the CDC. The primary imaging technique currently used to diagnose coronary artery disease is single photon emission computed tomography, commonly abbreviated as SPECT. Both SPECT and PET scans fall into the field of nuclear medicine, but they use different types of radiotracers to aid in the diagnostic process. According to GE Healthcare, a PET scan with Flyrcado has better diagnostic effectiveness than SPECT scans. That makes Flyrcado a better option for “patients with difficult presentations, such as those with a high body mass index (BMI) and women,” Wells Fargo analysts wrote. Due to its half-life of 109 minutes, Flyrcado can also be manufactured at an outside pharmacy and then delivered to hospitals and imaging centers. According to the company, this is among the advantages over existing radiotracers used in scans to detect heart disease. “Because of these advantages, we expect Flyrcado to cannibalize current PET tracers over time,” Wells Fargo said. Stifel analysts are also optimistic about Flyrcado's potential. The approval of the radiotracer is “clearly an incremental positive catalyst for GEHC, anyway.” [Flyrcado] “Contribution to consensus numbers today, it appears likely to be a growth-supporting, incremental positive contribution to the 2025 GEHC outlook,” analysts wrote to clients on Sunday. Stifel raised its price target on GEHC to $102 per share from $100. Looking ahead to next year, a proposed change to the way Medicare pays for diagnostics like Flyrcado could take hold and boost the overall diagnostics business. GE Healthcare is also likely to see a recovery as medical-focused stimulus rolls out. Talk more about these two additional drivers at the investor day scheduled for November 21st. Having just reduced our GEHC position, we have a rating of 2 on the stock, meaning we'll wait for a decline before thinking about buying more. We're reviewing our $92 price target as shares now trade above that level (Jim Cramer's Charitable Trust is long GEHC. A full list of stocks can be found here.) As a subscriber to CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable foundation's portfolio. If Jim discussed a stock on CNBC television, he waits 72 hours after the trade alert is issued before executing the trade. THE INVESTING CLUB INFORMATION SET FORTH ABOVE IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, ALONG WITH OUR DISCLAIMER. 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GE Healthcare's booth is seen ahead of the 2022 China International Fair for Trade in Services (CIFTIS) at the China National Convention Center on August 28, 2022 in Beijing, China.
Yi Haifei | China News Service | Getty Images
GE HealthcareThe company's quiet outperformance is becoming harder to ignore – and its new drug, used in radiology to improve the diagnosis of heart disease, may help the club's stock generate even more buzz.
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