In this article, we will discuss the 11 Best Mid-cap Healthcare Stocks to Buy According to Hedge Funds.
As per the US Bank, the healthcare in the US exhibits a large and intricate ecosystem, which is characterized by size, complexity, and influence on the broader national economy. Furthermore, the healthcare sector happens to be one of the largest sectors in the S&P 500, making up ~10% of the market capitalization of the index. Therefore, it provides investors with a significant opportunity to invest.
Domains Exhibiting Increased Investment Appeal
According to Terry Sandven, chief equity strategist, U.S. Bank Asset Management Group, weight loss, tools and diagnostics, data analytics, robotics, medical devices, and insurance are some of the areas possessing the highest investment appeal. Healthcare’s rich data offers a strong opportunity for data analytics companies, with the products of leading technology giants extending into healthcare.
While the sector has significant volatility and risk, due to the success/failure of new drugs, continued regulatory pressures, increased costs, and technological disruption, it also has strong growth potential, thanks to the fundamental demographic shifts and increased burden of chronic disease, according to the US Bank.
Amidst these trends, we will now have a look at the 11 Best Mid-cap Healthcare Stocks to Buy According to Hedge Funds.
A healthcare professional wearing a lab coat, holding a vial of medication.
Our Methodology
To list the 11 Best Mid-cap Healthcare Stocks to Buy According to Hedge Funds, we used a screener to shortlist the stocks catering to the broader healthcare sector. Next, we chose the stocks with a market cap of ~$2 billion – $10 billion. Finally, we selected the stocks that were popular among hedge funds. We also mentioned the hedge fund sentiments around each stock, as of Q1 2025.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
11 Best Mid-cap Healthcare Stocks to Buy According to Hedge Funds
11. Telix Pharmaceuticals Limited (NASDAQ:TLX)
Market Cap as of July 3: $5.37 billion
Number of Hedge Fund Holders: N/A
Telix Pharmaceuticals Limited (NASDAQ:TLX) is one of the 11 Best Mid-cap Healthcare Stocks to Buy According to Hedge Funds. The research firm stated that Telix Pharmaceuticals Limited (NASDAQ:TLX) is the most diversified, comprehensively positioned, and standalone publicly-traded radiopharmaceuticals company. The firm also cited the commercial-stage portfolio of targeted radiotherapy agents catering to the unmet needs in oncology. The company announced that its next-generation PSMA-PET imaging agent for prostate cancer, Gozellix® (kit for the preparation of gallium-68 (68Ga) gozetotide injection), is commercially available nationally in the US.
Telix Pharmaceuticals Limited (NASDAQ:TLX) highlighted that Gozellix builds on proven diagnostic excellence to offer early and accurate detection of metastases at initial staging, with 90% specificity. Telix Pharmaceuticals Limited (NASDAQ:TLX) remains focused on innovation in PSMA imaging, and Gozellix was the result of this commitment. It provides a new level of flexibility in distribution, production, and scheduling, together with a high standard of service and reliability.
Notably, PSMA-PET imaging has been established as the standard of care for staging and identifying biochemical recurrence of prostate cancer. That being said, only a relatively small fraction of 3.4 million men having prostate cancer in the US benefited, mainly due to access and availability challenges. Gozellix’s enhanced formulation provides a greater level of patient access as well as convenience via an extended transportation distance and clinical administration window. Telix Pharmaceuticals Limited (NASDAQ:TLX)’s stock has a consensus price objective of $22.92.
10. Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX)
Market Cap as of July 3: ~$2.14 billion
Number of Hedge Fund Holders: 19
Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX) is one of the 11 Best Mid-cap Healthcare Stocks to Buy According to Hedge Funds. Morgan Stanley assumed coverage of the company’s stock with an “Equal Weight” rating and a price objective of $5, as reported by The Fly. As per the analyst, Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX)’s stock witnessed volatility because of a combination of macroeconomic factors, underperformance on initial clinical results, and uncertainty related to the valuation and revenue drivers. Furthermore, the recent pipeline prioritization and stage of clinical development for the proprietary pipeline tend to leave numerous open questions on valuation, added the firm analyst.
However, as part of the business combination with Exscientia, Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX) has been proactively streamlining its portfolio, platform, and operations, making trade-offs to emphasize resources on programs having the strongest scientific rationale and highest potential for near and long-term impact. In Q1 2025, Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX)’s total revenue, consisting mainly of revenue from collaboration agreements, came in at $15 million as compared to $14 million for Q1 2024. This was because of the timing of projects from its Sanofi, Roche and Merck KGaA, Darmstadt, Germany collaborations.
9. Schrödinger, Inc. (NASDAQ:SDGR)
Market Cap as of July 3: ~$2 billion
Number of Hedge Fund Holders: 21
Schrödinger, Inc. (NASDAQ:SDGR) is one of the 11 Best Mid-cap Healthcare Stocks to Buy According to Hedge Funds. Morgan Stanley assumed coverage on the company’s stock with an “Equalweight” rating and a price objective of $28.00, down from the prior target of $31.00, as reported by The Fly. As per the firm’s analyst, Schrödinger, Inc. (NASDAQ:SDGR) saw volatility because of macroeconomic factors, underperformance on initial clinical results, as well as uncertainty on valuation and revenue drivers. That being said, the firm believes that Schrödinger, Inc. (NASDAQ:SDGR)’s software business offers a steady revenue stream, which tends to act as a safety net for the stock, irrespective of the outcomes of partnerships as well as proprietary pipeline.
The company announced that SGR-1505, its clinical-stage MALT1 inhibitor, has been designated as a Fast Track product by the US FDA for treating adult patients with Waldenström macroglobulinemia that have failed at least 2 lines of therapy, including a Bruton’s tyrosine kinase (BTK) inhibitor. Schrödinger, Inc. (NASDAQ:SDGR)’s key personnel stated that, despite continued therapeutic advances in the treatment of hematologic malignancies, there remains a challenge for treatment failure and disease progression due to BTK resistance for patients. The unmet need provides an opportunity for novel mechanisms like MALT1 as monotherapy and as part of the new combination regimens. Notably, the FDA Fast Track program focuses on facilitating the development and expediting review of drug candidates in order to treat serious conditions and fill unmet medical needs.
8. Kymera Therapeutics, Inc. (NASDAQ:KYMR)
Market Cap as of July 3: ~$3 billion
Number of Hedge Fund Holders: 25
Kymera Therapeutics, Inc. (NASDAQ:KYMR) is one of the 11 Best Mid-cap Healthcare Stocks to Buy According to Hedge Funds. Morgan Stanley analyst Judah Frommer assumed coverage of the company’s stock with an “Overweight” rating and a price objective of $70, down from $79. The research firm mentioned that the company is developing oral small-molecule approaches to target immunological pathways, which are validated by biologics. As per the firm’s analyst, healthy volunteer data with KT-621 demonstrates a potential multi-blockbuster opportunity.
Furthermore, the partnerships with Sanofi and Gilead tend to further validate Kymera Therapeutics, Inc. (NASDAQ:KYMR)’s drug discovery and protein degradation capabilities, added the analyst. Sanofi informed the company that KT-485/SAR447971, which is an oral, highly potent and selective development candidate targeting IRAK4 for immuno-inflammatory diseases that Kymera Therapeutics, Inc. (NASDAQ:KYMR) discovered and characterized via preclinical studies, was selected to advance into the clinical studies. After the extensive preclinical work aiding strong development potential, KT-485 continues to be prioritized for development under the companies’ existing IRAK4 collaboration, and is projected to advance into Phase 1 testing next year.
Kymera Therapeutics, Inc. (NASDAQ:KYMR) saw collaboration revenues of $22.1 million for Q1 2025 as compared to $10.3 million for Q1 2024. Furthermore, the collaboration revenues were all attributable to its Sanofi collaboration.
7. Certara, Inc. (NASDAQ:CERT)
Market Cap as of July 3: ~$2 billion
Number of Hedge Fund Holders: 28
Certara, Inc. (NASDAQ:CERT) is one of the 11 Best Mid-cap Healthcare Stocks to Buy According to Hedge Funds. Morgan Stanley assumed coverage of the company’s stock with an “Equal Weight” rating and a price objective of $16. The firm highlighted that it continues to monitor Certara, Inc. (NASDAQ:CERT)’s strategic review of its regulatory services business and potential opportunities stemming from the FDA’s announcement related to gradually reducing animal testing in favor of new approach methodologies, including in silico tools, computational modeling, and AI/ML.
Certara, Inc. (NASDAQ:CERT) has reiterated its guidance for FY 2025, with revenue expected to be within $415 million – $425 million and adjusted EBITDA margin to be between 30-32%. Certara, Inc. (NASDAQ:CERT) saw total revenue for Q1 2025 of $106.0 million, reflecting YoY growth of 10% on a reported and constant currency basis. Furthermore, the total revenue included $5.9 million of Chemaxon revenue.
Overall, the revenue growth was mainly because of growth in Certara, Inc. (NASDAQ:CERT)’s biosimulation software portfolio and contribution from M&A. Total bookings for Q1 2025 amounted to $118.2 million, representing YoY growth of 12% on a reported basis. Total Bookings consisted $4.9 million of Chemaxon bookings.
6. Disc Medicine, Inc. (NASDAQ:IRON)
Market Cap as of July 3: ~$2 billion
Number of Hedge Fund Holders: 34
Disc Medicine, Inc. (NASDAQ:IRON) is one of the 11 Best Mid-cap Healthcare Stocks to Buy According to Hedge Funds. Morgan Stanley assumed coverage of the company’s stock with an “Overweight” rating and a price objective of $85, as reported by The Fly. The research firm highlighted bitopertin’s potential to reach the market faster than was earlier expected via an accelerated approval process. Furthermore, the firm expects additional upside potential from Disc Medicine, Inc. (NASDAQ:IRON)’s pipeline programs in anemia, particularly highlighting DISC-0974.
The company has initiated APOLLO, which is a confirmatory clinical trial of bitopertin in adults and adolescents with EPP. Disc Medicine, Inc. (NASDAQ:IRON) stated that 2025 is off to a robust start as it continues to make operational progress throughout the portfolio. The company opines that bitopertin has the potential to be a life-altering therapy. Furthermore, Disc Medicine, Inc. (NASDAQ:IRON) highlighted that, due to a strong financial foundation that offers a cash runway into 2028, it remains well-placed to progress the commercial preparation efforts for bitopertin and the development of the rest of its pipeline. The company had cash, cash equivalents, and marketable securities of $694.7 million as of March 31, 2025.
5. Avantor, Inc. (NYSE:AVTR)
Market Cap as of July 3: ~$9.45 billion
Number of Hedge Fund Holders: 38
Avantor, Inc. (NYSE:AVTR) is one of the 11 Best Mid-cap Healthcare Stocks to Buy According to Hedge Funds. The company’s Q1 2025 results exhibited disciplined execution as well as a continued focus on cost management amidst the dynamic macro environment. Even though the company’s earnings and margin performance remained in line with its plan, the Lab Solutions revenue was impacted by lower demand, mainly in its Education and Government end market, after the policy changes. Furthermore, Avantor, Inc. (NYSE:AVTR) has expanded its cost transformation initiative and expects to deliver $400 million in gross run-rate savings exiting 2027.
While Avantor, Inc. (NYSE:AVTR)’s cost transformation continues to drive conversion and margins, its Bioscience production segment offers mission-critical materials and solutions. With respect to the Lab business, the company continues to make immediate and significant changes to fuel growth. The company’s delivery excellence initiative remains focused on ensuring greater supply chain efficiency and resilience. Next, Avantor, Inc. (NYSE:AVTR) has been accelerating digital enhancements to its platform, which includes the rollout of a new AI-enabled e-commerce platform, in order to further streamline customer experience. Another step is to strategically optimize the approach to pricing by leveraging the integration of digital technologies.
Broyhill Asset Management, an investment advisor, released its Q1 2025 investor letter. Here is what the fund said:
“Shares of Avantor, Inc. (NYSE:AVTR) declined 23% in the first quarter, as policy uncertainty around budget cuts for academic institutions and pharmaceutical companies weighed on the life sciences sector. With shares trading at valuations not previously seen in its history as a public company, we believe this is a dramatic overreaction as the market is essentially discounting a halting or meaningful slowdown in scientific progress at these levels. It is rare for companies benefiting from such strong secular growth trends to be valued at trough multiples on trough earnings, but that’s exactly how we view AVTR today, and exactly why we’ve capitalized on recent weakness to continue building our position.”
4. Ionis Pharmaceuticals, Inc. (NASDAQ:IONS)
Market Cap as of July 3: $6.84 billion
Number of Hedge Fund Holders: 43
Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) is one of the 11 Best Mid-cap Healthcare Stocks to Buy According to Hedge Funds. Barclays upgraded the company’s stock to “Overweight” from “Equal Weight” with a price objective of $57, an increase from the prior target of $51, ahead of the Tryngolza Phase 3 CORE/CORE2 data in severe hypertriglyceridemia, as reported by The Fly. The firm expects greater than 90% probability of the trial hitting the primary endpoint and expects a high probability that it will hit all key second biomarker endpoints.
Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) also announced that its partner, Biogen, shared positive topline results from Phase 1 study of salanersen (ION306/BIIB115), which is an investigational antisense oligonucleotide (ASO) that is being developed for potential treatment of spinal muscular atrophy (SMA). While leveraging the same mechanism of action as SPINRAZA® (nusinersen), but designed to achieve greater potency, salanersen can achieve high efficacy and enable once-yearly dosing. In Q1 2025, Ionis Pharmaceuticals, Inc. (NASDAQ:IONS)’s revenue rose by 10% as compared to the same period of last year, thanks to the increased commercial revenue, which includes new TRYNGOLZA product revenue after the approval in late December and higher SPINRAZA and WAINUA royalty revenue.
3. Penumbra, Inc. (NYSE:PEN)
Market Cap as of July 3: ~$9.7 billion
Number of Hedge Fund Holders: 47
Penumbra, Inc. (NYSE:PEN) is one of the 11 Best Mid-cap Healthcare Stocks to Buy According to Hedge Funds. The company announced the completion of enrollment in STORM-PE clinical trial. The pivotal, prospective, multi-center randomized controlled trial has enrolled 100 patients in order to evaluate computer assisted vacuum thrombectomy (CAVT) through utilising Penumbra’s Lightning Flash™ plus anticoagulation, versus anticoagulation alone, for treating acute intermediate-high risk pulmonary embolism (PE).
In the US, an estimated 900,000 cases of symptomatic PE take place annually. Pulmonary embolism could be life-threatening, with 10% – 30% of individuals dying within 1 month of diagnosis. Penumbra, Inc. (NYSE:PEN)’s Lightning Flash portfolio happens to be the most advanced mechanical thrombectomy system on the market, focused on addressing venous and pulmonary thrombus. Penumbra, Inc. (NYSE:PEN)’s gross profit for Q1 2025 came in at $215.9 million, or 66.6% of total revenue, compared to $181.1 million, or 65.0% of total revenue, for Q1 2024. This improvement in gross margin was mainly because of favorable product mix throughout the regions and productivity improvements.
Penumbra, Inc. (NYSE:PEN) increased its guidance for the U.S. Thrombectomy franchise growth to 20% – 21% YoY from 19% – 20% previously. It reiterated the guidance for gross margin expansion of a minimum of 100 bps in 2025, to over 67% for FY 2025. Baron Funds, an investment management company, released its Q1 2025 investor letter. Here is what the fund said:
“We initiated a position in Penumbra, Inc. (NYSE:PEN), a leading manufacturer of medical devices that remove blood clots from veins and arteries. Physicians use the company’s devices to treat pulmonary embolism (PE), deep vein thrombosis (DVT), acute limb ischemia, ischemic stroke, coronary disease, and other conditions. Penumbra’s devices, which are called mechanical thrombectomy devices, use computer algorithms to modulate the aspiration power depending on if a clot is detected and to control a separate valve that injects saline to reduce friction between the clot and catheter. This enables a differentiated device profile that maximizes clot removal with speed while decreasing risk of blood loss.
Penumbra serves large and underpenetrated markets. Management estimates the U.S. thrombectomy market opportunity consists of roughly 1.25 million annual procedures, including roughly 200,000 in stroke and over 1 million in PE, DVT, arterial, and coronary. The PE and DVT markets are only 10% penetrated with mechanical thrombectomy devices. Most PE patients currently receive conservative medical management with oral anticoagulation alone. Penumbra is running randomized clinical trials studying mechanical thrombectomy versus anticoagulation for PE patients. If the trials are positive, the market could shift towards greater adoption of mechanical thrombectomy. Meanwhile, Penumbra is gaining market share in PE and DVT. In stroke, the company’s new Thunderbolt device, which incorporates its computer assisted vacuum thrombectomy technology into the stroke market for the first time, could receive FDA approval and launch later this year, providing a potential catalyst for growth.”
2. Henry Schein, Inc. (NASDAQ:HSIC)
Market Cap as of July 3: ~$9.08 billion
Number of Hedge Fund Holders: 50
Henry Schein, Inc. (NASDAQ:HSIC) is one of the 11 Best Mid-cap Healthcare Stocks to Buy According to Hedge Funds. The company announced the completion of a $250 million strategic investment by funds affiliated with KKR, which is a leading global investment firm. Furthermore, William K. “Dan” Daniel has officially joined Henry Schein, Inc. (NASDAQ:HSIC)’s Board of Directors as an independent director. He joined Max Lin, who became a member of the company’s Board on May 2, 2025. As per Henry Schein, Inc. (NASDAQ:HSIC)’s Chief Executive Officer, deep experience of these appointments in health care, operations, and strategic growth is expected to be invaluable, with the company executing on its BOLD+1 strategy and creating long-term value.
Henry Schein, Inc. (NASDAQ:HSIC) continues to advance its BOLD+1 Strategic Plan, which was refreshed for 2025 to 2027, with the team focused towards growing distribution business via enhanced operational efficiency and improved customer experience, growing the dental and medical specialty businesses and corporate brand products as well as further developing the digital footprint and digital solutions. The company remains committed to its long-term financial goal of high single-digit to low double-digit earnings growth through successfully executing against the strategy.
1. Verona Pharma plc (NASDAQ:VRNA)
Market Cap as of July 3: $7.79 billion
Number of Hedge Fund Holders: 51
Verona Pharma plc (NASDAQ:VRNA) is one of the 11 Best Mid-cap Healthcare Stocks to Buy According to Hedge Funds. Piper Sandler increased the price target on the company’s stock to $160 from $76, while maintaining an “Overweight” rating. The analyst highlighted that the Street anticipates Ohtuvayre to reach blockbuster status in 2027 with strong growth as it further gets incorporated into the Chronic Obstructive Pulmonary Disease treatment paradigm. Notably, the drug’s dual bronchodilation and anti-inflammatory effects offer critical advantages in COPD therapy.
Verona Pharma plc (NASDAQ:VRNA) highlighted that the strong US launch of Ohtuvayre (ensifentrine) for the maintenance treatment of chronic obstructive pulmonary disease (COPD) has been accelerating, with 95% net sales growth in Q1 2025 as compared to Q4 2024, thanks to the significant increases in prescriptions, prescribers, new patients, and refills. Furthermore, the dramatic uptake of Ohtuvayre supports the unmet need of patients with COPD. Talking about Ohtuvayre’s Q1 2025 performance metrics, while the refills represented ~60% of overall dispenses, the new patient starts were more than 25% greater than those in Q4 2024.
Furthermore, a newly granted patent, which expires in June 2044, was listed in the FDA’s Orange Book for Ohtuvayre, apart from the 3 original Orange Book-listed patents. TimesSquare Capital Management, an equity investment management company, released its Q1 2025 investor letter. Here is what the fund said:
“Our preferences among Health Care stocks are those companies providing novel therapies for unmet needs that deserve premium pricing, or specialized service providers. There were two additions to the sector this quarter. Verona Pharma plc (NASDAQ:VRNA) is focused on developing therapies for respiratory diseases. Their Ensifentrine received FDA approval for treating chronic obstructive pulmonary disease. The first two quarters of the product launch exceeded estimates.”
While we acknowledge the potential of VRNA to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than VRNA and that has 100x upside potential, check out our report about this cheapest AI stock.
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