In this article, we will look at the 10 Best Drug Stocks to Buy Now.
Is China the Next Big Thing in the Pharmaceutical Industry?
Large American pharmaceutical companies are showing a distinct trend never seen before: they are increasingly looking for medicines in China. According to data from DealForma, as reported by CNBC, around 30% of Big Pharma deals with at least $50 million upfront in 2024 included Chinese companies. This was up from 20% the year before and almost 0% only five years prior. The surge in China deals is materializing when US policymakers and President Donald Trump are pursuing protectionist policies in technology, such as semiconductors and AI.
Various reasons are being attributed to this trend. Experts believe that Chinese companies are developing more effective molecules than ever before, that too in large quantities. They are in a position to begin testing these molecules on human subjects quicker and at a lower price than the US. Buyers have devised a business model allowing them to essentially import the medicines through licensing deals, according to CNBC. Biotech companies are further pushed into making these deals due to the drying up of venture funding in China.
Despite varying opinions among experts, there is an industry-wide consensus that this unique trend is here to stay. How this trend might affect the US biotech sector remains unclear at the moment. While some people believe it could potentially ruin American startups if large pharmaceutical companies stumble upon a promising Chinese drug at low price, others believe the competition would be fruitful for the industry. Either way, this trend is anticipated to metamorphose the landscape of the American biopharma sector. CNBC reported that Tim Opler, a managing director in Stifel’s global healthcare group, said the following about the situation:
“It’s kind of a watershed moment where the pharma industry is like, ‘We don’t really need to buy U.S. biotechs necessarily. We will if it makes sense, but we can buy perfectly good biotech assets through licensing deals with Chinese companies.”
What Does the Future of the Pharmaceutical Sector Look Like?
EY believes the pharmaceutical sector is expected to see more deal activity in 2025 compared to 2024, especially if interest rates remain low. Although the industry may see an increase in larger acquisitions to address growth gaps, smaller strategic deals are expected to persist throughout the year. The policy environment in the US is undergoing changes due to political impacts on business, such as re-regulation, lower corporate taxes, continued drug pricing reforms, and the possibility of higher tariffs. Other factors that may affect the biotech and pharmaceutical industries include changes in leadership within health agencies and immigration.
A survey by Deloitte showed that drug pricing and access are the top concerns among executives in 2025. The survey also showed that the primary concerns include competition from generic drugs and biosimilars and the looming patent cliff, with over $300 billion in sales at risk due to expiring patents by 2030. Due to this trend, executives anticipate an increase in mergers and acquisitions in 2025.
We discussed the future of the healthcare industry in the US in a recently published article on the 10 Best Medical Device Stocks To Buy According to Hedge Funds. Here is an excerpt from the article:
“According to McKinsey, the healthcare industry is expected to continually undergo a shift in growth dynamics. Health services and technology (HST) revenue pools are anticipated to grow at a compound annual growth rate of 8% between 2023 and 2028, supported by double-digit growth in software platforms and advanced data and analytics. The sales of innovative technologies such as generative AI to payers and providers are further supporting this growth.
In addition, pharmacy services, especially those focused on specialty pharmacy, are expected to see continued growth. The launch of new therapies and increased utilization are expected to be the primary drivers of this growth. McKinsey estimates specialty pharmacy revenue will grow at a compound annual growth rate of 8% between 2023 and 2028, growing EBITDA for managed service providers and specialty pharmacies.
Therefore, optimistic trends are materializing for the healthcare industry as a whole, including the medical device sector.”
With these trends in view, let’s look at the 10 best drug stocks to buy now.
A pharmaceutical sales rep holding a medicine pack, highlighting the drug candidate products.
Our Methodology
We sifted through stock screeners, online rankings, and ETFs to compile a list of 30 drug stocks. We then selected the top 12 most popular stocks among elite hedge funds as of Q3 2024. We sourced the hedge fund sentiment data from Insider Monkey’s database. The list is sorted in ascending order of hedge fund sentiment.
Why do we care about what hedge funds do? 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Drug Stocks to Buy Now
10. Novo Nordisk A/S (NYSE:NVO)
Number of Hedge Fund Holders: 61
Novo Nordisk A/S (NYSE:NVO) is a global healthcare company specializing in diabetes care. It develops, discovers, manufactures, and markets pharmaceutical products. Its operations are divided into two business segments: biopharmaceuticals and diabetes and obesity care. The latter segment covers GLP-1, insulin, and other protein-related products. Novo Nordisk A/S (NYSE:NVO) is one of the two major pharmaceutical companies competing in the GLP-1 weight loss market, with the other being Eli Lilly.
While both companies have approved weight loss medicines leading the market with billions in revenue, Novo Nordisk A/S (NYSE:NVO) is working on a new oral weight loss pill that may transform the market if approved. Novo Nordisk CEO Lars Fruergaard Jørgensen said that the company plans to file for regulatory approval for its oral weight loss drug in the United States in the coming months. If the company gains approval, it may be able to launch the drug as early as next year, which is when Eli Lilly also plans the release of its weight loss drug.
Apart from potential optimism surrounding this oral weight loss drug, Novo Nordisk A/S (NYSE:NVO) is functioning on strong fundamentals. Fiscal 2024 was a strong year for the company, with sales climbing 25% to $40.6 billion. It also raised its total dividend per share by 21.3% to DKK 11.40, which includes an interim dividend of DKK 3.50 distributed in August. This is the 29th consecutive year of dividend growth at NVO. In 2025, Novo Nordisk A/S (NYSE:NVO) expects a free cash flow of around DKK 75 to 85 billion and sales growth of 16-24% at constant exchange rates.
9. Zoetis Inc. (NYSE:ZTS)
Number of Hedge Fund Holders: 62
Zoetis Inc. (NYSE:ZTS) is a global animal health company that focuses on the discovery, development, manufacture, and commercialization of vaccines, medicines, biodevices, genetic tests, diagnostic products, and precision animal health. Its operations are divided into the United States and International segments. Each segment boasts a diversified product portfolio, including vaccines, parasiticides, pain and sedation, animal health diagnostics, and more.
The company markets its products in around 45 countries across the globe and specializes in products across eight core species: companion animals (dogs, cats, and horses), cattle, swine, livestock (sheep and fish), and poultry. Zoetis Inc. (NYSE:ZTS) delivered 11% revenue growth in fiscal Q4 2024, reflecting the strength and demand of its brands and its continued focus on execution to drive broad-based growth. Revenue in the US grew by 11%, while international revenue increased by 10% operationally, marking significant revenue milestones for the company in a competitive landscape.
It also drove operational revenue growth in its companion animal portfolio and 5% operational revenue growth for its livestock portfolio. Zoetis Inc. (NYSE:ZTS) is confident about the ability of its growth drivers to drive sustainable growth in 2025, positioning it for continued above-market growth in the mid-to-high single-digit range for 2025 and beyond. The diversity of its business model with multiple growth drivers supports this optimism. The company ranks ninth on our list of the 10 best drug stocks to buy now.
8. Abbott Laboratories (NYSE:ABT)
Number of Hedge Fund Holders: 63
Abbott Laboratories (NYSE:ABT) discovers, develops, manufactures, and sells healthcare products. Its business segments include Medical Devices, Diagnostic Products, Established Pharmaceutical Products, and Nutritional Products. Its Established Pharmaceutical Products segment manages the international sale of an elaborate range of branded generic pharmaceutical products. The Medical Devices segment manages the global sales of heart failure, rhythm management, structural heart, electrophysiology, neuromodulation, and diabetes care products.
The company’s main business highlights several growth opportunities. Its FreeStyle Libre franchise in the diabetes care unit, which comprises a range of continuous glucose monitoring (CGM) systems, has been one of the most significant growth drivers for Abbott Laboratories (NYSE:ABT) and holds the potential to expand its market share. The company’s cardiovascular devices, which include its structural heart portfolio, are also expected to drive long-term growth as the global population ages.
In fiscal Q4 2024, the company generated $8.5 billion in operating cash flow, which it used to reinvest in its business by repaying debts, funding capacity expansions, and returning $5 billion to shareholders through share repurchases and dividends. Abbott Laboratories (NYSE:ABT) is well positioned to deliver strong growth in fiscal 2025 and forecasts organic sales growth in the 7.5% to 8.5% range. Its innovative abilities, diversified business, and industry expertise lend it a competitive market edge.
7. AbbVie Inc. (NYSE:ABBV)
Number of Hedge Fund Holders: 68
AbbVie Inc. (NYSE:ABBV) is a research-based pharmaceutical company that develops and sells products to treat chronic diseases in oncology, gastroenterology, rheumatology, dermatology, virology, and various other serious health conditions.
Analysts are optimistic about AbbVie Inc.’s (NYSE:ABBV) growth, primarily because of its two blockbuster drugs, Skyrizi and Rinvoq. These drugs, which target dermatology, rheumatology, psoriatic diseases, and inflammatory bowel disorders, are projected to exceed $27 billion in annual sales by 2027.
It also has strong fundamentals and generated $15.1 billion in revenue in fiscal Q4 2024, reflecting a 5.6% growth and exceeding analyst expectations. This growth was attributed to its ex-Humira platform, a drug collection in the company’s pharmaceutical portfolio. The platform delivered more than 18% full-year sales growth, with revenue growth accelerating to 22% in fiscal Q4 2024. AbbVie Inc. (NYSE:ABBV) also announced a dividend increase of 5.8%, effective February 2025, continuing its trend of increasing dividends for 12 consecutive years.
Polaris Capital Management said the following about AbbVie Inc. (NYSE:ABBV) in its Q3 2024 investor letter:
“US biopharma/biotech companies topped the health care sector, with the majority of holdings posting returns in excess of 10%. AbbVie Inc. (NYSE:ABBV) showed positive top-line growth from its immunosuppressive drugs, Skyrizi and Rinvoq. Abbvie’s management continues to work through the loss of exclusivity from Humira, switching patients to Skyrizi or Rinvoq rather than Humira biosimilars.”
6. Amgen Inc. (NASDAQ:AMGN)
Number of Hedge Fund Holders: 68
Amgen Inc. (NASDAQ:AMGN) is a biotechnology company that discovers, develops, manufactures, and markets human therapeutics. It delivers new therapies for patients with complex cancers, especially in areas with significant unmet needs. The company ended fiscal Q4 2024 with 14 medicines, each annualizing at more than $1 billion. Several of these are expected to be key growth drivers for the company through the decade.
Repatha, which treats cholesterol and heart disease, and EVENITY, which targets osteoporosis in postmenopausal women, are drugs that are continually delivering strong growth for the company. Repatha has developed into a multi-billion dollar product. Heart disease, the leading cause of death worldwide, is further driving its growth.
Amgen Inc. (NASDAQ:AMGN) also has a strong portfolio for rare diseases, which is expected to expand in 2025 with the potential regulatory approval for TEPEZZA internationally, the first and only FDA-approved medicine to treat Thyroid Eye Disease (TED). Launches in new indications for UPLIZNA, which treats neuromyelitis optica spectrum disorder (NMOSD), are expected to further strengthen the growth trajectory of the company’s rare disease business.
Analysts are bullish on the stock as its October 2023 acquisition of Horizon Therapeutics is expected to pay off in the next five years. PGIM Jennison Health Sciences Fund stated the following regarding Amgen Inc. (NASDAQ:AMGN) in its Q2 2024 investor letter:
“Amgen Inc. (NASDAQ:AMGN) is a large-cap global biotech company with a diverse portfolio of marketed and pipeline products. Amgen’s discovery pipeline had led the company to broaden its focus from oncology, immunology, and renal disease to include musculoskeletal, cardiovascular, and neurologic conditions. In addition, Amgen has turned its expertise in antibody manufacturing into a leading position in the development of biosimilars of competitor drugs. Most recently, Amgen shares advanced in 2Q following its announcement that its novel injectable GLP-1 agonist / GIPR antagonist, MariTide, for obesity showed promising interim Phase 2 data and has shown enough promise to warrant advancement into pivotal trials as soon as late 2024. While Eli Lilly and Novo Nordisk will remain the market leaders in the diabetes/obesity space, we think there is room for Amgen to carve out a meaningful share of the market with its antibody-peptide conjugate approach that could enable monthly or better dosing for MariTide.”
5. Bristol-Myers Squibb Company (NYSE:BMY)
Number of Hedge Fund Holders: 70
Bristol-Myers Squibb Company (NYSE:BMY) is a biopharmaceutical company that discovers, develops, and delivers advanced medicines for serious diseases. Its medicines fall into various therapeutic classes, including hematology, oncology, cardiovascular, immunology, and neuroscience.
The company has a strong drug portfolio and robust pipeline due to acquisitions and partnerships, forming a base of a wide economic moat. For instance, its acquisition of Celgene strengthened its pipeline, providing it with a strong entrenchment in blood cancer. Bristol-Myers Squibb Company’s (NYSE:BMY) recent acquisitions of oncology firms RayzeBio and Mirati and neurology firm Karuna have further bolstered its overall pipeline.
Bristol-Myers Squibb Company (NYSE:BMY) has also exhibited strong performance in dividend growth, with eight consecutive years of increases and outperforming the sector median of two years by 300%. It has maintained dividend payments for 35 consecutive years, surpassing the sector median of 15 years by 133%. This reflects the company’s strong financial health and ability to deliver value to shareholders. It takes the fifth spot on our list of the 10 best drug stocks to buy now.
4. Pfizer Inc. (NYSE:PFE)
Number of Hedge Fund Holders: 80
Pfizer Inc. (NYSE:PFE) is a global biopharmaceutical company that manufactures, develops, markets and sells biopharmaceutical products worldwide. It advances wellness, prevention, treatment, and cures in developing and emerging markets. The company’s goal is to become a world-class oncology leader. It is already the third-largest biopharma company in oncology in the United States and has plans to continue its progress in oncology for the rest of the decade.
Pfizer Inc. (NYSE:PFE) is focused on its oncology pipeline for future growth, with its 2030 goals entailing the addition of several new blockbuster drugs to its portfolio. The company is expected to continue looking for opportunities to acquire promising pharmaceutical companies to augment its pipeline further. It used a significant portion of its pandemic profits on the $43 billion acquisition of Seagen, a biotech company specializing in oncology.
This strategy is working well for Pfizer Inc. (NYSE:PFE) as management estimates earnings growth between 10% and 18% for 2025. Analysts also estimate the company’s earnings to grow by around 14% annually over the next 3-5 years. Furthermore, Pfizer Inc. (NYSE:PFE) has an attractive dividend yield of 6.3%, higher than most blue-chip stocks. Its management has reiterated plans to support and raise this dividend periodically, recently announcing a 2.4% increase in early December.
3. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 81
Johnson & Johnson (NYSE:JNJ) develops, manufactures, and sells a range of products in the healthcare field through its subsidiaries. With a primary focus on products related to human well-being and health, the company operates through two segments: Innovative Medicine and MedTech. Its Innovative Medicine segment encompasses various therapeutic areas, including infectious diseases, immunology, neuroscience, metabolic and cardiovascular diseases, pulmonary hypertension, and oncology. The MedTech segment includes an elaborate range of medical devices and products used in cardiovascular intervention, orthopedic, interventional solutions, surgery, and vision fields. Johnson & Johnson (NYSE:JNJ) also offers a commercially available intravascular lithotripsy (IVL) platform through its MedTech segment for peripheral artery disease (PAD) and coronary artery disease (CAD).
The company has solid fundamentals and a AAA credit rating, higher than the US government’s. Its elaborate portfolio features over 10 blockbuster drugs and several therapeutic domains, ranging from oncology to infectious diseases. Its medical device manufacturing segment further diversifies its operations. On January 13, Johnson & Johnson (NYSE:JNJ) announced the $14.6 billion acquisition of neurological drugmaker IntraCellular. This acquisition will allow the company access to Caplyta, an oral drug for the treatment of bipolar disorder and schizophrenia.
Apart from that, the company has strong fundamentals. Johnson & Johnson (NYSE:JNJ) reported sales of $88.8 billion for fiscal year 2024, reflecting a 4.3% year-over-year growth. These strong results reflect the company’s high-growth strategy. It has a solid balance sheet and generates enough cash flow through its operations to cover its high-yielding dividend. Johnson & Johnson (NYSE:JNJ) has various other growth opportunities as well, such as the robotic-assisted surgery industry. It is developing the Ottava system to compete in the sector, which is expected to drive further growth for the company after its approval.
2. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 86
Merck & Co., Inc. (NYSE:MRK) is a biopharmaceutical company that delivers health solutions to advance the treatment and prevention of diseases in animals and people. Its Pharmaceutical segment offers vaccines and human health pharmaceutical products, which typically consist of therapeutic and preventive agents. Its Animal Health segment develops, discovers, manufactures, and markets a range of vaccines and veterinary pharmaceutical products.
The company is experiencing some headwinds, negatively impacting its revenue outlook. For instance, it has temporarily stopped the shipments of its HPV vaccine Gardasil to China until mid-2025 due to weak discretionary spending. Despite these short-term challenges, Merck & Co., Inc. (NYSE:MRK) has strong operations, supported by robust demand for its diverse and innovative portfolio. Its Keytruda drug for cancer treatment is performing well, and the launch of Winrevair, a drug that treats pulmonary arterial hypertension (PAH), is also boosting revenue growth for the company.
Merck & Co., Inc.’s (NYSE:MRK) pipeline lends it a competitive market advantage, with around 20 potential new growth drivers holding blockbuster potential. Its late-stage pipeline in infectious diseases, oncology, and cardiometabolic further bolsters its future outlook. The company’s strong commercial execution, diversified portfolio, and innovative pipeline lend it resilience against short-term headwinds, positioning it as an attractive investment with a solid long-term growth trajectory.
GreensKeeper Asset Management, an investment management company, released its Q3 investor letter. Here is what the fund said:
“Merck & Co., Inc. (NYSE:MRK) was our second-largest detractor this quarter, declining -8.3%. MRK’s leading HPV vaccine, GARDASIL 9, faced challenges internationally due to inventory buildup within its Chinese distributor, which is expected to reduce shipments for the remainder of 2024. Despite this short-term impact, the long-term outlook for GARDASIL 9 remains promising. Meanwhile, the company’s $27 billion Keytruda cancer juggernaut continues to grow at a healthy clip, powering earnings growth.”
1. Eli Lilly and Company (NYSE:LLY)
Number of Hedge Fund Holders: 106
Eli Lilly and Company (NYSE:LLY) develops, manufactures, discovers, and sells pharmaceutical products. These products span oncology, diabetes, immunology, neuroscience, and other therapies. Investors are bullish on Eli Lilly and Company (NYSE:LLY) due to its in-demand GLP-1 drugs, used to treat diabetes and obesity, which are still in their early growth stages, and the company’s strong financials.
On February 10, the company announced a collaboration with AdvanCell to advance cancer treatment through targeted alpha therapies. By combining Eli Lilly and Company’s (NYSE:LLY) expertise in drug manufacturing with AdvanCell’s Pb-212 production technology and infrastructure, the collaboration aims to expedite clinical progress for innovative radiopharmaceuticals. This is expected to be a significant opportunity for the company to further strengthen its cancer treatment portfolio and explore Pb-212-based therapies.
Apart from its partnerships, the company has strong fundamentals. It reported a 32% revenue growth in fiscal 2024 compared to fiscal 2023, exceeding its first-time guidance by $4 billion. Eli Lilly and Company (NYSE:LLY) also made substantial progress across its strategic deliverables in fiscal Q4 2024, with revenue growing by 45% in the quarter, supported by strong uptake of its Mounjaro and Zepbound drugs. Its immunology, oncology, and neuroscience segments are also performing well, supporting bullish sentiments for the stock.
Aristotle Atlantic Partners, LLC highlighted LLY in its Q4 2024 investor letter. Here is what the firm has to say:
“Eli Lilly and Company (NYSE:LLY) contributed to performance in the fourth quarter. While shares underperformed, our underweight position versus the benchmark resulted in a positive contribution to relative returns. Lilly shares were weak following an uncharacteristic third-quarter earnings miss driven by softer-than-expected sales of its blockbuster diabetes and obesity drugs. The company blamed this partly on wholesaler destocking. Lilly reinforced its view that end demand for the drugs remains strong”.
Overall, LLY ranks first among the 10 best drug stocks to buy now. While we acknowledge the potential of drug stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than LLY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
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