In this article, we will take a look at the 10 Best Pharma Stocks To Buy Right Now.
Healthcare takes the concept of ‘defensive’ further than almost any industry, encompassing many companies that provide patient care, engage in the research and development of new treatments, and design, manufacture, and market diagnostic equipment and tests. Breakthroughs in medical technology, pharmaceuticals, and treatment methods have transformed patient outcomes, with pharmaceutical companies, in particular, attracting significant attention as the demand for rapid results has increased. A report from Grand View Research estimates that the global pharmaceutical manufacturing market was valued at around $516.48 billion in 2022 and is projected to grow at a compound annual growth rate (CAGR) of 7.63% from 2023 to 2030.
Today, the biopharma sector boasts its largest and most diverse clinical pipeline to date—a result of decades of pioneering research. The number of unique drugs in development has nearly doubled, growing from 3,200 in 2012 to 6,100 in 2022. That said, only 14% of drugs in clinical trials make it to FDA approval, according to Research from MIT, pushing the average cost of developing a single drug to about $1 billion. AI could be the game-changer here. Generative AI, for example, lets researchers explore way more potential compounds than traditional methods can while helping spot disease patterns in massive data sets to find the best drug combinations. Moreover, PwC predicts that AI-driven automation and analytics could slash process timelines by 60–70% and reduce operational costs by over 30%.
See also: 10 Most Promising Gene Editing Stocks to Buy According to Hedge Funds.
Similarly, interest in weight-loss drugs like Ozempic and Wegovy has fueled huge growth in the industry. A recent study published in the scientific journal Addiction indicates that GLP-1 drugs could cut opioid and alcohol addiction rates by up to half. These drugs are also being tested for Alzheimer’s and other conditions commonly linked to obesity. For pharmaceutical companies aiming to lead in areas like cardiovascular and renal health, developing GLP-1s is becoming essential. The focus has shifted beyond competing with the top dogs in the anti-obesity market, which is projected to reach $130 billion by 2030. As the potential applications of GLP-1s grow, so does the opportunity for new players to enter the field. Swiss company Roche, for instance, rejoined the race for a weight-loss pill last year with its acquisition of California-based Carmot Therapeutics for up to $3.1 billion. The company is looking to “fast-track” its anti-obesity treatments, aiming to capture a chunk of the weight-loss market and restore confidence in its pipeline.
Headwinds in Pharmaceuticals
At first glance, the pharma industry might look like it’s thriving. But, like any industry, it faces its own set of challenges. Both biotech and pharmaceuticals faced a steep 48.6% decline in funding last year compared to 2021. The IPO market also dropped sharply in 2022, with proceeds plummeting amid market instability and volatility. The surge in drug-developer IPOs in 2020 and 2021, which raised approximately $46.5 billion—surpassing the total from the previous eight years combined—left many general investors wary. The biotech industry’s high-risk, high-reward nature, coupled with macroeconomic and geopolitical risks affecting broader markets, has put upcoming IPOs under close scrutiny. That said, drug developers have managed to raise $2 billion through IPOs this year as of September 3, reflecting a 24% increase compared to the same period in 2023. Though nearly two-thirds of these funds were secured in the initial two months amid a surge of new listings, according to BNN Bloomberg. However, with less than $800 million raised in the following six months, drug developers’ share of U.S. IPO proceeds has dropped from 17% in February to 6.5%.
In his welcome remarks at the October 7 conference, Tim Hunt, CEO of the Alliance for Regenerative Medicine (ARM), highlighted a rise in investment in cell and gene therapies in 2024. He noted that 13 of the world’s 15 largest pharma companies by market capitalization now have an “active presence” in this field. With numerous product patents set to expire, major pharmaceutical companies are increasingly looking to cell and gene therapies to bridge potential revenue gaps. Despite this interest, the number of cell and gene therapy deals in the pharma sector dropped by 38% in Q2 2024 compared to the same period in 2023, and there has been a decline in related patent applications. That said, the industry remains compelling and is one that potential investors shouldn’t ignore.
Pixabay/Public Domain
Our Methodology
We began by examining several U.S. pharmaceutical ETFs to identify stocks with the highest weightings. From these selections, we ranked each stock based on the total number of hedge fund holders as of Q2 2024.
At Insider Monkey we are obsessed with 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here)
10. Bristol-Myers Squibb Company (NYSE:BMY)
Number of Hedge Fund Holders: 61
Bristol-Myers Squibb Company (NYSE:BMY) is a global biopharmaceutical company involved in the research, development, licensing, manufacturing, marketing, and distribution of its products. Earlier this year, BMY completed a $14 billion acquisition of Karuna Therapeutics, gaining access to its experimental psychosis treatment, KarXT.
On October 31, Bristol-Myers Squibb Company (NYSE:BMY) reported third-quarter earnings and revenue that exceeded Wall Street’s expectations, driven by strong performance from its blockbuster blood thinner Eliquis and a lineup of key drugs aimed at long-term growth. These results come as the biopharma giant targets $1.5 billion in cost savings by the end of 2025, which it plans to reinvest in core drug brands and R&D. Revenue also rose 8% year-over-year to $11.89 billion, and the company raised its full-year revenue forecast, anticipating around a 5% increase in sales.
On September 29, BMO Capital raised its price target on Bristol-Myers Squibb Company (NYSE:BMY) from $48 to $53, maintaining a Market Perform rating. This update came after the approval of COBENFY, a new drug by BMY priced at $1,850 for a 30-day supply, or around $22,500 annually before rebates or discounts. The approval, which comes without a boxed warning, validates Bristol-Myers Squibb’s $12.7 billion acquisition of Karuna, the drug’s original developer.
9. Gilead Sciences, Inc. (NASDAQ:GILD)
Number of Hedge Fund Holders: 62
Based in Foster City, California, Gilead Sciences, Inc. (NASDAQ:GILD) is a U.S. biopharmaceutical company focused on developing antiviral treatments for diseases like HIV/AIDS, hepatitis B and C, influenza, and COVID-19.
Despite challenges in its solid tumor oncology division, Gilead Sciences, Inc. (NASDAQ:GILD) has an Outperform rating from BMO Capital, underscoring the firm’s positive view of Gilead’s broader business potential. Analysts at TD Cowen and Leerink Partners also reaffirmed their Buy and Outperform ratings, with Leerink upgrading the stock following strong Phase 3 results for Gilead’s HIV drug, lenacapavir.
In a Phase 3 trial, lenacapavir showed a massive 96% reduction in HIV infections, and Gilead Sciences, Inc. (NASDAQ:GILD) plans to file for approval by the end of 2024. The company also posted a 6% year-over-year growth in total product sales, driven by an 8% increase in sales of its HIV treatment Biktarvy and a 23% rise for its oncology drug, Trodelvy.
According to Insider Monkey, 62 hedge funds held stakes in Gilead Sciences, Inc. (NASDAQ:GILD) at the end of the second quarter of 2024.
Parnassus Investments mentioned Gilead Sciences, Inc. (NASDAQ:GILD) in its Q1 2024 investor letter. Here is what the fund said:
“Gilead Sciences, a global biopharmaceutical company, saw its shares decline as a cancer drug failed to expand into additional lung indications, denting investor faith in the company’s oncology franchise. We maintain confidence in Gilead’s core HIV franchise and ability to expand into cancer treatment portfolios.”
8. AbbVie Inc. (NYSE:ABBV)
Number of Hedge Fund Holders: 67
AbbVie Inc. (NYSE:ABBV) is a biopharmaceutical company focused on developing, manufacturing, and distributing treatments for chronic and complex diseases. Its next-generation immunology drugs, Skyrizi and Rinvoq, continue to drive growth despite competition from biosimilars of its older drug, Humira.
On October 10, Truist Securities raised ABBV’s price target from $210 to $215, maintaining a Buy rating. The revision reflects an update in AbbVie’s financial model, particularly accounting for In-Process Research and Development (IPR&D) expenses. Projections now include tavapadon, a developmental treatment expected to reach peak sales of about $1 billion, leading to updated revenue forecasts of $55.6 billion for 2024, $59.5 billion for 2025, and $63.7 billion for 2026.
In its latest earnings call, AbbVie Inc. (NYSE:ABBV) reported a strong third quarter with sales beating expectations and solid growth across key product areas, prompting an upward revision to its full-year revenue and earnings guidance. While Humira sales declined, the immunology, oncology, and neuroscience segments all posted gains. Q3 revenues reached nearly $14.5 billion, reflecting operational growth of 4.9%, while adjusted earnings per share came in at $3, topping guidance by $0.10. AbbVie Inc. (NYSE:ABBV) also raised its full-year revenue forecast by $500 million and adjusted EPS guidance to $10.90-$10.94. Moreover, demand for the company’s Skyrizi and Rinvoq remains high, with sales expected to exceed $17 billion.
7. Amgen Inc. (NASDAQ:AMGN)
Number of Hedge Fund Holders: 69
Amgen Inc. (NASDAQ:AMGN) is a global biopharmaceutical leader specializing in human therapeutics across areas like oncology, hematology, inflammation, bone health, and cardiovascular diseases.
Amgen Inc. (NASDAQ:AMGN) reported $8.5 billion in revenue for Q3 2024, marking a 23% jump from $6.9 billion in the same period last year. This growth was fueled by a 24% rise in product sales, with ten key products achieving double-digit sales increases, including Repatha, Tezspire, Evenity, Tavneos, and Blincyto. Additionally, the company’s innovative oncology portfolio grew by 17%, while the rare disease segment saw a 21% year-over-year increase, generating $1.2 billion in Q3 revenue.
On October 16, Goldman Sachs reaffirmed its Conviction Buy rating on Amgen Inc. (NASDAQ:AMGN) with a price target of $369. The endorsement reflects Amgen’s progress amid a pivotal year, especially with Phase 2 obesity data for MariTide expected by year-end 2024. Positive results could unlock a massive obesity treatment market, projected to reach $130 billion by 2030. Goldman’s analysis highlighted that the upcoming data will be crucial for validating Amgen’s unique strategy of combining a GLP1-R agonist with a GIPR antagonist—potentially positioning MariTide as a strong competitor to existing and emerging treatments like Wegovy and Zepbound.
By Q2 2024, 69 hedge funds tracked by Insider Monkey held stakes in Amgen Inc. (NASDAQ:AMGN).
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.”
6. Abbott Laboratories (NYSE:ABT)
Number of Hedge Fund Holders: 69
Abbott Laboratories (NYSE:ABT) is a global healthcare leader producing a broad range of medical devices, diagnostics, nutritional products, and branded generic pharmaceuticals. Its top products include Pedialyte, Similac, BinaxNOW, Ensure, and Glucerna.
In its strong Q3 earnings report, Abbott Laboratories (NYSE:ABT) exceeded both revenue and EPS expectations, posting $10.64 billion in revenue and $1.21 EPS. Moreover, the company’s sales rose 4.9%, with its Medical Devices segment achieving 13.3% organic growth, primarily due to Diabetes Care sales topping $1.6 billion. Abbott Laboratories (NYSE:ABT) also raised its full-year EPS guidance for the third time in 2024, setting a new range of $4.64 to $4.70.
Following the robust Q3 performance, Piper Sandler raised ABT’s price target to $133 from $131, keeping an Overweight rating on the stock. Among the 69 hedge funds holding stakes in Abbott Laboratories (NYSE:ABT) per Insider Monkey, Fisher Asset Management held the largest position, with 10.5 million shares valued at $1.09 billion.
5. McKesson Corporation (NYSE:MCK)
Number of Hedge Fund Holders: 70
McKesson Corporation (NYSE:MCK) is a leading global healthcare company focused on enhancing care across all settings. Operating through four main segments—U.S. Pharmaceutical, Prescription Technology Solutions, Medical-Surgical Solutions, and International—the company delivers approximately 41,000 packages daily, accounting for one-third of the U.S. pharmaceutical volume.
In fiscal Q1 2025, McKesson Corporation (NYSE:MCK) reported strong results with $79.3 billion in revenue, a 6% year-over-year increase. Adjusted earnings per diluted share rose by 8% to $7.88, prompting an upward revision in its full-year guidance. The U.S. Pharmaceutical segment, particularly its Oncology offerings, showed robust growth.
On October 2, Barclays reaffirmed its Equalweight rating and a $76 price target for MCK, highlighting the company’s strong organic sales growth and improved gross margins. McKesson Corporation (NYSE:MCK) also raised its quarterly dividend by 15% and approved an additional $4 billion for share buybacks. The company’s recent acquisitions, including Florida Cancer Specialists and a majority interest in Core Ventures for $2.49 billion, aims at bolstering oncology spending by an estimated $3.6 billion.
ClearBridge Large Cap Value Strategy stated the following regarding McKesson Corporation (NYSE:MCK) in its Q3 2024 investor letter:
“In a similar case of post-COVID market normalization, drug distributor McKesson Corporation (NYSE:MCK) lowered profit guidance for its medical-surgical business twice during the period, most likely due to continued post-COVID headwinds as primary care sites are consuming less of its equipment, while its prescription technology solution segment is tied to volumes of certain high-value specialty drugs. We still believe McKesson’s core pharma distribution business is very healthy, however, and it is ramping up its Optum contract in the second half of the year, while its most recent oncology practices acquisition should be accretive over the long term, enabling McKesson to continue delivering low-double-digit earnings growth without much economic sensitivity.”
4. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 80
Johnson & Johnson (NYSE:JNJ), one of the world’s largest healthcare companies, offers a broad portfolio that includes pharmaceuticals, medical devices, and consumer health products.
Following Johnson & Johnson’s strong third-quarter earnings, RBC Capital Markets raised its price target for the stock from $178 to $181, maintaining an Outperform rating. The company’s Q3 results exceeded expectations, with a 5.6% year-over-year underlying growth, excluding COVID-related sales, largely driven by the Innovative Medicine segment. However, MedTech reported a slower growth rate of 3.7%, falling short of the anticipated 6.7%, partly due to seasonal trends and challenges in the Asia Pacific region.
In addition, Johnson & Johnson (NYSE:JNJ) reported positive Phase 3 study results for its drug TREMFYA in treating ulcerative colitis and Crohn’s disease. The data showed that TREMFYA led to higher endoscopic remission rates than ustekinumab and placebo, particularly in patients who were new to biologic therapies or had previously not responded to them.
According to Insider Monkey, 80 hedge funds held positions in Johnson & Johnson (NYSE:JNJ) as of Q2 2024.
3. Pfizer Inc. (NYSE:PFE)
Number of Hedge Fund Holders: 84
Pfizer Inc. (NYSE:PFE) is a leading global pharmaceutical company that develops, manufactures, and sells prescription medications, vaccines, and consumer healthcare products, focusing on treatments for a wide range of medical conditions, from common ailments to rare diseases.
On October 29, Pfizer posted results for the fiscal third quarter of 2024. The company reported earnings per share of $1.06, surpassing the consensus estimate of $0.62, and revenues of $17.7 billion, above the expected $14.92 billion. Adjusted R&D expenses were $2.56 billion, below the forecast of $3.06 billion, while adjusted selling, informational, and administrative expenses (SI&A) were $3.22 billion, compared to an estimate of $3.42 billion. Excluding revenues from Comirnaty and Paxlovid but including contributions from Seagen, Pfizer Inc. (NYSE:PFE) anticipates operational revenue growth of 9% to 11% in 2024 compared to 2023.
On October 8, BMO Capital Markets maintained its Outperform rating on Pfizer Inc. (NYSE:PFE) with a price target of $36. The firm noted the recent investment by activist investor Starboard Value, which acquired a significant stake in the pharma giant, investing around $1 billion, equivalent to approximately 0.62% of the company’s equity value as of October 4, 2024.
2. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 96
Merck & Co., Inc. (NYSE:MRK), headquartered in Rahway, New Jersey, is a prominent American multinational pharmaceutical company with historical ties to the original Merck Group, founded in Germany in 1668. Known globally as Merck Sharp & Dohme (MSD), the company is highly regarded for its contributions to pharmaceuticals and vaccines.
Merck & Co., Inc. (NYSE:MRK) reported a 4% boost in third-quarter 2024 revenue, bringing in $16.7 billion, driven by strong sales of its cancer drug KEYTRUDA and the launch of Winrevair. While Gardasil sales declined by 10%, mainly due to lower demand in China, the company remains optimistic about future growth, targeting $11 billion in sales by 2030. Merck & Co., Inc. (NYSE:MRK) also shared positive clinical developments and new FDA approvals, further expanding its oncology portfolio.
On October 25, Barclays reaffirmed its Overweight rating and a $140 price target for Merck & Co., Inc. (NYSE:MRK) following new data from competitor Arcus Biosciences on its HIF-2α inhibitor, casdatifan. The data highlighted a 34% objective response rate (ORR), with a 25% confirmed ORR, presenting some competition for Merck’s cancer drug, Welireg. However, Barclays noted that the confirmed-to-unconfirmed response ratio did not represent as significant a competitive shift as initially expected.
As of Q2 2024, Insider Monkey data shows that 96 hedge funds held stakes in Merck & Co., Inc. (NYSE:MRK), with Millennium Management as one of the largest shareholders, holding shares valued at approximately $1.18 billion.
Oakmark Equity and Income Fund stated the following regarding Merck & Co., Inc. (NYSE:MRK) in its Q3 2024 investor letter:
“Merck & Co., Inc. (NYSE:MRK) is a global pharmaceutical firm with leading oncology, vaccine and animal health franchises. Premier products in Merck’s portfolio include Keytruda, Gardasil, Winrevair and Bravecto. Outsized contributor Keytruda is an immuno-oncology drug that treats several cancers and tumors. Keytruda is an astounding clinical and commercial success that is on track to become one of the best-selling prescription drugs to date. Investor angst surrounding Keytruda’s pending U.S. patent expiration in 2028 presented a chance to buy shares at a discounted valuation. We believe opportunities to extend Keytruda’s duration through life cycle management are underappreciated. More importantly, discounted cash flows from products already on market cover today’s entire stock price, meaning there is minimal value ascribed to a promising pipeline with strong sales potential. We believe Merck is led by a capable management team that looks to reinvest these cash flows in an accretive manner.”
1. Eli Lilly and Company (NYSE:LLY)
Number of Hedge Fund Holders: 100
Eli Lilly and Company (NYSE:LLY), founded in 1876 and headquartered in Indianapolis, Indiana, is a global pharmaceutical leader operating in 18 countries. The company specializes in developing innovative drugs for conditions such as diabetes, cancer, autoimmune disorders, and neurological diseases.
On November 1, Truist Securities adjusted its price target for Eli Lilly and Company (NYSE:LLY) to $1,029, slightly down from $1,033, while reaffirming a Buy rating on the stock. The update reflects the company’s strong performance amid sustained demand for type 2 diabetes (T2D) and obesity treatments. With obesity treatments reaching only about 4-5% of the market, Eli Lilly’s drug TZP is projected to drive growth, with sales forecasted at $12-13 billion for 2024, signaling substantial market potential.
Additionally, Eli Lilly and Company (NYSE:LLY) reported a robust 42% revenue increase in its third-quarter earnings, driven by diabetes and cancer drugs Mounjaro and Zepbound, which collectively brought in over $3 billion. Earnings per share rose significantly to $1.18, up from $0.10 a year earlier. The company has also raised its 2024 revenue guidance to $45.4-$46 billion, forecasting a 50% growth in the fourth quarter.
In Q2 2024, 100 hedge funds tracked by Insider Monkey held stakes in Eli Lilly and Company (NYSE:LLY), with Fisher Asset Management being the largest stakeholder, holding 4.88 million shares valued at $4.43 billion.
Here is what Baron Funds said about Eli Lilly and Company (NYSE:LLY) in its second-quarter 2024 investor letter.
“Shares of global pharmaceutical company Eli Lilly and Company (NYSE:LLY) increased on continued investor enthusiasm around GLP-1 drugs for diabetes and obesity. We remain shareholders. Lilly’s Mounjaro/Zepbound not only offers superb blood sugar control for diabetics but can drive 20%-plus weight loss and likely improve cardiovascular outcomes in both diabetic and non-diabetic obese patients. Lilly is developing next-generation drugs, including retatrutide, which drives approximately 25% weight loss, and orforglipron, a daily pill that produces approximately 15% weight loss. In the U.S. alone, there are 32 million Type 2 diabetics and an additional 105 million obese patients who we estimate would qualify for GLP-1 drugs. Although supply and access are limited near term, we think GLP-1 drugs will become the standard of care for both diabetes and obesity and will become a $150 billion-plus category. We see Lilly setting a high efficacy bar and capturing significant long-term market share. We think the adoption of GLP-1s will drive Lilly to triple total revenue by 2030.”
While we acknowledge the potential of LLY, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. 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.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
