In this article, we will be taking a look at the 10 cheap pharmaceutical stocks to buy according to analysts.
The Evolving Landscape of Healthcare and Biopharma Innovation
Almost no other industry goes as far as the phrase “defensive” as the healthcare sector, which encompasses a wide range of companies that provide patient care, research and development of new medicines, and design, manufacture, and sell diagnostic instruments and tests. Patient care has evolved due to advancements in therapeutic techniques, drugs, and medical technology. Pharmaceutical companies in particular have received much attention as the demand for speedy results has increased. Grand View Research predicted that the value of pharmaceutical manufacturing worldwide was $516.48 billion in 2022. The sector is anticipated to increase at a compound annual growth rate (CAGR) of 7.63% between 2023 and 2030.
The biopharma industry now has the most extensive and varied clinical pipeline to date, due to decades of groundbreaking research. In 2012, there were 3,200 distinct medications under development; by 2022, that number had nearly doubled to 6,100. The average cost of producing a single treatment is over $1 billion, while just 14% of medications in clinical trials reach FDA clearance, according to MIT research. This could be a game-changer for AI. For instance, generative AI helps identify illness patterns in large data sets to determine the optimal medicine combinations while enabling researchers to investigate far more possible compounds than they could with conventional techniques. Additionally, according to PwC, AI-driven analytics and automation could cut operational costs by more than 30% and process timeframes by 60–70%.
In a similar vein, the market has grown significantly due to consumer interest in weight-loss medications like Ozempic and Wegovy. According to a recent study in the scientific journal Addiction, GLP-1 medications may reduce the prevalence of alcohol and opioid addiction by as much as 50%. Additionally, these medications are being evaluated for Alzheimer’s disease and other disorders that are frequently associated with obesity. The development of GLP-1s is becoming crucial for pharmaceutical businesses that want to be leaders in fields like cardiovascular and renal health. Competition with the leading companies in the anti-obesity business, which is expected to grow to $130 billion by 2030, is no longer the main emphasis.
The possibility for additional participants to enter the field is growing along with the possible applications of GLP-1s. For example, the Swiss business Roche entered the weight-loss drug sweepstakes in 2023 when it paid up to $3.1 billion to acquire California-based Carmot Therapeutics. The corporation wants to “fast-track” its anti-obesity medicines to regain faith in its pipeline and take a share of the weight-loss market.
Challenges and Opportunities in the Pharmaceutical and Biotech IPO Market
The pharmaceutical sector may appear to be flourishing at first glance. However, it has its own set of difficulties, just like every other industry. Compared to 2021, funding for biotech and pharmaceuticals fell by a sharp 48.6% last year. In 2022, the IPO market also saw a significant decline, with profits falling as a result of market volatility and instability. Many general investors were apprehensive of the spike in drug-developer initial public offerings (IPOs) in 2020 and 2021, which garnered about $46.5 billion, more than the total from the preceding eight years combined.
Future initial public offerings (IPOs) are being closely watched due to the high-risk, high-reward nature of the biotech sector as well as macroeconomic and geopolitical issues that impact larger markets. However, as of September 3, 2024, drug developers had raised $2 billion through initial public offerings (IPOs) this year, a 24% increase over the same period in 2023. However, according to BNN Bloomberg, over two-thirds of these funds were raised in the first two months as a result of a spike in new listings. However, pharma companies’ portion of U.S. IPO profits has decreased from 17% in February to 6.5%, with less than $800 million raised in the next six months.
Tim Hunt, CEO of the Alliance for Regenerative Medicine (ARM), emphasized increased funding in cell and gene therapies in 2024 in his opening remarks at the October 7 conference. According to him, thirteen of the fifteen biggest pharmaceutical companies in the world by market capitalization now have an “active presence” in this area. Major pharmaceutical corporations are increasingly turning to cell and gene therapies to fill possible revenue shortages as many product patents are about to expire. Despite this optimism, there has been a reduction in related patent filings, and the number of cell and gene therapy deals in the pharmaceutical industry fell by 38% in Q2 2024 compared to the same time in 2023. Nevertheless, the sector is appealing and should not be disregarded by possible investors. Given this, we will take a look at some of the best cheap pharmaceutical stocks according to analysts.
A closeup of pills in a pharmacy, representing the high quality medications of the company.
Our Methodology
Our methodology involved selecting stocks with a market capitalization exceeding $3 billion, a P/E ratio below 40, and a price target upside of more than 10%. We then ranked these stocks based on their upside potential, as of February 17.
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 363.5% since May 2014, beating its benchmark by 208 percentage points (see more details here).
Here is our list of the 10 cheap pharmaceutical stocks to buy according to analysts.
10. Sanofi (NASDAQ:SNY)
Price Target Upside: 10.09%
Sanofi (NASDAQ:SNY) is a global healthcare company headquartered in Paris, France. It specializes in medical treatments for neurology, immunology, oncology, rare diseases, diabetes, and cardiovascular conditions, along with vaccines for influenza, meningitis, and travel-related diseases. It is often considered a cheap pharmaceutical stock due to its strong financial performance and growth potential.
Sanofi (NASDAQ:SNY) reported €41.1 billion in total sales for FY 2024, representing an 11.3% growth at constant currency rates (CER). Beyfortus, a new RSV vaccine for newborns, achieved blockbuster status with €1.7 billion in its first full year, while Dupixent produced almost €13 billion. Despite a 1.8% drop in reported terms, SNY’s EPS increased 4.1% at CER to €7.12, exceeding the forecast. Additionally, the business suggested a €3.92 dividend for 2024, which would be the 30th straight year of growth.
Sanofi (NASDAQ:SNY) anticipates that revenues will rise by a mid-to-high single-digit percentage in 2025 and that company profitability will rise by about 10% before share buybacks. Additionally, the business intends to cancel shares by repurchasing €5 billion worth of shares, mostly through open market acquisitions and block trades.
9. Amgen Inc. (NASDAQ:AMGN)
Price Target Upside: 10.68%
Amgen Inc. (NASDAQ:AMGN) is a pharmaceutical company that discovers, develops, manufactures, and markets human therapeutics. It provides patients with complicated tumors with innovative treatments, particularly in regions where there are a lot of unmet needs. The corporation had 14 medications at the end of fiscal Q4 2024, each of which had an annualization of over $1 billion. Over the course of the decade, a number of them are anticipated to be important growth drivers for the business.
The medications EVENITY, which targets osteoporosis in postmenopausal women, and Repatha, which addresses heart disease and cholesterol, are consistently generating significant growth for Amgen Inc. (NASDAQ:AMGN). Repatha has grown into a commodity worth billions of dollars. Its expansion is also being driven by heart disease, which is the world’s top cause of mortality.
Additionally, Amgen Inc. (NASDAQ:AMGN) has a robust rare illness portfolio that is anticipated to grow in 2025 with the possible international regulatory approval of TEPEZZA, the first and only FDA-approved medication for the treatment of Thyroid Eye illness (TED). It is anticipated that the company’s rare disease business will continue to grow as additional indications for UPLIZNA, which treats neuromyelitis optica spectrum disorder (NMOSD), are introduced.
Given that the company’s October 2023 acquisition of Horizon Therapeutics is anticipated to pay off over the following five years, analysts are optimistic about the stock. In its investor letter for Q2 2024, PGIM Jennison Health Sciences Fund said the following about Amgen Inc. (NASDAQ:AMGN):
“Amgen Inc. (NASDAQ:AMGN) is a large-cap global biotech company with a diverse portfolio of marketed and pipeline products. Amgen’s discovery pipeline has 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.”
8. Novartis AG (NYSE:NVS)
Price Target Upside: 17.30%
Novartis AG (NYSE:NVS) is a Swiss global healthcare company that develops prescription medicines across multiple therapeutic areas, including cardiovascular, immunology, neuroscience, oncology, and ophthalmology.
In a deal valued at much to $3.1 billion, Novartis AG (NYSE:NVS) announced on February 11, 2025, that it would repurchase Anthos Therapeutics and recover the rights to abelacimab, which is a drug that may be a breakthrough in the prevention of blood clots and strokes. The medicine was first licensed from Novartis by Blackstone Life Sciences in 2019, and the company invested $250 million in clinical trials to support its development. To acquire complete control, the business is paying $925 million upfront, with potential further payments contingent on future milestones.
With net income rising 26% to $3.93 billion in Q4 2024, Novartis AG (NYSE:NVS) exceeded Wall Street’s forecasts. The business now anticipates sales growth of at least 5% until 2029. With its emphasis on pharmaceuticals, the company also achieved a record-high free cash flow of $16.3 billion, up 24%. As one of the cheap pharmaceutical stocks with strong financials, the company continues to reward investors by raising its dividend by 6% to CHF 3.50 per share, marking 28 years of consecutive increases, and expects to repurchase $5.4 billion worth of shares in 2025.
In the third quarter, 24 hedge funds owned shares in Novartis AG (NYSE:NVS), up from 30 funds in the previous quarter, according to Insider Monkey’s database. The largest shareholder in the business was Renaissance Technologies, owned by Jim Simons, with 2.30 million shares valued at $264.6 million.
7. AstraZeneca PLC (NASDAQ:AZN)
Price Target Upside: 21.98%
British pharma giant, AstraZeneca PLC (NASDAQ:AZN) is placed 7th on our list of cheap pharmaceutical stocks. The business creates pharmaceuticals for uncommon, metabolic, cardiovascular, renal, and oncological conditions. BofA reaffirmed its Buy recommendation for the stock on February 12th, citing a £145 price objective. Based on the stock’s value, which is deemed attractive at roughly 14 times its anticipated 2026 profits per share, the company has a bright outlook. BofA believes that the stock may rise to 18 times its projected 2026 P/E due to mid-term guidance that points to a high single-digit compound annual growth rate for sales.
The net cash flow from operating activities of AstraZeneca PLC (NASDAQ:AZN) increased by $1.5 billion in 2024. The $2.2 billion in capital expenditures was in line with the anticipated 50% increase over 2023. While paying off approximately $7 billion in debt, the corporation also grew through strategic acquisitions, such as Fusion, Icosavax, and Amolyt. The business also increased its dividend to $3.10 per share in 2024 and aims to boost it again to $3.20 in 2025. With solid growth momentum despite significant hurdles, the company anticipates that overall sales will expand at a high single-digit rate in 2025, while core EPS will climb by a low double-digit percentage.
In Q3 2024, 42 hedge funds owned AstraZeneca PLC (NASDAQ:AZN), compared to 49 funds the previous quarter, according to data from Insider Monkey.
6. Pfizer Inc. (NYSE:PFE)
Price Target Upside: 25.03%
Pfizer Inc. (NYSE:PFE) is a global biopharmaceutical company that manufactures, develops, markets and sells biopharmaceutical products worldwide. In developing and emerging markets, it promotes wellness, prevention, treatment, and cures. The company wants to become a leading cancer organization in the globe. With intentions to keep improving over the next ten years, it is currently the third-largest biopharma firm in the US for cancer.
With the addition of multiple new blockbuster medications to its portfolio as part of its 2030 targets, Pfizer Inc. (NYSE:PFE) is concentrating on its oncology pipeline for future growth. It is anticipated that the business will keep searching for chances to buy out promising pharmaceutical firms to expand its pipeline. It spent a large amount of its pandemic profits on the $43 billion purchase of the oncology-focused biotech business Seagen.
Pfizer Inc. (NYSE:PFE) is seeing good results from this approach, as management projects earnings growth of 10% to 18% in 2025. Additionally, analysts predict that over the next three to five years, the company’s earnings will increase by about 14% yearly. In addition, it offers a larger dividend yield than the majority of blue-chip companies, at an alluring 6.3%. Its management recently announced a 2.4% increase in its quarterly dividend in early December, reaffirming its intention to support and grow this dividend on a recurrent basis.
5. GSK plc (NYSE:GSK)
Price Target Upside: 29.94%
GSK plc (NYSE:GSK), formerly known as GlaxoSmithKline, is a global pharmaceutical and healthcare corporation based in the United Kingdom that creates and distributes a variety of medications, vaccines, and consumer health items. With more than 20 vaccines in its portfolio, the firm is a leader in immunology, respiratory therapies, and vaccines. It creates cancer treatments for multiple myeloma, ovarian cancer, and endometrial cancer in addition to other drugs.
GSK plc (NYSE:GSK) reported impressive financial results for Q4 2024, demonstrating solid growth across key metrics. Sales increased by 8% to over £31 billion in 2024. Additionally, core operating profit rose by 13%, while core earnings per share (EPS) grew by 12%.
The company’s strong performance was primarily driven by its Specialty Medicines segment, which saw a 19% increase in sales. Notably, Oncology sales nearly doubled to more than £1.4 billion, while HIV sales grew by 13% for the full year.
GSK plc (NYSE:GSK)’s pipeline continues to strengthen, with 11 positive phase III trials reported in 2024. The company anticipates five new product approvals in 2025, including Blenrep for multiple myeloma and depemokimab for severe asthma. This robust pipeline supports GSK’s long-term growth prospects, with the company raising its 2031 sales target to over £40 billion.
4. Organon & Co. (NYSE:OGN)
Price Target Upside: 36.13%
Organon & Co. (NYSE:OGN) is a global healthcare and pharmaceutical company that is primarily focused on improving women’s health and well-being and it stands fourth on our of cheap pharmaceutical stocks. Bacterial vaginosis, breast cancer, contraception, endometriosis, menopause, polycystic ovarian syndrome (PCOS), and postpartum hemorrhage (PPH) are among the topics that are the focus of the company’s portfolio and innovation pipeline. The company offers more than 60 goods and treatments for women’s health, biosimilars, and a large portfolio of well-known drugs in several therapeutic areas.
Organon & Co. (NYSE:OGN) has a solid product portfolio and is constantly looking to improve what it has to offer. Nexplanon, the biggest product of the company, is anticipated to bring in $1 billion by 2025. With the October 2024 acquisition of Dermavant Sciences Ltd., the business expanded its immuno-dermatology portfolio with cutting-edge therapies like VTAMA, opening up new growth prospects. The company recently announced that the FDA had approved VTAMA (tapinarof) cream for the treatment of atopic dermatitis in adults and children two years of age and up.
While promoting expansion, the corporation has also kept operating expenses under control. In 2024, Organon & Co. (NYSE:OGN) wants to generate about $1 billion in free cash flow. The business had already produced around $700 million in free cash flow as of November. Its dividend payments are supported by its robust cash flow, which also gives it the freedom to invest in high-potential assets. In order to demonstrate the company’s dedication to providing value to shareholders while also concentrating on future expansion, the Board of Directors announced a quarterly dividend of $0.28 per share.
3. Merck & Co., Inc. (NYSE:MRK)
Price Target Upside: 46.72%
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 division sells vaccinations and pharmaceuticals for human health, which usually include both preventative and therapeutic ingredients. A variety of vaccinations and veterinary pharmaceutical products are developed, discovered, produced, and marketed by its Animal Health sector.
The company’s sales outlook is being adversely affected by certain factors. For example, because of low discretionary spending, it has temporarily halted the distribution of its HPV vaccine Gardasil to China until the middle of 2025. Merck & Co., Inc. (NYSE:MRK) maintains excellent operations despite these short-term difficulties, which are bolstered by high demand for its inventive and varied portfolio. The company’s Keytruda cancer treatment medication is doing well, and the introduction of Winrevair, a medication for pulmonary arterial hypertension (PAH), is also helping to increase revenue growth.
Merck & Co., Inc. (NYSE:MRK) has a competitive edge in the market due to its pipeline, which includes over 20 novel growth drivers with blockbuster potential. Its late-stage pipeline in cardiometabolic, cancer, and infectious disorders further supports its prospects for the future. The firm is positioned as an appealing investment with a strong long-term development trajectory because of its innovative pipeline, diversified portfolio, and good commercial execution, which provide it resilience against short-term setbacks.
The investment management firm GreensKeeper Asset Management published its investor letter for the third quarter. The fund said the following:
“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.”
2. Biogen Inc. (NASDAQ:BIIB)
Price Target Upside: 60.66%
Biogen Inc. (NASDAQ:BIIB) is a leading biotechnology company focused on developing and commercializing therapies for neurological and neurodegenerative diseases, including multiple sclerosis, Alzheimer’s disease, and spinal muscular atrophy.
Biogen Inc. (NASDAQ:BIIB)’s Q4 2024 earnings call on February 12, 2025, highlighted key financial trends. While total revenue declined by $160 million, the core pharmaceutical business grew for the first time in four years, driven by four new product launches: Leqembi (Alzheimer’s), Skyclarys (Friedreich’s ataxia), Zurzuvae (postpartum depression), and Qalsody (ALS). These products offset declining MS revenue, with Leqembi seeing strong growth in Asia, Skyclarys doubling patient numbers, and Zurzuvae exceeding expectations. Biogen Inc. (NASDAQ:BIIB) also streamlined operations to cut costs while reinvesting in growth, leveraging strong cash flow for future opportunities.
As of Q3 2024, 49 hedge funds held shares in Biogen Inc. (NASDAQ:BIIB), as tracked by the Insider Monkey database. The largest stakeholder was Vanguard Group Inc with stakes worth $2.5 billion.
1. Novo Nordisk A/S (NYSE:NVO)
Price Target Upside: 81.93%
Novo Nordisk A/S (NYSE:NVO) is recognized as a global healthcare company specializing in diabetes care. The two business segments that comprise its operations are biopharmaceuticals and diabetes and obesity care. GLP-1, insulin, and other products related to proteins are covered in the latter section. In the GLP-1 weight reduction industry, Novo Nordisk A/S (NYSE:NVO) and Eli Lilly are the two main pharmaceutical companies that compete.
The company is developing a new oral weight reduction tablet that, if approved, may revolutionize the market, even though both companies have authorized weight loss medications that dominate the market with billions of dollars in revenue. In the upcoming months, Novo Nordisk A/S (NYSE:NVO) intends to submit a regulatory approval application for its oral weight reduction medication in the United States, according to CEO Lars Fruergaard Jørgensen. If the business gets approved, it might be able to start selling the medication as early as next year, which is also when Eli Lilly intends to introduce its medication for weight reduction.
Aside from any excitement for this oral medication for weight loss, Novo Nordisk A/S (NYSE:NVO) is operating on solid foundations. The corporation had a successful fiscal year in 2024, as its sales increased by 25% to $40.6 billion. In August, it paid out an interim dividend of DKK 3.50, increasing its total dividend per share by 21.3% to DKK 11.40. For the 29th year in a row, NVO has increased its dividend. At constant currency rates, Novo Nordisk A/S (NYSE:NVO) anticipates a free cash flow of approximately DKK 75 to 85 billion and revenue growth of 16–24% in 2025.
Overall, NVO ranks first among the 10 cheap pharmaceutical stocks to buy according to analysts. While we acknowledge the potential of NVO as an investment, our conviction lies in the belief that 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 NVO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
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.
