In this article, we will be taking a look at the 10 innovative healthcare stocks to watch in 2025.
In the US, healthcare costs and prices have been increasing. According to the Centers for Medicare & Medicaid Services, U.S. healthcare spending increased 7.5% from 2022 to $4.9 trillion in 2023. In 2023, the healthcare industry made up 17.6% of the US economy, an increase of 17.4% from 2022. The growth of Medicare and private health insurance is the two leading causes of this increase.
Impact of Tariffs on the US Healthcare Industry and China Relations
The impact of tariffs on this continuing trend has become a significant bone of contention in the healthcare industry as more and more US corporations turn to China for agreements on the next breakthrough chemical, whether in the areas of obesity or cancer. Carlo Rizzuto, managing director of Versant Ventures, spoke on CNBC’s “Fast Money” on February 7 about the impact of tariffs on healthcare. Rizzuto says that tariffs may impact the sector in two ways. Products made in China and sold in the US or other countries would be the first. The industry would need to watch how the tariffs are used in the market to comprehend how they would impact such trade operations.
Second, and more precisely, the US healthcare industry relies heavily on China as a basis for contract production and research. Consequently, anything that raises that price is probably going to make the market more difficult. Cost hikes won’t help the healthcare industry’s management, which is already under pressure from investors.
Speaking on China’s enormous impact in the pharmaceutical and healthcare sectors, Rizzuto said that the vast majority of healthcare companies use a Chinese CRO or manufacturing partner in some capacity during the research and development phase. As a result, it significantly affects how the nation’s biotech and pharmaceutical industries function. This trend is rather common in businesses of all sizes.
In other words, the lack of infrastructure to facilitate the transfer prevents healthcare corporations from reshoring all of their externalized R&D and production to the United States. Therefore, it is hard to imagine how such a large-scale reshoring might occur. The amount of tariffs imposed can be used to determine the expenses of achieving this objective linearly.
According to McKinsey, healthcare EBITDA will rise from a starting point of $676 billion in 2023 to $987 billion in 2028 at a 7% CAGR. Recovery from post-pandemic lows is anticipated to spur progress in several areas, even though development is anticipated to be faster in some (such as specialized pharmacy and HST). Software platforms are essential to the healthcare ecosystem because they let payers and providers operate more effectively in a complex environment.
By automating procedures, fostering data connectivity, and producing actionable insights, technological innovation (such as generative AI and machine learning) keeps providing opportunities for stakeholders from all industries. McKinsey predicts that increased utilization and pipeline expansion (as in cancer) will result in a considerable increase in specialty pharmacy income. Specialty pharmacy profit pools are continuing to grow as a result of the rise in the use of specialty medications.
With this in mind, we will now have a look at the 10 innovative healthcare stocks to watch in 2025.
A healthcare professional in a meeting with a patient discussing care options using digital technology.
Our Methodology
For this article, we began by screening the top holdings of the iShares U.S. Healthcare ETF (IYH) to focus on prominent companies within the U.S. healthcare sector. From this list, we selected the top 10 holdings based on their weight in the ETF portfolio. We then ranked these stocks according to the number of hedge funds holding positions in each company as of Q4 2024, based on data from Insider Monkey’s hedge fund tracking database.
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).
Here is our list of the 10 innovative healthcare stocks to watch in 2025.
10. Abbott Laboratories (NYSE:ABT)
Number of Hedge Fund Holders: 66
Abbott Laboratories (NYSE:ABT) discovers, develops, manufactures, and sells healthcare products. The company’s business segments include medical equipment, well-known pharmaceutical items, diagnostic products, and nutritional products. Its established pharmaceutical items business sells a wide variety of branded generic pharmaceutical products abroad. Products about electrophysiology, neuromodulation, structural heart, heart failure, rhythm management, and diabetes care are sold all over the world by the Medical Devices division.
The main business of Abbott Laboratories (NYSE:ABT) highlights several growth opportunities. The company’s FreeStyle Libre franchise, which offers a range of continuous glucose monitoring (CGM) devices and has the potential to grow its market share, has been one of its main growth engines in the diabetes care sector. The company’s cardiovascular products, especially its structural heart portfolio, should provide long-term growth as the world’s population ages.
In fiscal Q4 2024, the company’s operating cash flow was $8.5 billion, which it used to pay down debt, expand capacity, and distribute $5 billion in dividends and share repurchases to shareholders. Abbott Laboratories (NYSE:ABT) is in a strong position to generate strong growth in fiscal 2025, with an organic sales growth estimate of 7.5% to 8.5%. Its diverse business and industry knowledge, along with its creative skills, provide it with a competitive edge in the market, making it one of the best healthcare stocks to consider for long-term growth.
9. Amgen Inc. (NASDAQ:AMGN)
Number of Hedge Fund Holders: 72
Amgen Inc. (NASDAQ:AMGN) discovers, develops, manufactures, and markets human therapeutics. Especially in areas where many unmet needs exist, it offers patients complex, cutting-edge treatments. After fiscal Q4 2024, the company had 14 pharmaceuticals with annualizations of more than $1 billion each. Several of these are expected to be significant growth drivers for the company over the next ten years.
Furthermore, TEPEZZA, the first and only FDA-approved drug for the treatment of Thyroid Eye Disease (TED), may receive international regulatory clearance in 2025, adding to Amgen Inc. (NASDAQ:AMGN)’s strong rare illness portfolio. With the introduction of new indications for UPLIZNA, a treatment for neuromyelitis optica spectrum disorder (NMOSD), the company’s rare illness business is expected to continue to grow, making it one of the best healthcare stocks in the market.
Two drugs that continuously contribute to Amgen Inc. (NASDAQ:AMGN)’s strong growth are EVENITY, which treats osteoporosis in postmenopausal women, and Repatha, which treats heart disease and cholesterol. The value of the product Repatha has increased to billions of dollars. The biggest cause of death worldwide, heart disease, is contributing to its rise. Analysts are hopeful about the company because of the expected five-year payout from its October 2023 acquisition of Horizon Therapeutics.
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 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. AbbVie Inc. (NYSE:ABBV)
Number of Hedge Fund Holders: 85
AbbVie Inc. (NYSE:ABBV) stands eighth on our list among the best healthcare stocks. It 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.
In addition to having solid fundamentals, it made $15.1 billion in fiscal Q4 2024, which was 5.6% higher than analysts had predicted. The company’s ex-Humira platform, a group of medications in its pharmaceutical portfolio, was credited with this expansion. The platform increased sales by over 18% throughout the course of the year, and in fiscal Q4 2024, revenue growth accelerated to 22%.
Because of its two popular medications, Skyrizi and Rinvoq, analysts are upbeat about AbbVie Inc. (NYSE:ABBV)’s growth. By 2027, the yearly sales of these medications—which treat inflammatory bowel disorders, psoriatic illnesses, rheumatology, and dermatology—are expected to surpass $27 billion. In addition, the business declared a 5.8% dividend increase that would take effect in February 2025, carrying on the company’s 52-year dividend growth pattern.
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 over 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.”
7. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 91
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. Vaccines and pharmaceutical goods for human health, which usually include therapeutic and preventive substances, are available through its pharmaceutical section. Its Animal Health division creates, finds, produces, and sells a variety of vaccinations and veterinary medications.
Merck & Co., Inc. (NYSE:MRK)’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. The business 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.
Asad Haider, a Goldman Sachs analyst, remained optimistic about the stock and rated it as a Buy on April 8. The analyst feels that Merck & Co., Inc. (NYSE:MRK)’s Animal Health division, which makes a substantial amount of money and is expected to expand in the future, is being undervalued by the present market valuation, which is unduly gloomy. The analyst believes that this offers investors a mispricing opportunity.
6. Intuitive Surgical, Inc. (NASDAQ:ISRG)
Number of Hedge Fund Holders: 95
Intuitive Surgical, Inc. (NASDAQ:ISRG) is a California-based company. It develops and markets technologies that help physicians and healthcare providers improve the quality and accessibility of minimally invasive care in the US and globally. With an Outperform rating and a price target of $641 for the shares, RBC Capital Markets reiterated its optimistic outlook on the stock on January 24. The company’s impressive 2024 fourth-quarter performance was well-received by analysts.
With 84% of its revenue coming from recurring services, Intuitive Surgical, Inc. (NASDAQ:ISRG) reported $8.4 billion in 2024, a 17% increase over 2023. While operating costs stayed within the lower end of their projected range, product margins increased as a result of increased shipment volumes, improved plant utilization, and cost savings in logistics, shipping, and components. This led to a 29% increase in net income over the prior year.
Intuitive Surgical, Inc. (NASDAQ:ISRG)’s revenue for the fourth quarter increased by 25% year over year to $2.41 billion. A 19% increase in da Vinci system placements, a higher average selling price, and a wider variety of purchases were the main drivers of the 36% growth in systems revenue. The corporation’s cash and investment holdings increased from $8.3 billion in the third quarter to $8.8 billion by the end of the year. This rise was caused by operating cash flow, which was somewhat offset by capital expenditures of $312 million.
To further its goal of minimizing illness and suffering globally, Intuitive Surgical, Inc. (NASDAQ:ISRG) announced on January 27 that it would donate $45 million to the Intuitive Foundation. The money will go toward teaching, research, and charitable endeavors that enhance patient outcomes. With this commitment, the business has given the Foundation more than $170 million since its founding in 2018, making Intuitive Surgical, Inc. (NASDAQ:ISRG) one of the best healthcare stocks to watch in the industry.
5. Boston Scientific Corporation (NYSE:BSX)
Number of Hedge Fund Holders: 96
The fifth stock on our list of the best healthcare stocks is Boston Scientific Corporation (NYSE:BSX). It is a Massachusetts-based company that specializes in developing, manufacturing, and distributing medical devices for interventional procedures worldwide. It is divided into two sections: Cardiovascular and MedSurg. Citing the company’s impressive fourth-quarter earnings, Canaccord Genuity raised the price objective from $101 to $117 on February 6 and kept its Buy rating on the shares.
In the fourth quarter of 2024, Boston Scientific Corporation (NYSE:BSX) recorded net sales of over $4.6 billion, a 22.4% increase over the same time the previous year. Compared to $504 million, or $0.34 per share, in the previous year, GAAP net income attributable to common stockholders increased to $566 million, or $0.38 per share. Adjusted EPS for Q4 increased from $0.55 to $0.7. Net sales for 2024 as a whole came to $16.75 billion, representing a 17.6% increase over the previous year.
Boston Scientific Corporation (NYSE:BSX) announced on March 3 that it has reached a final deal to buy the privately held medical device startup SoniVie Ltd. The TIVUS Intravascular Ultrasound System, an experimental device created by SoniVie, is intended to treat hypertension disorders by targeting the nerves that surround blood vessels.
4. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 98
Johnson & Johnson (NYSE:JNJ) develops, manufactures, and sells a range of products in the healthcare field through its subsidiaries. The business is divided into two segments: Innovative Medicine and MedTech, with a primary focus on goods about human health and well-being. Infectious diseases, immunology, neuroscience, metabolic and cardiovascular disorders, pulmonary hypertension, and oncology are among the therapeutic specialties covered by its Innovative Medicine division. A wide variety of medical devices and products utilized in the domains of cardiovascular intervention, orthopedics, interventional solutions, surgery, and vision are included in the MedTech section.
The foundation of Johnson & Johnson (NYSE:JNJ) is solid. For fiscal year 2024, it recorded sales of $88.8 billion, a 4.3% increase over the previous year. The company’s high-growth strategy is reflected in these impressive outcomes. Its cash flow from operations is sufficient to pay its high-yielding dividend, and its financial sheet is sound.
The corporation announced on January 13 that it will acquire neurological medication manufacturer IntraCellular for $14.6 billion. Through this acquisition, the business will have access to Caplyta, an oral medication used to treat schizophrenia and bipolar disorder.
Asad Haider, an analyst at Goldman Sachs, returned to coverage of Johnson & Johnson (NYSE:JNJ) on April 9 with a Buy rating and a $172.00 price target. Morgan Stanley maintained its Equal Weight rating on the company’s shares while increasing its price objective from $163 to $164.
3. Thermo Fisher Scientific Inc. (NYSE:TMO)
Number of Hedge Fund Holders: 100
Thermo Fisher Scientific Inc. (NYSE:TMO) provides analytical instruments, reagents, equipment, software, and other services for analysis, research, diagnostics, and discovery. Analytical Instruments, Life Sciences Solutions, Laboratory Products and Services, and Specialty Diagnostics are its four business divisions.
Thermo Fisher Scientific Inc. (NYSE:TMO) is growing steadily, and in fiscal Q4 2024, it recorded $11.4 billion in revenue, which is a 5% increase from the previous year. Given that it produced more than $7.3 billion in free cash flow in fiscal 2024, its solid cash position further enhances its reputation. After growing its dividends for eight years in a row, the business also has a high dividend yield. Its potential to provide value to shareholders was demonstrated by the 250% outperformance of the sector median over two years.
Thermo Fisher Scientific Inc. (NYSE:TMO) has a competitive market position because of its long-standing client connections, high switching costs, and leadership in the life sciences, positioning itself among the best healthcare stocks. Its tools and supplies are particularly helpful in the development of new drugs. In the upcoming years, it’s management anticipates high-single-digit revenue growth, and the company anticipates continuing its steady expansion.
Because of its recent strategic acquisition of SOLV’s Purification and Filtration business, which was valued at $4.1 billion, analysts are optimistic about the stock. According to its long-term growth strategy, the acquisition is expected to improve Thermo Fisher Scientific Inc. (NYSE:TMO)’s reputation in the bioprocessing industry, particularly infiltration. Puneet Souda, an analyst at Leerink Partners, gave the business a Buy recommendation on February 27 and has remained bullish about it. Due to several circumstances surrounding its purchase of SOLV’s Purification and Filtration division, he has assigned the stock this rating. The analyst predicts that the deal will become accretive over time, with a good return on invested capital by the fifth year.
2. Eli Lilly and Company (NYSE:LLY)
Number of Hedge Fund Holders: 115
Eli Lilly and Company (NYSE:LLY), a global pharmaceutical company based in Indianapolis, develops and markets medications across the US, Europe, Japan, China, and other regions. The company said on February 26 that it would invest at least $27 billion to construct four new manufacturing facilities in the US to meet the increasing demand for its diabetes and weight loss medications and to further the development of new drugs.
Eli Lilly and Company (NYSE:LLY) had a great year in 2024, exceeding its initial projection by $4 billion and seeing a 32% increase in annual revenue over the previous year. Revenue increased by 45% in just the fourth quarter due to the success of recently released items, which brought in over $3.1 billion. Mounjaro and Zepbound were particularly well-liked. Along with strong growth in immunology, neuroscience, and oncology, the business also witnessed a 20% gain in revenue from its non-incretin portfolio. A positive product mix helped the gross margin increase to 83.2% in the fourth quarter. Investments in early and late-stage initiatives resulted in an 18% increase in research and development costs. Due to its robust sales of new items, operating income more than doubled to $5.6 billion.
Eli Lilly and Company (NYSE:LLY) declared on February 28 that Jaypirca (pirtobrutinib), a reversible Bruton’s tyrosine kinase (BTK) inhibitor, has been recommended for approval by the European Medicines Agency’s (EMA) Committee for Medicinal Products for Human Use. Adults with relapsed or refractory chronic lymphocytic leukemia who have already taken a BTK inhibitor are the target population for this treatment. The recommendation is currently awaiting the final evaluation by the European Commission, which may be a major impetus for the company if it is approved.
1. UnitedHealth Group Incorporated (NYSE:UNH)
Number of Hedge Fund Holders: 150
UnitedHealth Group Incorporated (NYSE:UNH) tops our list for being one of the best healthcare stocks. It operates in the healthcare sector in the US and globally, with four main segments: UnitedHealthcare, Optum Health, Optum Insight, and Optum Rx. The board of directors approved a $2.10 quarterly dividend per share on February 24.
In line with its previous forecasts, UnitedHealth Group Incorporated (NYSE:UNH) produced approximately $400 billion in revenue in 2024 and adjusted earnings per share of $27.66. Throughout the year, it concentrated on improving the customer experience, speeding up innovation, and honing its business plan for sustained expansion to solidify its position going forward. Over $16 billion was distributed to shareholders in the form of dividends and share repurchases, while over $17 billion was allocated to expansion initiatives. The company anticipates operational cash flow to be 1.2 times its net income in 2025, or around $33 billion.
Optum Rx, a division of UnitedHealth Group Incorporated (NYSE:UNH), announced modifications to its payment models on March 20 to better reflect pharmacy expenses impacted by manufacturer pricing. The changes go into effect right away, and they will be fully implemented by January 2028. More than 24,000 independent community pharmacies in Optum Rx’s non-affiliated network will profit from this change, which attempts to give customers more reliable and reasonably priced prices.
Overall, UNH ranks first among the 10 innovative healthcare stocks to watch in 2025. While we acknowledge the potential of healthcare companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than UNH but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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