In this article, we will be taking a look at the 12 most profitable pharmaceutical stocks right now.
The Pharmaceutical Industry: Growth, Innovation, and Emerging Challenges
Healthcare, which includes numerous businesses that offer patient care, conduct research and development of novel treatments, and design, produce, and distribute diagnostic tools and tests, takes the term “defensive” a step further than practically any other industry. Improvements in medical technology, medications, and therapeutic approaches have changed the course of patient care. As the need for quick results has grown, pharmaceutical corporations in particular have drawn much attention. Global pharmaceutical manufacturing was estimated to be worth $516.48 billion in 2022, according to a Grand View Research analysis. From 2023 to 2030, the industry is expected to expand at a compound annual growth rate (CAGR) of 7.63%.
The biopharma industry now has the most extensive and varied clinical pipeline, 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. To identify the optimum medicine combinations, generative AI, for instance, helps researchers identify illness patterns in large data sets and explore a far greater number of possible compounds than traditional approaches can. 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-1 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 of additional participants entering the field is growing along with the possible applications of GLP-1s.
The pharmaceutical industry faces challenges despite appearing robust. Biotech and pharma funding dropped 48.6% in 2022 compared to 2021, with IPO proceeds also declining amid market volatility. While 2020 and 2021 saw drug-developer IPOs raise $46.5 billion, surpassing the previous eight years combined, investor caution has increased. In 2024, drug developers raised $2 billion through IPOs by September 3, a 24% year-over-year increase. However, two-thirds of these funds came early in the year, with proceeds falling sharply later, reducing their share of U.S. IPO proceeds from 17% in February to 6.5%.
In his October 7 remarks, Tim Hunt, CEO of the Alliance for Regenerative Medicine, highlighted increased 2024 investment in cell and gene therapies, noting that 13 of the 15 largest pharma companies are active in this space. With numerous patents expiring, these therapies offer potential revenue opportunities. However, Q2 2024 saw a 38% drop in cell and gene therapy deals compared to 2023, alongside fewer patent applications. Despite these challenges, the field remains a strong investment prospect.
A closeup of pills in a pharmacy, representing the high quality medications of the company.
Our Methodology
Our methodology focuses on identifying high-growth stocks by applying a rigorous Stock Analysis filter. We considered companies with positive net income growth for 5 years and then ranked them accordingly. We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 900 as of Q3 2024.
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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Here is our list of the 12 most profitable pharmaceutical stocks right now.
12. Novartis AG (NYSE:NVS)
Net Income Growth 5Y: 8.32%
Novartis AG (NYSE:NVS) is a leading global healthcare company based in Switzerland, recognized for its innovative pharmaceutical products and commitment to improving patient outcomes. The company primarily focuses on developing and manufacturing prescription medications across various therapeutic areas, including oncology, cardiovascular diseases, immunology, and neuroscience.
In the third quarter of 2024, Novartis AG (NYSE:NVS) reported a 10% increase in net sales. This growth was fueled by strong demand for key products, including Entresto and Cosentyx, which saw sales increases of 26% and 28%, respectively. The company also achieved a 20% rise in core operating income, with a core margin climbing to 40.1%, marking a 340 basis point improvement year-over-year. Core earnings per share (EPS) rose to $2.06, reflecting an increase of 20% compared to the previous year.
For the first nine months of 2024, Novartis AG (NYSE:NVS) reported an 11% growth in net sales and a similar 20% increase in core operating income. The core EPS for this period was $5.83, up 21%, and free cash flow reached a record $12.6 billion, up 15% year-over-year. The company recently received FDA approval for early breast cancer treatment, which could potentially triple its addressable market.
As tracked by the Insider Monkey database, 24 hedge fund holders held shares in Novartis AG (NYSE:NVS) in Q3 2024, with Renaissance Technologies being the largest stakeholder with shares worth roughly $264.6 million.
11. AbbVie Inc. (NYSE:ABBV)
Net Income Growth 5Y: 9.47%
AbbVie Inc. (NYSE:ABBV) is a global biopharmaceutical company that specializes in the development, manufacture, and marketing of a wide range of pharmaceutical products. The company focuses on several key therapeutic areas, including immunology, hematologic oncology, aesthetics, neuroscience, eye care, and other key products.
AbbVie Inc. (NYSE:ABBV) reported strong Q3 2024 results, surpassing market expectations with EPS of $3, above the forecasted $2.92. This performance led the company to raise its full-year EPS guidance to $10.90–$10.94. Their revenue growth was also robust, exceeding expectations by $260 million which was driven by an 18% increase in the ex-Humira platform.
The company’s key products like Skyrizi and Rinvoq excelled, with combined sales expected to exceed $17 billion in 2024. Skyrizi’s sales rose 51.5% to $3.2 billion, while Rinvoq grew 47.4% to $1.6 billion. AbbVie Inc. (NYSE:ABBV)’s oncology sector saw an 18.2% growth in Venclexta sales, while neuroscience revenues increased 16% which was supported by Vraylar and Botox Therapeutic. Aesthetics also grew modestly, with Botox Cosmetic sales up 6.5% in the U.S.
AbbVie Inc. (NYSE:ABBV)’s revenue drivers include the strong performance of key products like Skyrizi and Rinvoq, strategic acquisitions like Cerevel Therapeutics enhancing the neuroscience pipeline, and recent regulatory approvals for treatments like Vyalev and Botox. These factors, alongside pipeline advancements and global market expansion, make AbbVie Inc. (NYSE:ABBV) stand among the most profitable stocks in the pharmaceutical sector.
Street analysts hold a consensus Moderate Buy rating on the stock, with an average 12-month price target of $205.82. The projections range from a high of $240 to a low of $165, indicating a potential 12.42% upside from the current price of $183.08.
10. Zoetis Inc. (NYSE:ZTS)
Net Income Growth 5Y: 10.71%
Zoetis Inc. (NYSE:ZTS) is a global animal health company that focuses on the discovery, development, manufacture, and commercialization of medicines, vaccines, and diagnostic products and services for animals. Essentially, the company creates and sells a wide range of products designed to improve the health and well-being of both companion animals (like dogs and cats) and livestock (such as cattle, pigs, and poultry).
Zoetis Inc. (NYSE:ZTS) reported strong financial results for Q3 2024, showcasing a 14% operational revenue growth. U.S. revenue rose by 15%, while international revenue increased by 13% which was driven by the company’s innovative companion animal portfolio, which grew 15% operationally, and an 11% operational increase in the livestock segment. The corporation’s total revenue reached $2.4 billion, with growth split between an 8% contribution from volume and 6% from price increases.
Zoetis Inc. (NYSE:ZTS)’s key drivers included Zoetis’ osteoarthritis pain franchise, with Librela and Solensia generating $151 million in global revenue, the Simparica franchise adding $333 million, and the dermatology franchise contributing $449 million. These products underline the company’s focus on addressing unmet needs in the animal health market.
Zoetis Inc. (NYSE:ZTS)’s profitability was also a highlight, with adjusted net income growing 15% operationally to $716 million. This reflects the company’s ability to efficiently convert revenue growth into profits through strong operational and pricing strategies.
Over the years, Zoetis has demonstrated consistent double-digit operational revenue growth, supported by innovative products like Librela, which became the fourth-largest U.S. pet care product within 11 months of its launch, and Simparica Trio, the top vet-prescribed parasiticide. These successes underline Zoetis’ market leadership and ability to drive long-term growth.
As of Q3 2024, 62 hedge funds included Zoetis Inc. (NYSE:ZTS) in their portfolios, according to data from the Insider Monkey database. Reflecting this positive sentiment, analysts have given the stock a consensus Strong Buy rating.
9. SIGA Technologies, Inc. (NASDAQ:SIGA)
Net Income Growth 5Y:
SIGA Technologies, Inc. (NASDAQ:SIGA) is a commercial-stage pharmaceutical company that specializes in the health security market, particularly in the United States. It is one of the best profitable stocks in the pharmaceutical industry.
In the third quarter of 2024, SIGA Technologies, Inc. (NASDAQ:SIGA) reported strong financial performance which was driven by robust procurement orders and diverse revenue sources. The company secured $122 million in procurement orders, surpassing the previous year’s performance. Key revenue drivers included $53 million in product sales, with $23 million from oral TPOXX and $17 million from IV TPOXX sales to the US Government, as well as $12 million from international sales. SIGA Technologies, Inc. (NASDAQ:SIGA) also earned $4 million in research and development revenues.
The growth is primarily attributed to increased demand for TPOXX, its antiviral drug for smallpox and orthopoxviruses, with a $112.5 million order from the US Government under the 19C contract. The corporation achieved a pre-tax operating income of $13 million which is a notable improvement from a loss last year, and net income of $13 million for the nine months ending September 30, 2024, with a fully diluted income per share of $0.19.
Looking ahead, SIGA Technologies, Inc. (NASDAQ:SIGA) is preparing for a new long-term agreement with the US Government in 2025 and is expanding internationally, with a recent sale of TPOXX to Morocco marking its entry into Africa. Additionally, the company is developing monoclonal antibodies in collaboration with Vanderbilt University which is supported by funding from the US Department of Defense, which could open new growth opportunities.