In this article, we discuss the 15 best pharmaceutical stocks to invest in. If you want to skip our detailed analysis of these stocks, go directly to the 5 Best Pharmaceutical Stocks to Invest In.
After the Covid-19 pandemic hit, the pharmaceutical industry rapidly began the process of developing and testing vaccines and medicines for the new disease. Early on, Remdesivir – an anti-viral drug by Gilead Sciences, Inc. (NASDAQ: GILD) – was speculated to be a treatment for Covid-19. This expectation could be one of the reasons for the increase in the stock price of Gilead Sciences, Inc. (NASDAQ: GILD) in the period from March 2020 to July 2020. Although FDA approved Remdesivir in October 2020, the lower-than-expected pricing of Remdesivir announced by Gilead Sciences, Inc. (NASDAQ: GILD) in July 2020 seems to have reduced the company’s ability to generate a significant revenue stream from the drug.
Later in 2020, Moderna, Inc. (NASDAQ: MRNA), Pfizer Inc. (NYSE: PFE) and its German biotech partner BioNTech SE (NASDAQ: BNTX) received emergency use authorization for their two mRNA-based vaccines. In particular, the mRNA technology has made it easy to develop new vaccines as opposed to earlier technologies. These two companies are expected to bring in $60 billion in vaccine sales in 2021. Also, the loss of effectiveness of these vaccines 6 months after the administration of the second dose has prompted these drugmakers and others to develop booster shots. This Covid-19 booster market is expected to rival the $6 billion for annual flu shot sales with newer entrants like Johnson & Johnson (NYSE: JNJ) likely limiting the pricing power of the two mRNA vaccine producers.
Apart from the Covid-19 drugs and vaccines, there is a trend of increased research and development in the pharmaceutical industry for the last couple of decades. In its April 2021 report on Research and Development in the Pharmaceutical Industry, the Congressional Budget Office (CBO) notes that the pharmaceutical industry invested $83 billion in R&D in 2019, up from $38 billion in 2008 and $5 billion in 1980.
Moreover, CBO notes that, on average, 38 new drugs were approved each year from 2010 to 2019. This represents a 60% increase in new drug approvals from the previous decade. Between 2009 and 2019, the biggest increase in R&D spending was for oncology, diabetes, and autoimmune treatments.
In its report, Outlook for Global Medicines Through 2021: Balancing Cost and Value, QuintilesIMS Institute expects that new drug launches will reach historic levels in the next five year. It also notes that, on average, 45 new active substances (NAS) will annually come from more than 2000 drugs in the late-stage pipeline through 2021. These developments will likely be mainly oncology, diabetes, and autoimmune treatments.
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As the pharmaceutical industry has a historic number of new drugs and revenue streams, not all hedge funds will be able to reap profits from the pharmaceutical industry. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
With this context in mind, let’s now discuss our list of the 15 best pharmaceutical stocks to invest in. These companies were ranked keeping in mind the basic business fundamentals, hedge fund sentiment, and analyst ratings for each.
15 Best Pharmaceutical Stocks to Invest In
15. Takeda Pharmaceutical Company Limited (NYSE: TAK)
Number of Hedge Fund Holders: 19
Takeda Pharmaceutical Company Limited (NYSE:TAK) is a Japanese pharmaceutical company. It is the largest pharmaceutical company in Asia by revenue. Its products include drugs and treatments for cancers, neurological and gastroenterological disorders. It is ranked fifteenth on our list of 15 best pharmaceutical stocks to invest in. The stock has returned about -11.48% to investors over the course of the past year.
On July 30, Takeda Pharmaceutical Company Limited (NYSE:TAK) posted earnings for the second quarter of 2021, reporting earnings per share of $0.58, missing estimates by $0.29. The revenue over the period was around $8.66 billion, up 14.27% year-over-year.
At the end of the second quarter of 2021, 19 hedge funds in the database of Insider Monkey held stakes worth $551.2 million in Takeda Pharmaceutical Company Limited (NYSE:TAK).
Out of the hedge funds being tracked by Insider Monkey, Catherine Wood’s ARK Investment Management is the top stakeholder of Takeda Pharmaceutical Company Limited (NYSE:TAK) during the second quarter of 2021 with 15.4 million shares worth $260.7 million.
Just like Johnson & Johnson (NYSE:JNJ), Pfizer Inc. (NYSE:PFE), and Eli Lilly and Company (NYSE:LLY), Takeda Pharmaceutical Company Limited (NYSE:TAK) is one of the best pharmaceutical stocks to invest in.
14. Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX)
Number of Hedge Fund Holders: 60
Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) is an American pharmaceutical company, active in R&D and manufacturing of medicines for specialty diseases such as cystic fibrosis with gene-editing technology. It is ranked fourteenth on our list of 15 best pharmaceutical stocks to invest in. The stock has returned about -27.53% to investors over the course of the past year.
On July 29, Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) posted earnings for the second quarter of 2021, reporting earnings per share of $3.11, beating estimates by $0.73. The revenue over the period was around $1.79 billion, up 17.64% year-over-year.
At the end of the second quarter of 2021, 60 hedge funds in the database of Insider Monkey held stakes worth $2.8 billion in Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX).
On July 30, Piper Sandler kept its Overweight rating on Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) while raising its price target to $323 from $261, noting the strong results for Q2.
ClearBridge Investments, in its Q1 2021 investor letter, mentioned Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX). Here is what the fund said:
“While equity participation has been broadening, not all sectors and industries have benefited. Health care, which represents the Strategy’s second largest overweight, has lagged in recent months but we believe positive vaccine development and upcoming clinical news for other therapeutics will eventually lead to greater recognition by investors. Vertex Pharmaceuticals, continues to expand its cystic fibrosis franchise globally while advancing multiple underappreciated pipeline assets.”
13. Sanofi (NASDAQ: SNY)
Number of Hedge Fund Holders: 16
Sanofi (NASDAQ:SNY) is a French pharmaceutical company manufacturing drugs in many fields including oncology, diabetes, and thrombosis. It is one of the world’s largest vaccine producers. It is ranked thirteenth on our list of 15 best pharmaceutical stocks to invest in. The stock has returned over 2.38% to investors over the course of the past year.
On July 29, Sanofi (NASDAQ:SNY) posted earnings for the second quarter of 2021, reporting earnings per share of $0.82, beating estimates by $0.07. The revenue over the period was around $10.40 billion, up 7.61% year-over-year.
At the end of the second quarter of 2021, 16 hedge funds in the database of Insider Monkey held stakes worth $1.3 billion in Sanofi (NASDAQ:SNY). Out of the hedge funds being tracked by Insider Monkey, billionaire Ken Fisher’s Fisher Asset Management has the most valuable stake in Sanofi (NASDAQ:SNY) as of the end of the second quarter of 2021, worth close to $941.8 million, comprising 0.59% of its total 13F portfolio.
On August 6, Morgan Stanley reiterated its Overweight rating on Sanofi (NASDAQ:SNY) while raising its price target to 106 Euros from 104 Euros.
Sanofi (NASDAQ:SNY) is one of the best pharmaceutical stocks to invest in, along with Johnson & Johnson (NYSE:JNJ), Pfizer Inc. (NYSE:PFE), and Eli Lilly and Company (NYSE:LLY).
Artisan Partners Limited Partnership, in its Q4 2020 investor letter, mentioned Sanofi (NASDAQ: SNY). Here is what the fund said:
“Top detractors in Q4 included Sanofi. This defensive security was out of favor as vaccine distribution started in earnest and the market shifted focus to a post-COVID world. Sanofi performed about in line with other global pharmaceuticals companies. We believe Sanofi’s management team will have success improving the pipeline and managing costs through restructuring. For perspective, Swedish Match was down ~4% in the quarter but provided a 54% total return for 2020.”
12. Gilead Sciences, Inc. (NASDAQ: GILD)
Number of Hedge Fund Holders: 54
Gilead Sciences, Inc. (NASDAQ:GILD) is an American pharmaceutical company with an R&D focus on antiviral drugs for diseases such as HIV, hepatitis C. It is ranked twelfth on our list of 15 best pharmaceutical stocks to invest in. The stock has returned about 5.61% to investors over the course of the past year.
On July 29, Gilead Sciences, Inc. (NASDAQ:GILD) posted earnings for the second quarter of 2021, reporting earnings per share of $1.87, beating estimates by $0.12. The revenue over the period was around $6.22 billion, up 20.88% year-over-year.
At the end of the second quarter of 2021, 54 hedge funds in the database of Insider Monkey held stakes worth $1.73 billion in Gilead Sciences, Inc. (NASDAQ:GILD).
On July 30, RBC Capital raised its price target on Gilead Sciences, Inc. (NASDAQ:GILD) to $84 from $81 while maintaining its Outperform rating. RBC Capital argued that Gilead Sciences, Inc. (NASDAQ:GILD) has revenue streams from multiple drugs.
11. Merck & Co., Inc. (NYSE: MRK)
Number of Hedge Fund Holders: 79
Merck & Co., Inc. (NYSE: MRK) is an American pharmaceutical company. Its medicines include cancer immunotherapy and anti-diabetic drugs. It is ranked eleventh on our list of 15 best pharmaceutical stocks to invest in.
On July 29, Merck & Co., Inc. (NYSE: MRK) posted earnings for the second quarter of 2021, reporting earnings per share of $1.31, missing estimates by $0.04. The revenue over the period was around $11.40 billion, up 4.87% year-over-year.
At the end of the second quarter of 2021, 79 hedge funds in the database of Insider Monkey held stakes worth $5.3 billion in Merck & Co., Inc. (NYSE: MRK).
Out of the hedge funds being tacked by Insider Monkey, billionaire Ken Fisher’s Fisher Asset Management increased its stake in Merck & Co., Inc. (NYSE: MRK) by 3% during the first quarter of 2021 and by 5% during the second quarter of 2021. This stake is worth around $802 million, comprising 0.5% of its total 13F portfolio.
On July 26, Truist gave a Buy rating to Merck & Co., Inc. (NYSE: MRK) with a price target of $92, noting a P/E ratio of 15 over its expected 2022 EPS.
Along with Johnson & Johnson (NYSE:JNJ), Zoetis Inc. (NYSE: ZTS), and Eli Lilly and Company (NYSE: LLY), Merck & Co., Inc. (NYSE: MRK) is one of the best pharmaceutical stocks to invest in.
10. AstraZeneca PLC (NASDAQ: AZN)
Number of Hedge Fund Holders: 37
AstraZeneca PLC (NASDAQ:AZN) is a British-Swedish pharmaceutical company. Its products It is ranked tenth on our list of 15 best pharmaceutical stocks to invest in. The stock has returned over 5.12% to investors over the course of the past year.
On July 29, AstraZeneca PLC (NASDAQ:AZN) posted earnings for the second quarter of 2021, reporting earnings per share of $0.45, missing estimates by $0.24. The revenue over the period was around $8.22 billion, up 31% year-over-year.
At the end of the second quarter of 2021, 37 hedge funds in the database of Insider Monkey held stakes worth $2.77 billion in AstraZeneca PLC (NASDAQ:AZN).
On August 12, JPMorgan gave an Overweight rating to AstraZeneca PLC (LSE:AZN) with a price target of 10,000 GBp. AstraZeneca PLC (LSE:AZN) is traded on London Stock Exchange while AstraZeneca PLC (NASDAQ:AZN) is traded on Nasdaq as American depositary receipts (ADRs).
9. Bristol-Myers Squibb Company (NYSE: BMY)
Number of Hedge Fund Holders: 73
Bristol-Myers Squibb Company (NYSE:BMY) is an American pharmaceutical company, mainly active in drug manufacturing for cardiovascular diseases, diabetes, cancers, etc. It is ranked ninth on our list of 15 best pharmaceutical stocks to invest in. The stock has returned over 8.39% to investors over the course of the past year.
On July 28, Bristol-Myers Squibb Company (NYSE:BMY) posted earnings for the second quarter of 2021, reporting earnings per share of $1.93, beating estimates by $0.03. The revenue over the period was around $11.70 billion, up 15.54% year-over-year.
At the end of the second quarter of 2021, 73 hedge funds in the database of Insider Monkey held stakes worth $5.2 billion in Bristol-Myers Squibb Company (NYSE:BMY).
On July 26, Truist gave a Buy rating to Bristol-Myers Squibb Company (NYSE:BMY) with a $86 price target, assuming a P/E ratio of 9 over the 2022 EPS Truist expects.
Just like Johnson & Johnson (NYSE:JNJ), Zoetis Inc. (NYSE:ZTS), and Eli Lilly and Company (NYSE:LLY), Bristol-Myers Squibb Company (NYSE:BMY) is one of the best pharmaceutical stocks to invest in.
8. Horizon Therapeutics Public Limited Company (NASDAQ: HZNP)
Number of Hedge Fund Holders: 56
Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) is an American pharmaceutical company, active in the research and development of medicines for rheumatic and rare diseases. It is ranked eighth on our list of 15 best pharmaceutical stocks to invest in. The stock has returned over 41.32% to investors over the course of the past year.
On August 4, Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) posted earnings for the second quarter of 2021, reporting earnings per share of $1.62, beating estimates by $0.75. The revenue over the period was around $833 million, up 79.90% year-over-year.
At the end of the second quarter of 2021, 56 hedge funds in the database of Insider Monkey held stakes worth $4.3billion in Horizon Therapeutics Public Limited Company (NASDAQ:HZNP).
On August 5, BMO Capital reiterated its Outperform rating on Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) while boosting its price target to $132 from $118. BMO Capital noted the company’s strong Q2 results and its promising drug pipeline.
Carillon Tower Advisers, in their Q1 2021 investor letter, mentioned Horizon Therapeutics Public Limited Company (NASDAQ: HZNP). Here is what the fund said:
“Horizon Therapeutics is a biopharmaceutical company whose primary focus is research, development, and marketing of late-stage pharmaceutical products. After experiencing some unfortunate manufacturing hiccups in the later stages of 2020 for its key product Tepezza, which is used in the treatment of thyroid eye disease, the company recently received positive news that should relieve their supply issues going forward. With manufacturing of Tepezza back online after being forced to halt due to Operation Warp Speed’s COVID-19 vaccine production orders, Horizon expects patient treatments to resume in mid-April.”
7. Bausch Health Companies Inc. (NYSE: BHC)
Number of Hedge Fund Holders: 45
Bausch Health Companies Inc. (NYSE:BHC) is an eye health company, focusing on eye care pharmaceuticals, contact lenses, and other eye care products. It is ranked seventh on our list of 15 best pharmaceutical stocks to invest in. The stock has returned over 54.39% to investors over the course of the past year.
On August 3, Bausch Health Companies Inc. (NYSE:BHC) posted earnings for the second quarter of 2021, reporting earnings per share of $0.97, beating estimates by $0.01. The revenue over the period was around $2.10 billion, up 26.30% year-over-year.
At the end of the second quarter of 2021, 45 hedge funds in the database of Insider Monkey held stakes worth $4.08 billion in Bausch Health Companies Inc. (NYSE:BHC).
Out of the hedge funds being tracked by Insider Monkey, billionaire Carl Icahn’s Icahn Capital LP has increased its stake in Bausch Health Companies Inc. (NYSE:BHC) by $1 billion during the second quarter of 2021. This stake comprises 4.11% of its total 13F portfolio.
Bausch Health Companies Inc. (NYSE:BHC) is one of the best pharmaceutical stocks to invest in, along with Johnson & Johnson (NYSE:JNJ), Zoetis Inc. (NYSE:ZTS), and Eli Lilly and Company (NYSE:LLY).
In its Q1 2021 investor letter, Miller Value Partners highlighted a few stocks and Bausch Health Companies Inc. (NYSE:BHC) is one of them. Here is what the fund said:
“Bausch Health Companies (BHC) climbed 55% during the period. Glenview (6% owner) sent a letter to the company in early February arguing the company has not acted to unlock shareholder value and urging the company to sell its eye care business. Shortly after, activist investor Carl Icahn disclosing a 7.83% stake in the company. The company responded to the filing saying that they remain committed to splitting the business into two parts, but are open to pursuing all opportunities. The company reported strong 4Q results with better-than-expected 2021 guidance. 4Q revenue came in at $2,213M slightly ahead of consensus of $2,165M and EPS of $1.34 beat consensus of $1.12. The company guided for 2021 revenue of $8.6-8.8B coming in ahead of expectations of $8.55B with EBITDA of $3.4-3.55B ahead of $3.46B estimated. The company announced the transition of Paul Herendeen to an advisory role to be succeeded by Sam Eldessouky, previously senior vice president, controller and chief accounting officer. Finally, the company announced the sale of Amoun Pharmaceutical for $740M, which was relatively in line with estimates and should help support debt reduction targets ahead of the planned spin-off of Bausch + Lomb eye care business.”
6. AbbVie Inc. (NYSE: ABBV)
Number of Hedge Fund Holders: 82
AbbVie Inc. (NYSE:ABBV) is an American pharmaceutical company focusing on treatment for cancers, viruses (such as HIV), neurological disorders among other therapeutic classes. It is ranked sixth on our list of 15 best pharmaceutical stocks to invest in. The stock has returned over 24.19% to investors over the course of the past year.
On July 30, AbbVie Inc. (NYSE:ABBV) posted earnings for the second quarter of 2021, reporting earnings per share of $3.11, beating estimates by $0.08. The revenue over the period was around $13.96 billion, up 33.90% year-over-year.
At the end of the second quarter of 2021, 82 hedge funds in the database of Insider Monkey held stakes worth $5.4 billion in AbbVie Inc. (NYSE:ABBV).
On August 5, Argus reiterated its Buy rating on AbbVie Inc. (NYSE:ABBV) while raising its price target to $140 from $130. Argus noted the increase in the company’s sales of cancer drugs in Q2 and favorable P/E ratio.
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Disclose. None. 15 Best Pharmaceutical Stocks to Invest In is originally published on Insider Monkey.
