We recently published a list of the 10 Best Drug Stocks to Buy Now. In this article, we are going to take a look at where Amgen Inc. (NASDAQ:AMGN) stands against other best drug stocks to buy now.
Is China the Next Big Thing in the Pharmaceutical Industry?
Large American pharmaceutical companies are showing a distinct trend never seen before: they are increasingly looking for medicines in China. According to data from DealForma, as reported by CNBC, around 30% of Big Pharma deals with at least $50 million upfront in 2024 included Chinese companies. This was up from 20% the year before and almost 0% only five years prior. The surge in China deals is materializing when US policymakers and President Donald Trump are pursuing protectionist policies in technology, such as semiconductors and AI.
Various reasons are being attributed to this trend. Experts believe that Chinese companies are developing more effective molecules than ever before, that too in large quantities. They are in a position to begin testing these molecules on human subjects quicker and at a lower price than the US. Buyers have devised a business model allowing them to essentially import the medicines through licensing deals, according to CNBC. Biotech companies are further pushed into making these deals due to the drying up of venture funding in China.
Despite varying opinions among experts, there is an industry-wide consensus that this unique trend is here to stay. How this trend might affect the US biotech sector remains unclear at the moment. While some people believe it could potentially ruin American startups if large pharmaceutical companies stumble upon a promising Chinese drug at low price, others believe the competition would be fruitful for the industry. Either way, this trend is anticipated to metamorphose the landscape of the American biopharma sector. CNBC reported that Tim Opler, a managing director in Stifel’s global healthcare group, said the following about the situation:
“It’s kind of a watershed moment where the pharma industry is like, ‘We don’t really need to buy U.S. biotechs necessarily. We will if it makes sense, but we can buy perfectly good biotech assets through licensing deals with Chinese companies.”
What Does the Future of the Pharmaceutical Sector Look Like?
EY believes the pharmaceutical sector is expected to see more deal activity in 2025 compared to 2024, especially if interest rates remain low. Although the industry may see an increase in larger acquisitions to address growth gaps, smaller strategic deals are expected to persist throughout the year. The policy environment in the US is undergoing changes due to political impacts on business, such as re-regulation, lower corporate taxes, continued drug pricing reforms, and the possibility of higher tariffs. Other factors that may affect the biotech and pharmaceutical industries include changes in leadership within health agencies and immigration.
A survey by Deloitte showed that drug pricing and access are the top concerns among executives in 2025. The survey also showed that the primary concerns include competition from generic drugs and biosimilars and the looming patent cliff, with over $300 billion in sales at risk due to expiring patents by 2030. Due to this trend, executives anticipate an increase in mergers and acquisitions in 2025.
We discussed the future of the healthcare industry in the US in a recently published article on the 10 Best Medical Device Stocks To Buy According to Hedge Funds. Here is an excerpt from the article:
“According to McKinsey, the healthcare industry is expected to continually undergo a shift in growth dynamics. Health services and technology (HST) revenue pools are anticipated to grow at a compound annual growth rate of 8% between 2023 and 2028, supported by double-digit growth in software platforms and advanced data and analytics. The sales of innovative technologies such as generative AI to payers and providers are further supporting this growth.
In addition, pharmacy services, especially those focused on specialty pharmacy, are expected to see continued growth. The launch of new therapies and increased utilization are expected to be the primary drivers of this growth. McKinsey estimates specialty pharmacy revenue will grow at a compound annual growth rate of 8% between 2023 and 2028, growing EBITDA for managed service providers and specialty pharmacies.
Therefore, optimistic trends are materializing for the healthcare industry as a whole, including the medical device sector.”
Our Methodology
We sifted through stock screeners, online rankings, and ETFs to compile a list of 30 drug stocks. We then selected the top 12 most popular stocks among elite hedge funds as of Q3 2024. We sourced the hedge fund sentiment data from Insider Monkey’s database. The list is sorted in ascending order of hedge fund sentiment.
Why do we care about what hedge funds do? 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).
A pharmacist filling a prescription for a complex drug developed by the company.
Amgen Inc. (NASDAQ:AMGN)
Number of Hedge Fund Holders: 68
Amgen Inc. (NASDAQ:AMGN) is a biotechnology company that discovers, develops, manufactures, and markets human therapeutics. It delivers new therapies for patients with complex cancers, especially in areas with significant unmet needs. The company ended fiscal Q4 2024 with 14 medicines, each annualizing at more than $1 billion. Several of these are expected to be key growth drivers for the company through the decade.
Repatha, which treats cholesterol and heart disease, and EVENITY, which targets osteoporosis in postmenopausal women, are drugs that are continually delivering strong growth for the company. Repatha has developed into a multi-billion dollar product. Heart disease, the leading cause of death worldwide, is further driving its growth.
Amgen Inc. (NASDAQ:AMGN) also has a strong portfolio for rare diseases, which is expected to expand in 2025 with the potential regulatory approval for TEPEZZA internationally, the first and only FDA-approved medicine to treat Thyroid Eye Disease (TED). Launches in new indications for UPLIZNA, which treats neuromyelitis optica spectrum disorder (NMOSD), are expected to further strengthen the growth trajectory of the company’s rare disease business.
Analysts are bullish on the stock as its October 2023 acquisition of Horizon Therapeutics is expected to pay off in the next five years. 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.”
Overall, AMGN ranks 6th on our list of best drug stocks to buy now. While we acknowledge the potential of AMGN, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AMGN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
