We recently published a list of 10 Best Pharma Stocks to Buy for Long Term Growth. In this article, we are going to take a look at where AbbVie Inc. (NYSE:ABBV) stands against other best pharma stocks to buy for long term growth.
U.S. Pharma Turns to China for Drug Deals
With big American pharmaceutical corporations always searching for medications in China, the US pharmaceutical industry is going through a unique trend never seen before. About 30% of Big Pharma acquisitions involving at least $50 million upfront in 2024 involved Chinese corporations, according to DealForma statistics, as reported by CNBC. This was an increase from 20% the previous year and nearly 0% just five years before.
Experts cite several causes for this tendency. Some people think that Chinese pharmaceutical firms are drawing notice due to their sophisticated development skills, which enable them to produce potent compounds in large quantities. In addition to being able to start testing on human subjects more quickly, these Chinese companies can charge a lower price for these medications than the US. Buyers have developed a business strategy that enables them to import medicines through licensing agreements, according to CNBC. The dearth of venture capital in China is additional pressure on biotech companies to enter these agreements.
Experts think this situation is here to stay, even though there are several possible causes for this tendency. Although the US pharmaceutical industry is expected to be impacted, it is uncertain how these effects would manifest. If big pharmaceutical companies find a good Chinese drug at a low price, some experts think it may destroy American startups; others think the competition would benefit the sector. Tim Opler, a managing director in Stifel’s global healthcare group, stated the following regarding the circumstances:
“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.”
Emily Field, Head of European Pharma Research at Barclays, spoke to CNBC on February 20 about the performance of obesity medications, the effects of US tariffs, and the dynamics of the pharmaceutical industry. According to her, at least in the first half of this year, the industry might not perform poorly. The effectiveness of obesity medications is still up for debate, though, as leading companies in the field have shown inconsistent results in the past.
Speaking about the tariffs, she stated that since some businesses assemble their products in the US after producing them overseas, their implementation raises several unanswered questions for the pharmaceutical industry. These businesses, therefore, have relatively low manufacturing costs, which is an important factor to take into account when assessing the effects of tariffs. She thought that these businesses could easily absorb the higher expense of the tariffs. The topic hasn’t come up much on earnings calls this quarter, and the market is nearing the end of the reporting season.
Our Methodology
For this article, we screened for companies that operate in the pharmaceutical industry. From that list, we identified stocks that have achieved positive revenue growth over the past five years. Then, we picked companies with a 5-year revenue growth of 10% and ranked the top 10 based on hedge fund sentiment as of Q4 2024, as per Insider Monkey’s 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).
A pharmacist handing out a pharmaceutical drug to a patient in a drug store or chemist.
AbbVie Inc. (NYSE:ABBV)
Number of Hedge Fund Holders: 85
AbbVie Inc. (NYSE:ABBV) 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, AbbVie Inc. (NYSE:ABBV) 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. As one of the best pharmaceutical stocks, the yearly sales of these medications—which treat inflammatory bowel disorders, psoriatic illnesses, rheumatology, and dermatology—are expected to surpass $27 billion by 2027. In addition, the company declared a 5.8% dividend increase that would take effect in February 2025, carrying on the company’s 12-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.”
Overall, ABBV ranks 4th on our list of best pharma stocks to buy for long term growth. While we acknowledge the potential of pharmaceutical 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 ABBV but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
