Summary: Investors see an opportunity in drug company stocks due to their potential high returns and the pharmaceutical industry’s economic resilience. With exposure to medical innovation and research and an increasingly aging population, these companies’ prospects show great promise. This article will showcase the three best drug company stocks to buy in 2024 using a regulated investing platform like eToro and Interactive Brokers.
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What are drug company stocks?
About
From penny companies to Big Pharma, pharmaceutical companies vie for a specific market where innovation and research offer high-risk, high-reward opportunities for patented drugs. While the market is desirable and potential rewards lucrative, the risks are also tremendous, and failed drug trials waste money and time.
Because of this, the best drug companies aim for a diversified portfolio, have a secure source of funding for experimental drug development, and invest in product pipelines to maintain momentum into the future.
Why you should invest in drug company stocks
A growing but aging world population experiences an increasing demand for efficient drugs for contemporary diseases like Alzheimer’s and cancer. The global revenue of the pharmaceutical market will reach $1.5 trillion by the end of 2023, and the recent COVID-19 pandemic further highlighted the need to boost the sector.
These are just some factors that attract investors to drug company stocks. With stable revenue streams, breakthrough research, and a constantly growing market, many consider the industry to show too much promise to miss out on.
Three best drug company stocks to buy
We present you with our selection of the three best drug company stocks to buy in 2024, according to factors such as market capitalization, historical performance, product pipelines, and ongoing clinical trials:
- Pfizer Inc. (NYSE: PFE);
- Johnson & Johnson (NYSE: JNJ);
- AbbVie (NYSE: ABBV).
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1. Pfizer
About
Based in Manhattan, New York City, the company has become a worldwide household name for its Pfizer-BioNTech COVID-19 vaccine and Nirmatrelvir/ritonavir antiviral medication. Both products were crucial in stemming down and preventing further spread of the coronavirus during the 2020-2023 global pandemic.
Apart from COVID-19, the company has made a name for its immunology, cardiology, and oncology drugs and vaccines, as well as breakthrough research in clinical trials. Although the pandemic was declared over and the stock value is expected to decline, Pfizer has a robust portfolio, a solid market capitalization, and engages in research that can potentially result in new landmark treatments.
The company was a component of the Dow Jones from 2004 to 2020 and is currently an S&P 100 component. Among the best drug company stocks, it ranks 38th on the Fortune 500 and 39th on the Forbes Global 2000 lists.
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2. Johnson & Johnson
About
Founded in 1886 by the Johnson brothers and headquartered in New Brunswick, the corporation is vital to the global healthcare industry. Darzalex, a drug made by its subsidiary, Janssen, is a medication for cancer used by patients with early-stage multiple myeloma. It has made a revenue of $8 billion in 2022 alone.
Apart from cancer treatment, Johnson & Johnson is known for household consumer medical goods like Band-Aid, Neutrogena, and Tylenol, which the company spun off to Kenvue in July 2023.
Supporting its status as one of the best drug company stocks to buy in 2023, JNJ is a Dow Jones Industrial Average component. The company ranked 40th on the Fortune 500’s 2023 list and is one of only two U.S.-based companies with an AAA prime credit rating.
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3. AbbVie
About
Created as a spin-off from Abbot Laboratories, the Illinois-based corporation is known for its standout drug, Humira. It is an adalimumab commonly used to treat autoimmune ailments and diseases like Crohn’s disease and rheumatoid arthritis. Besides Humira, AbbVie produces Skyrizi, another autoimmune drug, and products like Botox, Imbruvica, and other drugs tackling cancer, neurologic disorders, and cystic fibrosis.
Being continuously innovative, advancing novel drugs, and improving existing patents, AbbVie is a drug company stock with the potential for a stable growth rate, reflected in its status as an S&P 100 component.
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Things to consider when buying drug company stocks
Here are some key considerations when investing in the pharma industry:
- The company’s product portfolio and pipeline: Consider the company’s product pipeline, the degree of diversification of its portfolio, and the stage of development of potential blockbuster drugs;
- Dividends: Some pharmaceutical companies pay dividends which can establish additional passive income for investors;
- Drug trials: Clinical trials are inherently risky, with positive results driving the value of drug company stocks and vice-versa with negative results;
- Market competition: Evaluate the company’s performance against its rivals, as the pharmaceutical sector is a highly competitive environment;
- Revenue and growth: Just like with other financial assets, drug company stocks with a history of rising growth tend to be more valuable;
- Patents: Check for expiring patents, as they usually serve as primary sources of revenue before the generic competition drives down profits;
- Regulatory environment: Confirm the regulatory approvals from relevant authorities like the FDA (the U.S.) or EMA (the E.U.). Track all regulatory changes and check the state of the pending approvals;
- Market trends: Stay up to date with biotechnology and pharmaceutical industry trends, like personalized medicine, new medical research, and shifts in global healthcare policies.
Pros and cons of investing in drug company stocks
Investing in drug company stocks can bring significant returns but is steeped in risks and has downsides that you should consider before spending any money. Some of the pros and cons of investing in Big Pharma stocks include:
Pros
- Potential returns: Drug companies can experience booms in growth when they invent and market new drugs or treatments, providing substantial returns for investors;
- Resilience: The healthcare sector is often more reliable in economic downturns than most other industries;
- Recurring revenue: Drug companies’ treatments and products usually include essential medication with stable demand. This market generates reliable income and steady streams of revenue;
- Demographics: An aging global population increases the demand for healthcare, which benefits drug companies;
- Innovation: Current research and clinical trials can unearth groundbreaking medical advancements, creating profit opportunities for companies and shareholders.
Cons
- Regulatory risks: Drug companies are subject to tight regulations, and turbulences in government policies can dampen their operations and profitability;
- Patent expirations: When drug patents expire, generic drug competitors gain access to the same market, reducing profits for the patent-holding company;
- Research and development costs: Inventing new drugs is costly and takes time, with a severe hazard of the research yielding no practical result;
- Market Competition: The pharmaceutical industry is tremendously competitive, with many corporations vying for market share, making it challenging to stand out.
- Healthcare Trends: Changes in healthcare policies, insurance reimbursement rates, or drug pricing can impact a company’s financial performance.
FAQs about the three best drug company stocks to buy in 2024
Can you invest in drug company stocks?
Yes, you can. In fact, some of the most successful drug companies are publicly traded and you can access them via stock exchanges.
Are drug company stocks a good investment in 2024?
Whether pharmaceutical companies are a good investment depends on their fiscal performance, FDA approval of their drugs, and the ongoing supply and demand of the various treatments. Carefully research the stock before investing.
What are some of the best drug company stocks?
Our choice for this guide includes the following three: Pfizer (NYSE: PFE), Johnson & Johnson (NYSE: JNJ), and AbbVie (NYSE: ABBV).
Are drug company stocks a risky investment?
Every investment carries a degree of risk. Despite this, pharmaceutical companies have historically been more stable and withstood recessions better than some other sectors. However, past performance is not a guarantee of future gains.
How do you buy drug company stocks?
Investors can buy drug company stocks using online investing services like eToro and Interactive Brokers.
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Invest in 2,800+ stocks and other assets including 70+ cryptocurrencies and commodities.
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0% commission on buying stocks - buy in bulk or just a fraction from as little as $10. Other fees apply. For more information, visit etoro.com/trading/fees.
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eToro USA is registered with FINRA for securities trading.
