Summary: “Big Pharma” comprises corporate giants that provide healthcare systems worldwide with drugs, vaccines, and other medical products. With a combined annual revenue exceeding 1.5 trillion dollars and leading companies involved in hundreds of clinical trials, Big Pharma is a robust industry with a promising future. This guide will list the top five Big Pharma stocks to buy using regulated platforms like eToro.
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What is the “Big Pharma”?
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The business giants covered by the label built a reputation for researching, developing, producing, and distributing life-saving prescription drugs and healthcare products. They are crucial in advancing medical sciences and supplying the healthcare sector with the fundamentals.
However, they also accrued significant criticism, such as prioritizing profits over public well-being, driving drug prices up, encouraging aggressive marketing tactics, and serving as a potential conflict of interest with clinics and other healthcare institutions. Due to their massive influence, there are concerns about their impact on healthcare regulatory agencies and legal policies.
Between the polarized opinions, Big Pharma companies have made an indisputable contribution to medicine with products like vaccines, antibiotics, and chronic disease treatments. While maintaining a balance between sustainable growth, development, and innovation on one side and accessibility and affordability on the other can be an ungrateful task, Big Pharma remains a solid industry that has weathered economic downturns and delivered continuous results to investors.
Top 5 Big Pharma stocks to buy
With an annual revenue of $1.482 trillion in 2022, the pharmaceutical industry holds a significant portion of the global market. By 2028, analyses show it will surpass the mark of $2 trillion, with a compound annual growth rate (CAGR) of approximately 5.70%.
As one of the world’s top five largest markets by revenue, the pharmaceutical industry remains attractive to investors, and Big Pharma stocks catch attention with their stable performance and growing value over time.
Here is our choice of the top 5 Big Pharma stocks to buy in 2024, according to their market capitalization, stock value appreciation, past performance, and estimates of future potential:
- Eli Lilly (NYSE: LLY);
- Novo Nordisk (NYSE: NVO);
- Johnson & Johnson (NYSE: JNJ);
- Merck (NYSE: MRK);
- AbbVie (ABBV).
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1. Eli Lilly
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Founded in 1867, Eli Lilly has pioneered landmark medical products like the first mass-produced polio vaccine and insulin therapy for chronic diabetes. As of today, its most prominent drugs are antidepressants Prozac and Cymbalta and the antipsychotic Zyprexa (Olanzapine).
Eli Lilly spearheads innovative research in oncology, immunology, and neuroscience. Along with its recent success with Alzheimer’s and obesity drugs, the company maintains its pledge to further global healthcare and press on with its enviable 2023 market performance by delivering high-quality medical products and services.
The Big Pharma leader is a component of the S&P 100 index and is listed as 142nd on the Fortune 500 and 201st on the Forbes Global 2000 lists.
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2. Novo Nordisk
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Founded in 1923, the Bagsværd-based company owes a significant portion of its success to semaglutide, an antidiabetic medication sold as Ozempic for diabetes treatment, and Wegovy as a weight-loss drug. This Big Pharma constituent became so successful with Ozempic in 2023 that it briefly became Europe’s most valuable company and lifted Denmark’s economy. Had it not been for Novo Nordisk’s contribution, the country’s economy would have contracted.
Novo Nordisk also deals in hemostasis management, growth hormone therapy, and hormone replacement therapy, among other domains.
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3. Johnson & Johnson
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Founded in 1886 by the Johnson brothers, the New Brunswick-headquartered company is one of the world’s largest healthcare companies. It is known for household products like Band-Aid, Neutrogena, and Tylenol, which were subsequently spun off to Kenvue in July 2023.
To show its dedication to innovation and focus its efforts on innovative medicine and MedTech, the company decided to change its recognizable logo and break the tradition of over 135 years.
As a Big Pharma stock, JNJ is a Dow Jones Industrial Average component. The company is ranked 40th on the Fortune 500’s 2023 list and is just one of the two U.S.-based companies with an AAA prime credit rating.
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4. Merck
Merck has made great strides in global healthcare advancement by developing efficient drugs like Keytruda (a humanized antibody called pembrolizumab used in cancer immunotherapy) and human papillomavirus (HPV) vaccines named Gardasil.
Sales have seen exceptionally high performance by the end of 2023, with Gardasil exceeding Wall Street expectations with the help of the Chinese market.
One of the leading Big Pharma stocks, Merck, is a Dow Jones Industrial Average and S&P 100 component. The company is listed as 69th on the Fortune 500 and 73rd on the Forbes Global 2000 lists.
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5. AbbVie
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Formed as a spin-off from Abbot Laboratories, the Illinois-headquartered is known for its trademark product, Humira. It is an adalimumab widely used in treating autoimmune diseases and conditions such as rheumatoid arthritis and Crohn’s disease.
Besides Humira, the Big Pharma company has developed Skyrizi, which is also used in combating autoimmune diseases. Other essential products include Botox, Imbruvica, and other drugs tackling cancer, neurologic disorders, and cystic fibrosis.
With constant innovation, advancement of new products, and improvements of the existing patents, AbbVie shows potential for a stable growth rate. ABBV, the last entry in this Big Pharma stocks list, is also an S&P 100 component.
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Things to consider when buying Big Pharma stocks
It is essential that you do your own research and find out the specifics of potential Big Pharma stocks before you invest. While the pharmaceutical industry showed resilience in the past, historic performance does not guarantee future gains. Big Pharma is not immune to spells of volatility, especially if the market landscape undergoes massive transformation or a groundbreaking drug reshuffles the list of big players.
By having fresh and relevant information, you can make informed decisions that will boost your odds of capitalizing on the upswing that Big Pharma is experiencing in 2024. Make sure to check the following:
- FDA approval: The Big Pharma players rely on Food and Drug Administration (FDA) approval to secure their products’ access to the market. The stamp of approval of relevant drug authorities like the FDA is, therefore, a kingmaker that can make or break the company’s revenue and its stock price;
- Market capitalization: Companies with higher market capitalization tend to be more reliable, maintain a more diverse portfolio, and have a stabler product pipeline. Higher market capitalization thus gives the company a better position in the pharmaceutical market constellation;
- Dividends: All five Big Pharma stocks listed here pay dividends, but the dividend yields vary. For example, Novo Nordisk has a dividend yield of 0.62% as of December 2023 and a tradition of 35 years of dividend payments. On the other hand, AbbVie has a dividend yield of 3.85% as of December 2023 but has paid dividends since 2014 only. You should include the pros and cons of each dividend stock into consideration;
- Risks and volatility: Big Pharma stocks are more stable than some other sectors but remain vulnerable to certain factors, especially drug trial results, regulatory decisions, and emerging market trends;
Pros and cons of investing in Big Pharma stocks
Investing in pharmaceutical stocks has enormous potential for future returns but is not devoid of risks and negative sides that you should also take into account. Some of the pros and cons of investing in Big Pharma stocks include:
Pros
- Stability: Big Pharma stocks have shown resilience in the past when economic downturns led to dips and downturns across the rest of the board. As their products tend to have a stable and constant demand, they are sought after as “defensive” stocks;
- Dividend payment: Big Pharma companies tend to pay out dividends to their shareholders, which is essentially a portion of the company’s profits. Dividend stocks are an attractive investing opportunity for income-oriented investors as they represent a potential steady revenue source;
- Innovation and research: Pharmaceutical companies invest heavily in innovation and research as a rule of thumb. Efforts put into new developments can lead to the discovery of groundbreaking drugs and treatments, which can lead to a surge in growth and stock price;
- Global presence: Big Pharma players have a global reach, allowing them to diversify their revenue through multiple streams and mitigate risks associated with potential local disruptions.
Cons
- Regulatory risks: The pharmaceutical market is sensitive to strict regulations and new legislation, which may impact financial performance significantly. Considerable delays in medicine approval and drug recalls can lead to plummeting stock prices.
- Patent expiration: When a hallmark drug’s patent expires, generic competition can drive down sales and profits of its patent-holding company;
- Reputation risks and controversies: Big Pharma companies may face legal issues, like lawsuits tied to product safety or aggressive marketing practices, which can result in substantial monetary penalties and crippling damage to their reputation;
- Ethical concerns and criticism: Investors and patients alike can have ethical concerns over some practices of the Big Pharma companies, like pricing, marketing, and profit-orientation, especially for essential drugs and treatments.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
FAQs about the 5 Big Pharma stocks to buy in 2024
Can you invest in Big Pharma stocks?
Yes, you can. In fact, most Big Pharma stocks are publicly traded companies that you can access via stock exchanges.
Are biotech stocks a good investment in 2024?
Whether Big Pharma is a good investment or not depends on their individual fiscal performance, FDA approval of their products, and the current supply and demand of the various medicines, treatments, and drugs. Your taste and investing style also play an important role. Carefully research the Big Pharma stock prior to investing.
What are some of the best Big Pharma stocks?
Several well-performing companies can be considered a part of the Big Pharma corporations. Our choice for this guide has been narrowed down to five: Eli Lilly (NYSE: LLY), Novo Nordisk (NYSE: NVO), Johnson & Johnson (NYSE: JNJ), Merck (NYSE: MRK), and AbbVie (NYSE: ABBV).
Are Big Pharma stocks a risky investment?
Every investment carries some risk. In spite of this, Big Pharma has historically been more resilient to economic downturns than some other sectors. However, past performance is not a guarantee of future gains.
How do you buy Big Pharma stocks?
Investors can buy Big Pharma stocks with online investing services like eToro.
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