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Before 2020, many people didn’t give much thought to pharmaceutical companies. Unless you were already a pharma investor or relied on some of the drugs developed by the companies below, there wasn’t much of a reason to keep up with what various pharmaceutical companies were doing.
But then COVID-19 came along and created a worldwide pandemic in 2020. Since then, a slew of pharmaceutical companies have been in the news nearly every day as they develop vaccines and distribute them worldwide, and conversations about vaccine efficacy rates, immunity, and booster shots have become a near-daily occurrence.
But even when the global pandemic eventually wanes, pharmaceutical companies will continue doing what they do best: researching, developing, testing, and bringing new drugs to market.
With the pharmaceutical industry nearly tripling sales over the past two decades, it’s no surprise that investors are taking a closer look at pharma stocks right now.
7 Pharmaceutical Statistics Investors Need to Know
- Pharmaceutical sales surpass $1 trillion annually
- It takes about 10 years to bring a new drug to market once it’s discovered
- The average cost of developing a new treatment is more than $2.5 billion
- The Food and Drug Administration (FDA) approves about 20 new drugs each year
- Pharmaceutical sales in the United States account for about half of all global pharmaceutical revenue
- Pharma companies spend about 20% of their revenue on research and development
- COVID-19 vaccine sales could total $109 billion by 2022 for Moderna and the Pfizer/BioNTech shots
7 Top Pharmaceutical Stocks
Here are the 7 best pharmaceutical stocks for 2021.
Pfizer (NYSE: PFE)
- Pfizer (NYSE:PFE)
- Market Cap: 258,300,132,560
Leading drugmaker Pfizer has received a lot of attention since the beginning of the coronavirus pandemic. The company partnered with BioNTech SE (BNTX) to bring a COVID-19 vaccine to market in under one year.
The vaccine was developed astonishingly fast and a recent estimate from Sanford C. Bernstein pharmaceuticals analyst Ronny Gal puts Pfizer and BioNTech’s total COVID-19 vaccine sales at $74 billion through 2022.
That’s higher than initially estimated because some experts now expect people to need a third dose of the vaccine to maintain immunity.
But despite the coronavirus vaccine demand, investors should know that most of Pfizer’s revenue—about 26% in 2021—came from oncology, while 17% came from vaccines. Investors may be familiar with some of the company’s most popular pharmaceutical products, including its epinephrine autoinjector EpiPen and the children’s cough medicine Dimetapp.
Pfizer’s sales increased by 2% in 2020 to nearly $42 billion and the company continues to develop 100 new drugs, including 23 in Phase 3 of development.
Bristol Myers Squibb (NYSE: BMY)
- Bristol Myers Squibb (NYSE:BMY)
- Market Cap: 148,570,512,153
Even after 120 years in existence, Bristol Myers Squibb continues to grow. The company snatched up another leading pharmaceutical company, Celgene, back in 2019 for the hefty sum of $74 billion and the purchase helped Bristol Myers Squibb boost revenue in 2020.
Sales spiked 63% last year to $42.5 billion and the company continues to plan for more growth through its 2020 purchase of MyoKardia. The company’s recent acquisitions have helped boost its drug pipeline, which has reached about 50 new drug compounds in development spanning across more than 40 diseases.
While the company’s share price hasn’t exactly been stellar over the past few years, Bristol Myers Squibb’s recent acquisitions, its growing drug pipeline, and the company’s 12-year track record of increasing its dividend make this pharmaceutical giant worth a serious look by investors.
AbbVie (NYSE: ABBV)
- AbbVie (NYSE:ABBV)
- Market Cap: 213,439,460,754
AbbVie was spun out of its parent company Abbott Laboratories back in 2013 and the company is a pharmaceutical giant thanks to Humira, a rheumatoid arthritis treatment. The drug generates some of the largest pharmaceutical revenues in the world, reaching $19.8 billion in 2020.
Some investors are concerned about the fact that Humira’s patent will expire in the United States in 2023, which will curb AbbVie’s ability to generate increased sales from the drug. But AbbVie has been planning for this transition, which is one of the reasons why it purchased Botox manufacturer Allergan for $63 billion in 2019.
Additionally, the company has two drugs—Skyrizi (for plaque psoriasis treatment) and Rinvoq (for rheumatoid arthritis)—that have seen their sales double from 2019 to 2020.
With AbbVie treating nearly 57 million people from 175 countries around the world and offering one of the highest dividend yields at 4.4%, this pharmaceutical stock deserves a close look by investors.
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Johnson & Johnson (NYSE: JNJ)
- Johnson & Johnson (NYSE:JNJ)
- Market Cap: 455,761,624,587
Johnson & Johnson is a healthcare behemoth that’s been in existence for more than 130 years. The company generates its revenue from three main segments: pharmaceuticals, medical equipment, and its consumer products.
Johnson & Johnson developed a single-dose COVID-19 vaccine in 2020, but unfortunately, the treatment hasn’t been as successful as the vaccines developed by Moderna or Pfizer. As of mid-2021, the company projected that it will have $2.5 billion in COVID-19 vaccine sales through the full year.
Despite Johnson & Johnson’s vaccine falling short of its peers’ success, the company has more than 50 drugs in late-stage development right now and its medical equipment segment—which took a hit in 2020—could experience a rebound once the pandemic wanes.
Income investors may be interested in the company’s long history of raising its dividend, which has been increased for 59 consecutive years.
Moderna (Nasdaq: MRNA)
- Moderna Inc. (NASDAQ:MRNA)
- Market Cap: 152,049,529,267
Moderna is, of course, one of the top COVID-19 vaccine makers and the vaccine has propelled the company into the consciousness of the public—as well as investors. The company’s vaccine success helped Moderna’s share price skyrocket more than 430% in 2020.
And the company could likely experience a continued boost from its vaccine, as some health experts have recommended that people who’ve already received two vaccinations may need to receive a third shot to keep COVID-19 immunity levels high.
The additional booster shot could increase Moderna’s total vaccine sales by 25%, reaching $35 billion by next year, according to Sanford C. Bernstein pharmaceuticals analyst Ronny Gal.
In addition to its COVID-19 vaccine, Moderna has more than 20 treatments currently in its development pipeline right now, which includes an HIV vaccine and a personalized cancer vaccine.
Merck & Co., Inc. (NYSE: MRK)
- Merck & Co. (NYSE:MRK)
- Market Cap: 193,118,575,557
Merck is another major biopharmaceutical company that faced some headwinds in 2020 but still managed to grow its business. The company’s total sales increased a moderate 2% in 2020 to $48 billion.
The company’s share price fell about 10% in 2020, but that doesn’t mean investors should overlook Merck. The company invested more than $13.6 billion in research and development in 2020 and has more than 80 treatments in various stages of development right now.
Additionally, the company already has a popular cancer drug, Keytruda, which is already a top-selling drug and could gain more momentum over the next few years. Keytruda brought in more than $14 billion in sales in 2020 and some have estimated that it could reach $24 billion by 2026.
Eli Lilly & Co. (NYSE: LLY)
- Eli Lilly and Company (NYSE:LLY)
- Market Cap: 234,160,778,852
Eli Lilly & Co. has been in the pharmaceutical business for more than 145 years and the company’s recent share price growth has propelled the company into the forefront of investors’ minds.
The company’s stock surged more than 150% over the past three years, with some of those gains coming as investors expected Eli Lilly to significantly benefit from COVID-19-related treatments. Those hopes never quite panned out as expected, but that doesn’t mean the company doesn’t have a lot of potential in its drug pipeline.
Eli Lilly has more than 60 treatments currently in various stages of development and the company already benefits from 11 drugs that bring in nearly half of its revenue.
Eli Lilly’s sales jumped 10% in 2020. With the company spending $6 billion in research and development last year and its share price rising nearly 60% in 2021 (as of Aug. 2021), it’s no wonder investors continue to focus their attention on this pharmaceutical stock.
Pharmaceutical Exchange-Traded Funds (ETFs)
If you want to invest in pharmaceutical companies, but you’d rather not experience some of the stock market volatility that can come along with owning an individual company’s stock, then you may want to consider an exchange-traded fund (ETF).
ETFs allow you to invest in a basket of stocks, which can help you spread out your investment risk while still benefiting from a particular sector.
There are a handful of pharmaceutical ETFs inventors can choose from, but three of the top ETFs are the Invesco Dynamic Pharmaceuticals ETF (PJP), the iShares U.S. Pharmaceuticals ETF (IHE), and the VanEck Vectors Pharmaceutical ETF (PPH).
Frequently Asked Questions
What are the best pharmaceutical stocks to buy now?
A lot of the companies on this list could make good long-term investments, but the best-performing pharmaceutical stock on this list is Moderna, which has seen its share price skyrocket nearly 2,000% over the past three years.
Are pharmaceutical stocks a good investment?
As with any investing sector, some companies will end up being good investments and others won’t. For pharmaceutical stocks, it’s important for long-term investors to find companies that are on the cutting edge of drug development and investing enough money to find new treatments.
Because treatments take years to get to market, investors may need to be more patient with pharmaceutical investments compared to other sectors.
Which pharmaceutical company will grow in 2021?
It’s impossible to predict which pharmaceutical companies will grow the most in any given year. Investors should focus their attention on finding pharma companies that are nicely diversified in their drug development pipelines and that are investing in—or acquiring—new treatments that have the long-term potential to grow the company.
Chris Neiger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Bristol Myers Squibb. The Motley Fool recommends Johnson & Johnson and Moderna Inc. Millennial Money is part of The Motley Fool network. Millennial Money has a disclosure policy.
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