The pharmaceutical industry, which includes big pharma and startup biotech companies, is a booming industry, which makes it an attractive investment for certain investors. Here’s everything one needs to know about investing in pharmaceutical stocks, including some of the best to consider investing in this year.
In this article:
- Why Investors Consider Investing in Pharmaceutical Stocks
- How to Compare Pharma Stocks
- Comparing Pharma Stocks in 2019
Everything Investors Need to Know About Investing in Pharmaceutical Stocks
Why Investors Consider Investing in Pharmaceutical Stocks
Investors who are concerned about market volatility and the economy may want to cast their eye at pharmaceuticals. The best pharmaceutical stocks can be surprisingly resilient.
After all, these are products that often need to be purchased. An inflexible product is one that will be sold at any price, and that covers many medications.
But, there are also a lot of pharma stocks on the market, and one needs to have some in-depth knowledge to determine which pharmaceutical stocks to buy. Here’s the information to help make the right choice.
How to Compare Pharma Stocks
What should an investor look at when comparing pharma stocks? Pharma stocks are unlike any other investment due to the fact that they only have a few major products, and their patents expire.
There are a few major things you should consider:
- Competition and patents — Some pharmaceutical companies have exclusive rights to a medication, but their patents usually expire after some time. It’s essential to look at whether there’s significant competition in their market, and whether their patents are due to expire soon.
- Pipeline products — Most pharmaceutical companies are currently going through clinical trials for new medications. These clinical trials are very lengthy and can have a dramatic impact on the company overall.
- If clinical trials are positive, the stock can soar and the company may have the opportunity for a new flagship product.
- Dividends — Many of the most important pharmaceutical companies have sizable dividends. Even if the stock itself is growing, these dividends are still being paid out. If you have a strategy that leans heavily on dividend investing, you may want to consider these high dividend stocks.
Comparing Pharma Stocks in 2019
For 2019, there are some pharma stocks that are obviously premium contenders. Here are some of the top pharmaceutical stocks to watch.
Pfizer has long been listed as one of the best pharma stocks — and one of the largest and best pharmaceutical companies in general. Because it’s an established player in the industry with a history behind it, Pfizer has a history of stable growth.
While it hasn’t exhibited the aggressive growth and expansion of some newer companies, it has remained consistently positive. Pfizer has quite a few drugs out, which means its own products are diversified.
This company continues to research and develop new drugs that may contribute further to the company’s success. If that isn’t already good enough, the company’s stock offers a substantial dividend for dividend-focused investors.
A biotech stock with limited competition, Vertex is a good option for those who are looking to invest in something new and up-and-coming. Vertex focuses on medications for cystic fibrosis, and to that end, it has developed three products to treat the illness.
Of course, because it’s fairly new compared to some other pharmaceutical stocks, there can be complexities.
If its medications face issues during clinical studies, this may be a substantial setback. But there is some allure in investing in a company so focused.
Another biotech company, Amgen is a larger pharmaceuticals company that focuses on developing medications for conditions that are traditionally ignored by the pharma industry. This includes issues such as osteoporosis, bone cancer, and kidney failure.
Amgen has built up its profit center by creating medications that don’t have any active and significant competition. That means it’s also an excellent companion to other pharma stocks.
Intercept has a single approved product, but that product is quite an interesting one. This company has a medication that’s intended to treat chronic liver disease, and it has shown itself to be potentially very effective.
Since it’s still experimental and being developed at this time, Intercept is a gamble. Like Vertex, its stock could crash if clinical studies fail.
However, also like Vertex, the new nature of this company means it’s still growing and doesn’t enjoy the stable growth established by the bigger, more established players on this list.
Investors who have a higher risk tolerance may find this attractive, but those who are looking for more stable growth may be more suited with a different stock option.
With a focus on ocular health, Novartis has a number of contact lenses, solutions, neuroscience drugs, and immunology drugs.
That’s a significant breadth for a pharma company, which can make it an attractive investment option even for non-pharmaceutical investors.
Novartis is well-diversified, with a current dividend yield of 3.5%.
Those who are risk-averse and who want to dip their toe into pharma stocks without going all-in may want to invest in Novartis.
With a small inventory of medications ranging from cancer treatments to hypertension treatments, Exelixis has a lot to offer. Particularly, its new cancer drug appears to be very effective against a specific type of kidney cancer.
There are also clinical studies in the works that indicate that the drug might be usable against thyroid cancer and advanced liver cancer. If Exelixis’ medications prove to be extremely effective against multiple types of cancer, its stock is likely to be on the rise.
Sanofi is an interesting pharmaceutical company because it focuses primarily on smaller, rare genetic conditions. While that means that it may not have broad appeal, it also means that it can sustain long-term sales: those who have these rare genetic conditions have limited options regarding their purchasing.
But Sanofi doesn’t just make drugs for rare genetic conditions; it also has medications available for more common issues, such as diabetes. Investors who are looking for a more targeted company that thrives on long-term sales may want to look further into this stock option.
AbbVie produces Humira, Imbruvica, and Mavyret. These medications treat immune systems, cancer, and hepatitis C, all of which are serious issues in need of effective medications.
Investors who are looking for a stable stock that offers stable income may want to look into investing in AbbVie. It has solid growth and a few medications are moving up its pipeline.
It also has a very strong dividend yield, which has averaged 5%.
The stocks on this list are a good start for investors looking for pharma stocks to buy. However, it’s still essential to properly diversify: even the top pharmaceutical stocks may be impacted by similar regulations and economic issues.
Before investing in pharmaceutical companies’ stocks, investors should do some research into the company itself, its history, and its competition.
What got you interested in investing in pharmaceutical stocks? Share your reasons with us in the comments section below!