Best Pharmaceutical Stocks to Invest In 2024

Pharmaceutical stocks can make great long-term investments as they belong to a sector that is considered defensive. This means that the pharma companies that issue those stocks aren’t as affected by recessions or by runaway inflation as firms in other sectors because the demand for drugs and therapies is consistent. If you need a pill for a heart condition, you will still take it, even if the price increases.

As the population ages and chronic medical conditions, such as diabetes, is on the rise, there’s growing demand for medical therapies. In this guide, we analyze the best pharmaceutical stocks that are expected to benefit from this growing need. Take a look at our top 10 picks:

Best Pharmaceutical Stocks to Buy in 2024

  1. Eli Lilly: Surging sales of diabetes/weight loss drug Mounjaro to treat diabetes and Zepbound to treat obesity, helped Eli Lilly become the world’s most valuable pharmaceutical company.
  2. Merck: Its ancer therapy, Keytruda, was the world’s top-selling drug in 2023. Its vaccine sales are also rising and it has a promising pulmonary arterial hypertension drug on the horizon. 
  3. Vertex Pharmaceuticals: The market leader in cystic fibrosis therapies added a gene-editing blood disorder cell therapy last year and is expecting approval for a non-opioid painkiller this year.
  4. AbbVie: The U.S. company has been active in acquisitions and increased sales of its immunology drugs Skyrizi and Rinvoq are making up for lost sales for its former flagship product Humira.
  5. Novo Nordisk: The Danish company’s anti-obesity and diabetes drugs are driving sales. It has recently bought smaller rival Catalent to increase its capacity to keep up with rising demand.
  6. Johnson & Johnson: The second-largest pharmaceutical company in the U.S. is seeing renewed growth now that it has completed the integration of heart-pump maker Abiomed.
  7. BioMarin Pharmaceutical: The U.S. biotech company develops enzyme therapies that address the cause of genetic conditions. It has eight approved therapies and a growing pipeline.
  8. GSK: The British company’s vaccine sales are booming, led by its shingles and RSV shots. The stock trades at less than 14 times earnings, a better valuation than other large drugmakers.
  9. Pacira Biosciences: The biopharmaceutical small-cap focuses on non-opioid pain management therapies. It should benefit from the push to cut down on the postsurgical use of opioids.
  10. Organon: The U.S. Veterans Health Administration selected the mid-cap company’s Hadlima as the preferred biosimilar for Humira to treat certain autoimmune or autoinflammatory conditions.

A Closer Look at the Best Pharmaceutical Stocks Invest in

Here’s a more in-depth look at the best pharmaceutical stocks to invest in this year:

1. Eli Lilly: Best Pharmaceutical Stock for Growth

The drugmaker, based in Indianapolis, Ind., made a big move recently to improve sales. It said it’s teaming up with e-commerce giant Amazon (NASDAQ: AMZN) to use Amazon Pharmacy to fill prescriptions for several of its drugs on Lilly’s direct sales website, LillyDirect, including blockbuster weight-loss therapy Zepbound, as well as migraine drug Emgality and diabetes products including Basaglar, Humalog, and Humulin.

Lilly graphicLily’s financials were already strong. In 2023, Lilly had record revenue of $34.1 billion, up 20% and earnings per share (EPS) of $5.80, down 16%, mainly due to higher costs attached to new product launches.

This year, the company expects significant growth. It currently estimates revenue of between $40.4 billion and $41.6 billion and sees EPS jumping to between $11.30 and $12.30. The continued growth of Zepbound and Mounjaro sales, plus rising sales of cancer therapy Verzenio are behind that optimism.

Lilly has more than doubled its quarterly dividend since 2018 and just raised it by 15%, lifting it for the sixth consecutive year.

Ticker  One-year price change  Market cap P/E
NYSE: LLY 129.73% $728.18 billion 132.10

2. Merck – Betting on a Rebound in 2024

The company’s blockbuster oncology therapy Keytruda is expected to add indications as well as to further boost revenue. In the fourth quarter alone it brought in $6.6 billion, up 22% from a year earlier. Looking past Keytruda, the company has a solid pipeline of oncology therapies, as well as growing sales from its HPV vaccines, Gardasil and Gardasil 9.

Merck graphicMerck reported $60.1 billion in revenue last year, up 1%, and it said it expects revenue of between $62.7 billion and $64.2 billion this year, rising between 4% and 7%. Full-year EPS  fell 97% to $0.14 last year, owing to the company’s several acquisitions, led by its $10.8 billion purchase of Prometheus Biosciences.

This year, the company is projecting adjusted EPS to be between $8.44 and $8.59, compared with $1.51 in 2023.

Marck raised its dividend by 5.5% last year to $0.77 per share. Over the past 10 years, the company has increased its dividend by 79%. The yield is an above-average 2.53%.

Ticker  One-year price change  Market cap P/E
NYSE: MRK 14.73% $307.56 billion 847.39

3. Vertex – On the Cusp of a Breakout

Cystic fibrosis (CF), a genetic disease that affects the lungs, pancreas and other organs, affects between 70,000 and 162,000 people worldwide. Vertex has used its profits from its CF franchise of therapies to diversify its base of approved therapies.

The company’s biggest news last year was the approval of gene therapy Casgevy, which Vertex developed with Crispr Therapeutics (NASDAQ: CRSP) to treat rare blood disorders of transfusion-dependent beta thalassemia and severe sickle cell disease. The therapy could be worth as much as $2.2 billion a year in sales.

Vertex chartThis year, Vertex is on track to submit new drug applications to the FDA for non-opioid painkiller VX-548, said to be worth $5 billion a year at peak sales, and its next-generation CF therapy, Vancaftor Triple.

In 2023, Vertex had revenue of $9.87 billion, up 11%, and EPS of $13.89, up 8% from the previous year. This year, it said it expects revenue to rise to between $10.55 billion and $10.75 billion. 

Ticker  One-year price change  Market cap P/E
NASDAQ: VRTX 38.27% $105.85 billion 29.77

4. AbbVie – Laying Down the Path for Rising Revenue

There were plenty of analysts who foretold a dark future for AbbVie because of the loss of patent protection for its immunology therapy Humira, which had until 2023 been the top-selling drug in the world for years. To paraphrase a famous Mark Twain quote when he read his own incorrect obituaries, “The report of (AbbVie’s) death was an exaggeration.”

AbbVie chartEven with a 32.2% decline in Humira’s revenue in 2023, the company’s overall revenue only fell 6.4% to $54.3 billion. EPS fell 59%, though, to $2.72, as the company made several key acquisitions. It bought ImmunoGen, which has a flagship ovarian cancer drug Elahere for $10.1 billion, and Cerevel Therapeutics for $8.7 billion.

While Humira, which is now facing biosimilar competition, is seeing declining sales, AbbVie’s newer immunology drugs are picking up the slack. Skyrizi and Rinvoq brought in $7.76 billion and $3.97 billion respectively, in 2023 sales, up 50.3% and 57.4%. AbbVie said it expects combined revenues for the pair to rise to more than $27 billion by 2027.

AbbVie has raised its dividend for 53 consecutive years, including a 4.7% boost in 2024 to $1.55, equaling a yield of about 3.4%.

Ticker  One-year price change  Market cap P/E
NYSE: ABBV 14.33% $315.30 billion 65.66

5. Novo Nordisk – Most Valuable Drugmaker Still Growing

Novo Nordisk, which became the largest pharmaceutical stock by market cap last year, has been a big player in diabetes care for years and had a 33.8% market share in diabetes therapies in 2023.

Its weight-loss therapies Wegovy and Saxenda, and its diabetes drugs Ozemic and Rybelsus drove record revenue in 2023. The company’s biggest problem is maintaining enough production to meet demand — a good problem to have. To that end, it spent $16.5 billion to buy smaller drugmaker Catalent for its production facilities.

Novo Nordisk graphicNow, Novo has a potential new market to drive sales of its therapies – Wegovy is expected to be approved later this year in China, Reuters reported.

Novo last year posted record revenue of $33.7 billion, up 31%, and EPS of $2.71, up 51%. This year, it expects another double-digit increase in revenue. Counting an interim dividend, the company paid out $1.39 a share last year in dividends. It also plans to buy $2.9 billion worth of its own shares in 2024.

Ticker  One-year price change  Market cap P/E
NYSE: NVO 82.97% $453.35 billion 48.63

6. Johnson & Johnson –  Dependable Stability With a Dividend

After spinning off its consumer products division into a separate company, Kenvue (NYSE: KVUE), last year, the healthcare giant, focuses on pharmaceuticals and medical technology. It isn’t known for its growth, but for its rock-solid fundamentals and 62-year history of dividend increases. It also raised its quarterly dividend by 5% last year to $1.19, giving it a yield of around 3.06%.

Johnson & Johnson chartIn 2023, Johnson & Johnson had revenue of $85.2 billion, up 6.5%, and EPS of $5.20, down 15% from a year earlier, due to a one-time charge in the first quarter. In the fourth quarter, the first full quarter since the Kenvue split was completed, the company saw its EPS rise by 39.3% to $1.70.

While the company may still be too big to see phenomenal growth, it can become more profitable. It has a huge late-stage pipeline with 17 oncology drugs in Phase 3 trials and 12 immunology therapies in Phase 3 trials.

Johnson & Johnson has substantially beefed up its MedTech segment by buying Abiomed. Abiomed was responsible for 4.7% of the 12.4% increase in the MedTech segment’s 2023 revenue. This year, the company is estimating revenue of between $87.6 billion and $87.8 billion, a jump of 5% at the midpoint.

Ticker  One-year price change  Market cap P/E
NYSE: JNJ 1.28% $375.40 billion 29.93

7. BioMarin Pharmaceutical – Focus on Rare Diseases Paying Off

The biotech company’s focus on ultra-rare diseases is paying off handsomely because its therapies see less competition and have allowed it to build a substantial moat around its lead therapy, Voxzogo, used to treat achondroplasia, the most common form of dwarfism.

BioMarin chartIn 2023, BioMarin had revenue of $2.42 billion, up 15%, and EPS of $0.87, up 16%. Voxzogo, thanks to a label expansion last fall that allows it to be used on patients under 5, saw sales rise 178% last year to $470 million.

The company also sees higher sales for Palynzio, used to treat a rare genetic condition, phenylketonuria, where phenylalanine builds up in the blood. Last year, Palynzio had $303.9 million in sales, up 19%. BioMarin is also hoping for increased sales for hemophilia A gene therapy Roctavian, which costs $2.9 million per injection.

This year, BioMarin is expecting revenue between $2.7 billion and $2.8 billion, up 13.6% at the midpoint, and adjusted EPS of between $2.60 and $2.80, up from adjusted EPS of $2.08 in 2023.

Ticker  One-year price change  Market cap P/E
NASDAQ: BMRN -8.10% $16.01 billion 96.98

8. GSK – Best Cheap Pharmaceutical Stock

Its shingles vaccine Shingrix and RSV vaccine, Arexvy, helped boost revenue at GSK in 2023 even with sales of its COVID-19 vaccine falling off significantly. Vaccines make up nearly a third of the company’s revenue, and the pandemic meant that adults got fewer shots for other diseases, such as shingles and RSV. Now, that trend is reversing and GSK stands to benefit from it. The stock, trading at below 14 times earnings, is significantly less expensive than its industry peers.

GSK chartThe drugmaker reported revenue of £30.3 billion ($37.88 billion) in 2023, up 3%, and EPS of 155.1 pence, up 11%. This year, GSK said it’s looking for revenue to rise between 5% and 7%, with EPS climbing between 6% to 9%.

GSK has a large pipeline with 71 programs, including 18 in phase 3 trials, or in the process of approval. One of the most promising was the combination of Blenrep with Takeda drug Velcade and the steroid dexamethasone, which cut the risk of progression or death in multiple myeloma patients by 59% compared with Johnson & Johnson’s Darzalex and dexamethasone.

The company raised its quarterly dividend by 4.8% this year to roughly $0.406, equaling a yield of around 3.4%.

Ticker  One-year price change  Market cap P/E
NYSE: GSK 21.16% $87.48 billion 13.88

9. Pacira Biosciences – Non-Opioid Pain Block to Lift Revenue

The specialty pharmaceutical company sells its non-opioid pain relief products mostly to hospitals, using its proprietary multivesicular liposome drug delivery technology. It just got a Regenerative Medicine Advanced Therapy (RMAT) designation from the FDA for its knee osteoarthritis gene therapy, PCRX-201.

Pacira chartThe company’s lead product, Exparel, a non-opioid pain block, was approved for an expanded application by the FDA in November, to be used as a regional analgesic for lower extremity procedures. Further supporting its sales is the fact that the drug is covered by Medicare reimbursement under the NOPAIN Act.

In 2023, Pacira had record revenue of $675 million, up 1%, with the iovera system, a handheld device that freezes the nerves causing knee pain, seeing a 29% gain in sales. Pacira substantially improved margins, with net income of $42 million, or  EPS of $0.89, compared with $15.9 million, or EPS of $0.34 in 2022.

The company forecasts 2024 revenue between $680 million to $705 million, up 2.5% at the midpoint.

Ticker  One-year price change  Market cap P/E
NASDAQ: PCRX -26.27% $1.36 billion 36.24

10. Organon – Biosimilar Sales Beef Up Earnings

The company, which spun off from Merck in 2021, operates in two segments: Women’s Health, which sells oral contraceptives, and fertility therapies and Biosimilars.

Organon chartOrganon had revenue of $6.3 billion, up 1%, and EPS of $3.99, up 11% in 2023. Biosimilar sales jumped 23%, buoyed by increased sales for cancer therapy Ontruzant, and by the sales of Humira biosimilar Hadlima. The latter’s sales should get an additional push as the Veterans Health Administration’s approved biosimilar for Humira patients.

Organon has kept its dividend at $0.28 since its spinoff, and has a dividend yield of around 6.24%.

Ticker  One-year price change  Market cap P/E
NYSE: OGN 0.67% $4.59 billion 4.49

How to Find the Best Pharmaceutical Stocks

Keep Up With Industry News

It’s expensive to develop drugs and therapies and by the time drugs become blockbusters, they have a relatively short window before they face generic or biosimilar competition. As much as with any industry, it’s important to be aware of how new therapies are faring in testing, and whether current therapies are likely to face tough new competition.

Investors in drugnakers need to keep updated on new technologies, drug approvals, clinical trial results, and market trends, as well as regulatory changes. Industry publications and conferences can be useful resources, as well as the EMA and FDA websites.

Follow Analyst Reports

Consider insights from established firms, though individual analysts vary greatly on their opinions. The key is seeing if there appears to be consensus about a particular pharmaceutical stock.

Evaluate if the Company Has a Healthy R&D Budget

Pharmaceutical stocks are different from other sectors because research and development (R&D) is so important for these companies’ long-term success. Their top products take a long time to develop and then, just as they are hitting peak revenue, will likely face generic or biosimilar competition. For that reason, the top pharmaceutical companies spend big on their pipelines, both for research to develop new therapies or in some cases, to buy new therapies.

The best pharmaceutical stocks generally are large-cap stocks, with plenty of free cash flow to develop a pipeline or to buy smaller companies to grow revenue. A strong R&D pipeline with promising drug candidates or innovative medical devices can provide major long-term potential.

Where to Get Pharmaceutical Stock Tips and Insights

To learn more about pharmaceutical stock picks, we recommend checking out AltIndex, a subscription service that uses artificial intelligence (AI) and alternative data

altindex chartThe service even has its own list of top pharmaceutical stocks. AltIndex analyzes social media and other websites, app downloads, customer satisfaction ratings, and other data regarding a company.

The data AltIndex gathers over time is then compared to other companies while using machine learning to come up with investment insights. Stocks are given a score from of 1 to 100, simplifying the analytical process for investors.

With more than 10k members, AltIndex is a widely used and trusted service. It provides over 100,000 unique daily stock insights and alerts, and has a very impressive win rate of 75% from its AI stock picks.

You can try AltIndex’s Starter Plan for just $29 a month and receive stock picks directly to your email, as well many other useful features.

Conclusion

It’s unwise to bet against the pharmaceutical industry. Pharmaceutical spending is expected to increase, thanks to our ageing population and the proliferation of chronic diseases. Pharmaceutical stocks can help balance your portfolio by adding growth, along with above-average dividends.

It makes sense to research and buy both the large-cap pharmaceutical companies, as well as smaller biotech companies that have a better growth ramp as they can more quickly adapt to new trends in medicine, such as gene-editing therapies.

FAQs

What’s the top pharmaceutical stock right now?

What are the benefits to investing in pharmaceutical stocks?

What are the disadvantages of investing in pharmaceutical stocks?

Jim Halley
Editor
Jim Halley
Editor

I am an experienced journalist who has also worked as an editor and writer at the Savannah Morning News, Salt Lake Tribune, USA Today, Stars and Stripes, and The Motley Fool. I spent the first half of my career in sports journalism, but in recent years have switched to writing about my other passion, stocks, particularly healthcare, real estate and consumer staples stocks. I've won numerous journalism awards from the Associated Press and state press associations and have been a judge for the Georgia Sportswriters Association. I've written one non-fiction book, Just One More Time, about Georgia Southern football, and…