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Pharmaceutical stocks are shares of publicly traded companies that engage in the development and marketing of prescription drugs. Some companies may exclusively focus on prescription drugs, while other larger pharmaceutical companies, like Johnson & Johnson, may be involved with other areas of the health care industry, including consumer health products and medical devices.

Pharmaceutical stocks are best for growth investors who are willing to accept a considerable level of risk and don’t need to access their original investment for the next five to 10 years.

9 Pharmaceutical Stocks to Watch

  1. Amgen (Nasdaq: AMGN)
  2. AstraZeneca (NYSE: AZN)
  3. BioMarin Pharmaceutical (Nasdaq: BMRN)
  4. Bristol-Myers Squibb Co. (NYSE: BMY)
  5. Gilead Sciences (Nasdaq: GILD)
  6. GlaxoSmithKline (NYSE: GSK)
  7. Johnson & Johnson (NYSE: JNJ)
  8. Pfizer Inc. (NYSE: PFE)
  9. Sanofi (Nasdaq: SNY)

 

How to Find the Best Pharmaceutical Stocks

Image via Flickr by Dennis S. Hurd

Just like all other types of investing, investors looking to find pharmaceutical stocks to include in their portfolios need to look closely at a company’s financial condition. Developing and researching new drugs require a great deal of money, so it’s vital that drugmakers have access to the capital required to fund these research and development (R&D) activities.

For newer pharmaceutical companies, investors should check out any approved products. Specifically, review the sales growth for any of its approved drugs, identify any rival drugs that could eat into its current market share or result in price drops, and determine how long until they face biosimilar or generic competition.

Typically speaking, it’s better for a drug company to have more drugs in the later phases of development and clinical testing phases rather than in earlier research, since the odds of failure during the early stages of a new drug are quite high.

A pharma company has a better shot at success with:

  • Multiple pipeline projects in Phase 3 studies that have performed especially well in Phase 2 testing.
  • No rivals already existing on the market or in a late stage of development.

Here are nine pharmaceutical stocks to watch:

Amgen (Nasdaq: AMGN)

While very much an aggressive next-generation biotech in the same lane as the recently-acquired Celgene Corporation, (NasdaqGS: AMGN), Amgen’s market capitalization of over $100 billion definitely should not be dismissed. In fact, by that measure of size, it’s considered one of the top 10 largest drugmakers.

While created in the 1980s, and missing the long pedigree often seen with other drugmakers, Amgen has made a name for itself by focusing on conditions typically overlooked by other big pharma corporations, including bone cancer, osteoporosis, kidney failure, and others. The resulting drugs have been lifesavers for patients and big profit centers for AMGN through the decades.

AstraZeneca (NYSE: AZN)

AstraZeneca offers a variety of pharmaceuticals that treat a wide array of serious conditions, such as maintenance drugs for many common kidney and cardiovascular disorders. Due to the seriousness of these conditions, patients are often willing to cut back on other things before forgoing lifesaving treatments provided by AstraZeneca. This is the core appeal of pharmaceutical stocks: Maintenance drugs are a reliably budgeted items for many households, resulting in reliable dividends for investors.

BioMarin Pharmaceutical (Nasdaq: BMRN)

Strangely enough, BioMarin is arguably one of the riskiest pharmaceutical stock investments on the list, even with a market capitalization of around $15 billion. This typically is the nature of biotech stocks, and as BioMarin Pharmaceuticals specializes in “orphan” or rare-disease drugs, there’s an inherent risk with this stock.

For example, if a company spends all its money on research and development for a drug that doesn’t pass FDA approval, that presents a bit of a setback.

However, long-term, BioMarin has been rather successful. Between 2007 and 2019, company sales increased from $22 million quarterly to $400 million, with shares advancing nearly fivefold. With three projects in earlier stages of development, two in Phase 3 trials, and seven drugs currently on the market, the company appears to be nicely diversified, and its revenue is anticipated to double again between 2018 and 2022.

Bristol-Myers Squibb Co. (NYSE: BMY)

Bristol-Myers is another well-known legacy pharmaceutical company. With roots dating back to 1887, Bristol-Myers has manufactured several popular products, including the original antibacterial giant, penicillin. However, BMY isn’t a company hanging out in the past. In January 2019, it offered an impressive $74 billion to buy Celgene, a next-generation biotech stock. This shows not only how deep-pocketed the company is, but also its desire to continue dominating the sector as opposed to resting on its laurels.

Gilead Sciences (Nasdaq: GILD)

Gilead is a research-based drug company — part of the biotech revolution focusing on niche treatments that serve previously unmet medical needs in Europe, the U.S., and others. This includes products for treating rare cancers, HIV/AIDS, and liver diseases. While the patient pool for cases like these is smaller, the lack of other viable treatment options results in these drugs being able to command premium prices, fueling significant profits and dividends for stockholders.

GlaxoSmithKline (NYSE: GSK)

Another company that operates several business segments to secure its revenue, GlaxoSmithKline’s non-pharmaceutical products include Tums antacids, Boost nutrition shakes and Aquafresh toothpaste. Of course, this is on top of a robust product line of patented pharmaceuticals and a billion-dollar development-and-research budget. It has the best of both worlds: a solid portfolio of everyday consumer products with long-term potential and a higher-reward line of patented drugs.

Johnson & Johnson (NYSE: JNJ)

A U.S.-based medical device, consumer packaged goods, and pharmaceutical manufacturing company, Johnson & Johnson has been around since 1886. With a pharmaceutical business spanning the areas of pulmonary hypertension, oncology, neuroscience, infectious disease and vaccines, immunology, cardiovascular, and metabolism, it is truly a big pharma giant.

2018 was a tough year for Johnson & Johnson, starting on a bad note with changes in tax laws and adverse market conditions, which caused the price of its stock to plummet. Strong sales of Zytiga, a prostate cancer therapy, and Stelara, an anti-immune biologic drug, saw the company outlook start to improve at the beginning of the second quarter. The price started bouncing back in the second quarter as demand increased sales of key drugs, medical devices, and consumer products.

Mid-December reports that company management was aware of safety concerns with its talcum powder essentially erased its YTD gains, and the company ended 2018 with net negative returns.

Pfizer (NYSE: PFE)

One of the most well-known pharmaceutical companies, Pfizer is a U.S.-based health care industry giant. A Dow Jones Industrial Average component, PFE has been in operations for almost 170 years in some way or another.

Its current blockbuster drugs include a group of vaccines under the Prevnar brand for pneumonia and similar type infections, blood thinner Eliquis, and Lyrica for treating fibromyalgia. Most investors have likely seen ads for one or more of these drugs, each bringing in more than $1 billion annually in revenue and exemplifying the large potential of Pfizer and it’s pipeline of products.

Sanofi (Nasdaq: SNY)

Sanofi is a pharmaceutical company that focuses on serious and oftentimes mostly unknown genetic conditions, including multiple sclerosis and Gaucher disease, along with certain types of cancers. It’s easy for investors to see why Sanofi’s products continue being must-buy items for patients worldwide.

In addition, this $100-billion drug company also produces more run-of-the-mill maintenance drugs for conditions that include diabetes and arthritis, making it a good choice for playing both mass-market treatments as well as high-priced niche pharmaceuticals.

It’s easy to see the appeal of investing in pharmaceutical stocks even with the risks that come with them. With nearly 10,000 baby boomers reaching retirement age daily, the prescription drug demand will continue to rise. Pharmaceutical stocks have the potential to generate solid future gains, with U.S. spending on prescription drugs expected to almost double by 2021, to a whopping $610 billion.

Schedule a free online training session with a member of the Raging Bull team of experts to learn more about investing in pharmaceutical stocks.

Author:
Kyle Dennis

Straight outta college Kyle Dennis taught himself to trade, and then made over $7 million in trading profits by the time he was 28 years old. Kyle reveals how to find, track, and profit from lucrative trades for exceptional profits. Thousands of traders follow him every day to learn how to target these high probability trades.

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