The pharmaceutical industry has faced both challenges and changes for much of 2020. The COVID-19 pandemic and the development of an effective vaccine against it have dominated the sector and so far, 2021 seems little changed as more than 200 vaccines are currently in development. But the pandemic has pushed organisations small and large to reconsider their business approach and ensure that supply shortages and limitations were overcome. Traditional competitors have partnered to boost research and development, while a range of other entities have been working hand-in-hand with the industry to provide widespread distribution and administration. This shift appears to have paid off as projections anticipate that the global pharmaceuticals market is expected to grow from $1228.45 billion in 2020 to $1250.24 billion in 2021 at a compound annual growth rate (CAGR) of 1.8%.
With the introduction of the so-called new normal, digitization has redefined workplace environments, shifted health care delivery and forged innovative collaborations to create further efficiency in the industry. And while pharmaceutical innovation is saving the world, pharma companies are at the very centre of this transformation, acting as the drivers for sustaining this forward momentum.
Giants in their own right which have held their own despite the challenges and with impressive growth potential, here are the top pharma stocks you should consider if you’re looking to invest in the pharmaceutical industry.
What is the state of the pharmaceutical industry in 2021?
According to a study by Clinical Services International (CSI), the pharmaceutical industry is set to be influenced by four distinct trends. As more and more COVID-19 vaccines are underway, this is expected to encourage further collaboration among organisations, with joint ventures such as these creating more value and boosting further opportunities for a more effective coronavirus response. What’s more, with the digital transformation of the industry well under way, technological innovations are not only set to impact drug development and the supply chain, but can also help companies improve patient access and support, shorten the length of the production process and distribute products to the market more efficiently.
And while COVID-19 vaccines have stolen the spotlight and the sector is experiencing pressures on pricing, the cost of drug development and changing business models, investment in innovative breakthrough therapies will increase to both combat these issues and to diversify medication portfolios even further.
Lastly, global market presence is expected to be a growth point for organisations this year, with Japan seen as one of the most rapidly growing pharmaceutical markets. As organisations are turning their attention there, Japan’s research, development and manufacturing capabilities are anticipated to grow and compete with the world’s most established markets like those of the U.S.
Top Pharma Stocks
Johnson & Johnson (JNJ)
A global healthcare giant which manufactures and sells healthcare products through its three segments, namely pharmaceuticals, medical devices and consumer health products, Johnson & Johnson has a diversified business model and strong performance, whose brands include a number of household names like the Band-Aid brand line of bandages, Tylenol medications, Neutrogena skin and beauty products and Acuvue contact lenses to name a few. Since its inception in 1886, the company has grown to become one of the world’s largest and most broad-based healthcare companies, with approximately 135,000 employees across the globe.
In June 2020, the company together with the National Institute of Allergy and Infectious Diseases (NIAID) confirmed its plans to begin clinical trials of a COVID-19 vaccine. Two months later in August, the U.S. government agreed to pay more than $1 billion to the company for the production of 100 million doses of the vaccine. A component of the Dow Jones Industrial Average, thanks to the company’s vaccine efforts and success, its stock has climbed 3.4% as of midday June 18 on a year-to-date basis.
Meanwhile, in 2020, revenue was higher by 0.6% to $82.6 billion from the previous year, while adjusted EPS was at $8.03. At the same time, the company expects revenue of $90.5 billion to $91.7 billion and adjusted EPS of $9.40 to $9.60 for 2021. In fact, on releasing its first-quarter financial results in April, the company reported earnings and revenue that beat Wall Street’s expectations. Its adjusted EPS came in at $2.59 per share versus the expected $2.34, while revenue was at $22.32 billion as opposed to $21.98 billion. The results were mainly driven by sales of its myeloma drug Darzalex and Stelara, a treatment for Crohn’s disease. On the other hand, its pharmaceutical business which developed the single-shot COVID-19 vaccine generated $12.19 billion in revenue, a 9.6% year-over-year increase.
Showcasing how much of a rock-solid investment the company can be, Johnson & Johnson ranked in the 36th position on the 2021 Fortune 500 list of the largest U.S. corporations by total revenue, while it is one of two companies with an AAA rating. It’s also worth mentioning that impressively, Johnson & Johnson has increased its dividend for 58 consecutive years, with its stock dividend yield currently at 2.62%.
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Roche Holdings (RO)
Engaged in the prescription pharmaceuticals and diagnostics businesses in Switzerland, Germany and internationally, the Swiss company is the world’s second-biggest drugmaker and one of big pharma’s most profitable firms. From offering pharmaceutical products for treating conditions like cancer, hepatitis, lymphoma, leukaemia, HIV/AIDS and transplantation, amongst others, Roche also provides in vitro diagnostics solutions for cardiology, blood donor screening, infectious diseases, gynaecology and other conditions, while it supplies diagnostic instruments such as consumables and test kits for use in the diverse research market.
In June of this year, the U.S. Food and Drug Administration (FDA) granted emergency use authorisation to Roche’s 20-minute COVID-19 PCR test. The test, which is expected to help doctors make rapid and informed decisions, can be used for both symptomatic and asymptomatic people and provides wide-ranging SARS-CoV-2 strain coverage under its variant surveillance programme, which will further improve healthcare decisions. The global health crisis also set in motion some important partnerships. Roche forged a collaboration with Gilead Sciences for a global clinical trial of its medication Actemra/RoActemra in hospitalised patients with severe COVID-19 pneumonia, as well a license and collaboration agreement with Shionogi for the development and commercialisation of its oral anti-influenza drug.
Roche reported solid results in 2020, with group sales increasing 1% at constant exchange rates (CER), while its diagnostic division also grew 14% for the full year. Its core EPS increased ahead of sales at 4%. At the same time, the company is aiming to up its dividend by 1% to CHF 9.10 per share, marking the 34th consecutive year of dividend growth.
And despite the pandemic, Roche delivered its planned pipeline, after having a string of its medicines approved, namely thyroid cancer medication Gavereto and influenza medication Xofluza, as well as breast cancer Phesgo. In addition, four new medicines were launched, whereas nine new molecules were moved to pivotal clinical studies compared to about three per year during the last four years.
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Developing and producing medicines and vaccines for immunology, oncology, cardiology, endocrinology and neurology, up until recently, Pfizer was best known for its erectile dysfunction medication Viagra, however, it has several blockbuster products in its portfolio amongst which include medication in the Prevnar family, followed by Ibrance both of which were the company’s top products based on revenue. With its medications available in over 125 countries worldwide, as of 2020 it has more than 170 research and development projects in its pipeline.
And while the company has experienced moderate growth over the past five years which saw its stock being knocked off the Dow Jones Industrial Average in August 2020, the company has made a strong comeback this year. Pfizer’s 2020 revenue was around $42 billion, a decrease from 2019’s, partly due to the Upjohn spin-off that took place during the year when the business was merged with Mylan to create Viatris (VTRS), which now houses Pfizer’s older drugs.
Things took a turn for the better this year, with first quarter 2021 revenues growing 42%, solidly beating consensus estimates. It also outperformed expectations on key metrics of its COVID-19 vaccine revenue, which was nearly 60% higher than analysts’ estimates. In the first quarter of 2021, the BNT162b2 generated $3.5 billion in revenue.
Following the news that the Pfizer vaccine is over 90% effective in preventing COVID-19, its shares rose more than 15% in one trading session, whereas shares were up about 1.5% in pre-market trading following the earnings announcement. The company has faced some pressure though after U.S. President Joe Biden expressed his support to waiving the patent rights protecting COVID vaccines, making it easier for other countries to make their own jabs. However, since gaining authorisation in both the U.S. and Europe to vaccinate children as young as 12 against the disease, its stock is once again forming a promising base. And according to the company, it has inked contracts for approximately 1.6 billion doses of its vaccine in 2021.
It’s time to buy Pfizer (PFE) for your portfolio.
Merck & Co. Inc (MRK)
Founded in 1668, Merck is a German multinational science and technology company regarded as the world’s oldest operating chemical and pharmaceutical company, as well as one of the largest firms in the world. A group of around 250 companies located in 180 countries, the company is divided into three business lines, namely Healthcare, Life Sciences and Performance Materials.
For much of 2020 Merck has been in the spotlight for its efforts to produce a COVID-19 candidate vaccine. Unfortunately, on January 25, 2021 it released a statement announcing that it had discontinued its COVID-19 vaccine research due to disappointing clinical trial results. Its stock tumbled 9.6% over that month, while its sluggish vaccine development in a highly competitive race contributed to an 11.8% decline in its stock price over the past year.
Yet, there is more to Merck than its attempt to create a coronavirus vaccine. The company is a force to be reckoned with, boasting more than six blockbuster medications in its portfolio, including Remicade, Implanon, Januvia and Keytruda. The latter, has played an instrument role in driving Merck’s steady revenue growth in the past few years, with nearly a third of sales - 32% to be exact - stemming from cancer treatment Keytruda, whose sales grew 19%, reaching $3.89 billion.
Meanwhile, revenue from diabetes medicine Januvia inched 1% higher to $1.26 billion. According to analysts, the company is on track to possibly achieving nearly $16 billion in sales in 2021 and by 2026, Merck is expected to do $24.32 billion annually in sales. Despite its COVID woes, clearly, the company’s financials are robust and with 350 years of experience under its belt, its growth potential is nonetheless very promising.
Interested? Buy Merck & Co Inc (MRK) stock here.
The Swiss multinational pharma company based in Basel researches, develops, manufactures and markets healthcare products worldwide and operates through two main segments - its Innovative Medicines and Sandoz. The former provides prescription medicines for patients and healthcare providers in ophthalmology, neuroscience and immunology, amongst others segments, whereas through Sandoz, it offers active ingredients and finished dosage forms of molecule pharmaceuticals to third parties.
Its strong and broad portfolios of both oncology drugs and generics, as well as its strong presence in neuroscience and cardiovascular, has helped Novartis retain its dominant position as a top pharma company over the years. However, in the past decade, it has been suffering from stagnation mainly due to poor execution by the management team, so much so that between 2011 and 2020, Novartis’ EPS was practically flat. Under new leadership, the company has seen consistent growth, particularly thanks to its efforts to improve its pipeline, a move seen by many as a smart one since it has enabled the firm to rely far less on legacy products which are not defended by patents and tend to have lower margins.
With a current market cap of CHF210.95 billion, in 2020 the company’s total revenue was that of $48.7 billion, an increase of some $1.3 billion or 3% compared to the previous year. Between 2014 and 2020, the bulk of Novartis’ revenue was generated through its pharmaceuticals and more specifically its innovative medicines. In fact, last year, the company made $39 billion from this segment, with close to one fifth of its revenue generated from its generic drug division Sandoz.
Thanks to its license and collaboration agreement with Alnylam Pharmaceuticals to develop, manufacture and commercialise Inclisiran, its agreement with CureVac for the manufacturing of a COVID-19 vaccine candidate and its collaboration with Artios Pharma to create next generation DDR cancer therapies, without a doubt, the company has impressive growth opportunities ahead.
Head over to Moneybase Invest to add Novartis (NVS) to your portfolio.
Eli Lilly (LLY)
Founded in 1876 and named after Colonel Eli Lilly, a pharmaceutical chemist and veteran of the American Civil War, the pharma conglomerate boasts one of the more diverse catalogues in the industry, with nine medications that individually raked in more than $1 billion annually. With products sold in approximately 125 countries, among its revenue leaders are Trulicity and Jardiance both of which are used for type 2 diabetes and Taltz employed for plaque psoriasis. More specifically, Trulicity brought in $5.06 billion, Taltz $1.788 billion and Jardiance brought in $1.153 billion, an indication that each has grown by 23%, 31% and 2% respectively year-over-year.
A company brimming with notable achievements, Eli Lilly was one of the first to mass produce the polio vaccine, as well as insulin, while it was one of the first pharma companies to produce human insulin using recombinant DNA, including Humulin, an insulin medication, Humalog, an insulin lispro and the first approved biosimilar insulin product in the U.S. by the name of Basglar. Actively seeking acquisitions over the past few years to enhance its product portfolio, currently Eli Lilly is a major manufacturer of psychiatric medications, producing Prozac, Dolophine and Zyprexa in addition to others.
But after announcing mixed results from its clinical trials of Donanemab, a medication to treat Alzheimer’s disease in March 2021, its stock price dropped 10%, reaching a $180.17 low-point, as investors feared that the drug would fail in further clinical trials. By June 10, it reached a high of $233.54. In effect, with its strong portfolio and pipeline ahead, growing revenues during one of the toughest years and a boosted dividend compared to that paid out last year, there’s no stopping it.
Head over to Moneybase Invest to buy Eli Lilly (LLY).
Novo Nordisk (NOVOB)
The Danish pharma conglomerate with production facilities in eight countries and affiliates or offices in 5 others, Novo Nordisk manufactures products and services specifically for diabetes, including care medications and devices for the condition. It is also a heavyweight in other areas including haemostasis management, growth hormone therapy and hormone therapy replacement. As a result, thanks to its extensive portfolio of these insulin and diabetes-related products and medications, it is considered a blue-chip stock, having held its own against many of its competitors hot on its heels.
The challenges brought on by the pandemic didn’t have a detrimental effect on the company, seeing that Novo Nordisk managed to increase its earnings per share by 8% year-over-year to $0.88 a share, beating analysts' expectations of $0.83 a share, while, at the same time, it reported overall sales growth of 7% in the quarter over year. It also saw a 9% sales growth in its international operations. And this on top of management’s reaffirmation of committing to return $2.69 billion to shareholders, in addition to its existing share buyback programme and semi-annual dividend.
Joining the fight against the COVID-19 pandemic, in March of 2020, volunteers began testing samples of SARS-CoV-2 with RT-qPCR equipment in order to increase available test capacity. At the same time, it has stepped up its merger and acquisition activity over the last year, making some notable acquisitions, namely the AstraZeneca spin-off Corvidia Therapeutics and Emisphere Technologies with the aim to gain control of a pill-based treatment for diabetes.
Upgrading its financial guidance for the rest of the year, Novo Nordisk is projecting 6% sales growth for 2021, up from February’s prediction of 5%, while it has announced some bold goals through 2025, including winning a third of the global market share for diabetes treatments and doubling its current sales for obesity-related products.
Perhaps it’s time to add Novo Nordisk (NOVOB) to your portfolio.
From its cutting-edge cancer medications like Tagrisso, Imfinzi and Lynparza to developing a vaccine against the COVID-19 pandemic, AstraZeneca has a vast portfolio of products for major diseases in a wide range of areas including oncology, cardiovascular, gastrointestinal, infection, neuroscience, respiratory and inflammation. Since its founding in 1999 following the merger of Swedish Astra AB and the British Zeneca Group, the company has grown to become one of the world’s largest pharmaceutical companies.
AstraZeneca has certainly stolen the spotlight in the past year for its COVID-19 vaccine. The two-dose jab is one of the big three vaccines, along with those developed by Pfizer and Moderna, yet, it has by far the greatest global reach, with about 130 countries using the vaccine as opposed to the 84 administering the Pfizer and the 37 the Moderna. It hasn’t been smooth sailing though. The company faced backlash after its vaccine’s link with rare blood clots associated with low platelet counts. Meanwhile, its stock has been on a rollercoaster, going up and down in value depending on the most recent developments. The stock began trading at around $50 in 2020, then dipped to $39.42 by March 20 only to reach a high of $61.10 by July 17.
But COVID-19 is not Astrazeneca’s sole area of success. Sales of its other medications, such as cancer drug Tagrisso have soared, as well as that of Imfinzi and Lynparza. Total revenue for 2020, including product sales and collaboration revenue, increased by 9% to $26,617 million, whereas product sales grew by 10%. In addition, total revenue from new medicines increased by 33% to $13,950 million. It also delivered robust revenue growth in the first quarter of 2021, marking a 15% increase.
Add Astrazeneca (AZN) stock to your portfolio.
How to invest in pharma stocks
Ready to buy a share of these top pharma stocks? Your first step to tapping into a world of investment opportunities with Moneybase Invest is to sign up and open an account.
- Download the app from either Google Play or the Apple App Store. Alternatively, you may access Moneybase Invest on your desktop by visiting https://live.cctrader.com/
- Once you’ve onboarded successfully and have funded your account, head over to the search bar at the top of your screen and input either the company name or ticker symbol.
- Select the instrument of your choice from the list and then click on the Buy button on the window located at the bottom of your screen.
- On the New Order page, input the number of shares you would like to purchase and hit the Place Buy Order. The stock has been added to your portfolio.
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