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The Best Pharmaceutical Stocks May Surprise You

Pharmaceutical stocks are a major component of just about any balanced portfolio.

America’s pharma industry is responsible for some of the biggest healthcare breakthroughs in history.

However, they don’t all trade the same.

Most major pharma stocks are slow-and-steady assets that offer decent dividends.

On the other hand, small-cap drug stocks can be extremely volatile, but they can generate incredible returns in a short time.

Whether you’re a long-term investor or speculative trader, you can find dozens of quality opportunities in the pharmaceutical sector.

Best Pharmaceutical Stocks to Buy Now

Pfizer Inc. (PFE)

Pfizer is one of the largest multinational pharmaceutical corporations on the planet.

It operates in virtually all countries across the globe.

Pfizer develops, manufactures, and markets drugs and healthcare products. Its global portfolio features both drugs and vaccines.

AbbVie Inc. (ABBV)

AbbVie is an Illinois-based company that originated as a spin-off of Abbott Laboratories in 2013.

They actively carry out research, develop, manufacture, and distribute drugs.

They tackle today’s health issues, ranging from life-threatening illnesses to chronic conditions.

The company has been making progress with its RINVOQTM drug.

They also reported positive developments regarding Allergan, which AbbVie aims to acquire.

Positive developments on both ends could make AbbVie an even more attractive pharmaceutical stock.

Eli Lilly And Co (LLY)

Eli Lilly develops,  manufactures, and markets pharmaceuticals. The firm offers drugs for human and animal use.

Eli Lilly has been making available a few drugs such as REYVOW™ (lasmiditan) C-V.

It is also working on clinical trials for a few other medicines.

The development of new drugs for conditions such as migraines, diabetes, and more would help boost demand for its products.

Bristol-Myers Squibb Co (BMY)

Bristol Myers Squibb focuses on discovering, developing, and delivering innovative medicine to patients with serious diseases.

The New York-based company is famous for its work with rheumatoid arthritis, diabetes, arthritis, HIV/AIDS, and more.

Novartis AG (NVS)

Novartis is one of the largest Pharma companies in the world in terms of both market cap and annual sales.

The company manufactures generic drugs, over-the-counter drugs, vaccines, diagnostics, contact lenses, and more.

Novartis’s partnership with the likes of Gilead will help them explore new areas.

Thus, making it highly likely that they record growth this year.

Cheap Pharmaceutical Stocks

Alimera Sciences Inc. (ALIM)

The Georgia-based company specializes in the commercialization and development of prescription ophthalmic pharmaceuticals.

Alimera mainly focuses on drugs for diseases affecting the back of the eye, or retina.

The company works on serving our aging population, ensuring that its drugs correct the eye defects older people have.

Adamas Pharmaceuticals Inc. (ADMS)

Adamas Pharmaceuticals has become famous for developing and manufacturing pharmaceutical products for chronic neurologic diseases.

The patent litigation with Sandoz Inc. has been settled and the company announced a new employment inducement grant.

These latest developments could be key to Adamas building a strong portfolio for the remainder of the year.

Adamas Pharmaceuticals had a rough run last year, but it’s starting to turn things around in 2020.

It’s very affordable and could record profits before the year is through.

Pharmaceutical Penny Stocks

China Pharma Holdings, Inc. (CPHI)

China Pharma Holdings is a Chinese company that trades on the NYSE.

 The firm manufactures and markets a wide range of products in China.

Their primary markets are hospitals and retailers.

Their drugs focus on cardiovascular applications, brain diseases, and infectious diseases.

In addition to manufacturing and marketing, China Pharma Holdings has a very active research and development unit.

China Pharma sells several types of products, including prescription drugs, OTC, and nutrition products.

Its drugs can be found in over 30 provinces and regions across China.

Agile Therapeutics Inc. (AGRX)

Agile Therapeutics regards itself is a forward-thinking women’s healthcare company.

Their primary focus is to fulfill the unmet health needs of women.

The firm offers female contraceptive options that don’t involve taking daily pills.

Acasti Pharma Inc. (ACST)

Acasti Pharma Inc. is a Canadian pharmaceutical company that trades on the NASDAQ exchange.

 This firm is a strong proponent of omega-3 fatty acids derived from krill oil.

According to their official website, omega-3 fatty acids are a safe and effective means of lowering triglycerides in patients suffering from hypertriglyceridemia.

Investing in Pharmaceutical Companies

The pharmaceutical industry is very unique.

It’s highly regulated and technical, so it can be intimidating for newer traders.

However, you can find a lot of quality trade opportunities if you take the time to understand the industry.


In the pharma industry, the clock starts ticking as soon as a new drug hits the market.

Drug firms have 20 years to take advantage of their exclusive patents, then it becomes a free-for-all.

Pharma companies get the best margins on branded medication that is under patent.

Patents give pharma firms pricing power, so they usually generate excellent returns from these drugs.

Pharmaceutical firms have to constantly roll out new branded drugs if they want to maintain high margins.

Product Pipelines

Investors pay a lot of attention to product pipelines.

Pharma stocks with a lot of promising drugs in development often support higher much higher valuations.

Product pipelines are one of the most important aspects of a drug companies future, so long-term investors should pay close attention to product pipelines.

Market Presence

Although the United States remains a leading country in terms of pharmaceutical revenues, the global pharmaceutical market has been witnessing massive growth over the past few years.

A report from IQVIA shows that the global pharmaceutical market was worth $1.2 trillion in 2018.

The market is set to reach around $1.3 trillion by 2023. Thus, as investors, you could also look at pharmaceutical companies and their market presence.

crm best pharmaceutical stocks
Source: Consumer Reports

Pharmaceutical Industry Overview

The pharmaceutical sector is responsible for the development, production, and sales of medications.

Obviously, this is an extremely important part of the economy that directly impacts the quality of life for billions of people across the globe.

The importance of this industry cannot be overstated.

The global pharmaceutical market grew significantly over the past two decades.

In 2001, global Pharma sales were around $390 billion.

That figure reached $1.2 trillion in 2018, and it’s expected to climb even higher over the next few years.

pharmaceutical industry market value
Worldwide Pharmaceutical Market Revenues [in billions of $]

The leading pharmaceutical companies are based in the United States and Europe.

Pfizer is one of the most notable pharma firms on the planet, with over $53 billion in revenues 2018.

Other top American pharma stocks include Johnson & Johnson, AbbVie, and Merck & Co.

On the international front, Europe has its own class of top-rate pharmaceutical companies.

Some of the leaders in the European pharma industry include NovartisGlaxoSmithKline (GSK), AstraZeneca, and Sanofi.

Pharmaceutical Industry Trends

Drug companies need to constantly innovate in order to earn consistent profits.

Federal law stipulates that drug patents become public domain after 20 years, so drug companies need to keep rolling out new patents in order to support their high margins.

This constant pressure to innovate leads to significant spending on research and development.

In 2010, the pharma industry spent $129 billion on R&D.

This figure grew to $182 billion in 2019 and is expected to reach $213 billion by 2024.

Artificial Intelligence

Pharma companies are starting to leverage AI in drug development and research.

These applications can crunch billions of data points much more rapidly than was previously possible.

AI has the potential to significantly reduce development time and research costs.

In a few years, AI technology could totally transform the pharma sector

How to Trade Pharma Stocks

When it comes to pharma stocks, it’s all about the pipeline, especially for small-cap pharmaceutical stocks.

However, the drug industry is highly regulated, so new medications need to undergo an extensive review process before they hit the public market.

In order to be approved, drug companies must put their products through a series of FDA-regulated clinical trials to prove the drug’s effectiveness and safety.

This is where things get tricky. No one can predict how clinical trials will play out. This creates significant uncertainty for pharma investors. The FDA review process includes three phases of clinical trials.

New drugs must pass through each stage of the process before the FDA will consider approving them.

On any given week, there could be dozens of high-stakes clinical trials unfolding across the country.

Each trial can be a catalyst for drastic movements in share prices.

If a trial goes unexpectedly well, it’s not uncommon to see a small-cap pharma stock double in price overnight.

On the other hand, bad results can bankrupt companies in a matter of days.

How to Follow Clinical Trials

If you want to trade pharma stocks successfully, you have to follow clinical trials.

They are so important that there are entire websites devoted to tracking them.

These types of resources can be a tremendous value for pharmaceutical investors.

  One website that can help you keep track of all the latest pharma stock news is BioPharmCatalyst.

 The site has an FDA calendar that breaks down all of the latest clinical trial news, so it’s a great resource for traders who want to stay on top of the market.

bc best pharmaceutical stocks

Bottom Line

The best pharmaceutical stocks have a strong and steady product pipeline.

For large-cap pharma stocks, look for companies with lots of free cash on the sidelines.

Large pharma companies will often buy out smaller firms for the sake of acquiring their drug patents and intellectual property, so extra cash can make all the difference in this industry.

On the small-cap side, look for companies with high-potential product pipelines.

These smaller firms have the best chance at clinical trials and they’re also major acquisition targets for the larger firms.

Either way, they have the potential to skyrocket if they can come up with a promising new drug.

A word of caution though, most pharma startups never make it. These firms go bankrupt all the time.

Investing in small pharma startups is like playing the lottery.

Even professional traders with decades of experience have a hard time getting it right. However, when you pick a winner, it pays off big.

More On the Top Pharma Stocks: Closing Thoughts

Pharmaceutical stocks have been delivering significant returns to investors over the years.

However, choosing the best pharmaceutical stocks to trade is a massive task for some investors.

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John Parker is a finance writer and journalist based in the Outer Banks, NC. He worked in finance for several years before branching out into his writing career. He is The Stock Dork's chief review writer and works with several other online publications.