Top Pharmaceutical Stocks

EMBC, SNDL, and LNTH are top for value, growth, and momentum, respectively

The pharmaceutical industry is made up of companies that research, develop, make, and sell drugs and treatments used to treat or eradicate diseases and vaccinate people. This includes some of the largest and best-known companies in the world, such as Pfizer Inc., Merck & Co., and AbbVie Inc. A number of pharmaceutical companies have experienced a surge in their sales after winning approval from U.S. and other governments for vaccines aimed at protecting people against the COVID-19 virus.

Over the past 12 months, pharmaceutical stocks, based on the iShares U.S. Pharmaceuticals ETF (IHE), have outperformed the overall market. IHE's total return over the period was -2.6%, compared with the S&P 500's total return of -9.8%. These market performance figures and all statistics in the tables below are as of Sept. 14, 2022.

Here are the top three pharmaceutical stocks in each category: best value, the fastest growth, and the most momentum.

Best Value Pharmaceutical Stocks

These are the pharmaceutical stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.

Best Value Pharmaceutical Stocks
  Price ($) Market Cap ($B) 12-Month Trailing P/E Ratio
Embecta Corp. (EMBC) 32.50 1.9 5.5
Organogenesis Holdings Inc. (ORGO) 3.55 0.5 6.4
Organon & Co. (OGN) 28.62 7.3 6.6

Source: YCharts

  • Embecta Corp.: Embecta is a diabetes care company that makes medical devices. The company offers pen needles, syringes, and safety devices to help people manage diabetes. Embecta only recently became an independently traded public company. On April 1, the company announced that it had completed its spinoff from Becton, Dickinson & Co., also known as BD.
  • Organogenesis Holdings Inc.: Organogenesis Holdings is a holding company that, through subsidiaries, develops and manufactures products used for advanced wound care and in the surgical and sports medicine industries. On Aug. 15, the company announced that it had received clearance from the U.S. Food and Drug Administration (FDA) for PuraPly MZ. PuraPly MZ is a brand extension of the pre-existing PuraPly brand and consists of a powdered product used to address complex surgical wounds.
  • Organon & Co.: Organon is a global women's health-care company that develops and produces medicines and other products across a range of areas, including reproductive health, heart disease, immunology, oncology, and dermatology.

Fastest Growing Pharmaceutical Stocks

These are the top pharmaceutical stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and their most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one or the other figure unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 2,500% were excluded as outliers.

Fastest Growing Pharmaceutical Stocks
  Price ($) Market Cap ($B) EPS Growth (%) Revenue Growth (%)
SNDL Inc. (SNDL) 2.80 0.7 N/A (see company description) 2,250
Intra-Cellular Therapies Inc. (ITCI) 50.15 4.7 N/A (see company description) 189.8
Merck & Co. (MRK) 86.95 220.3 154.1 28.0

Source: YCharts

  • SNDL Inc.: SNDL is a Canada-based medical and adult-use cannabis producer. The company operates cultivation and processing facilities, retail stores, and also sells alcoholic beverages. The company announced on Aug. 22 that it would acquire cannabis product manufacturer Valens Co. (VLNS) for total consideration of about $138 million. The deal is expected to close in January 2023. SNDL had negative EPS for the most recent quarter, so it does not have an EPS growth figure in the table above.
  • Intra-Cellular Therapies Inc.: Intra-Cellular Therapies is a biopharmaceutical company that develops and markets treatments for people living with complex psychiatric and neurologic diseases. The company reported Q2 2022 earnings on Aug. 9. Net losses widened as revenue nearly tripled YOY. Intra-Cellular said that "strong uptake in bipolar depression" contributed to revenue growth. The company had negative EPS for the most recent quarter, so it does not have an EPS growth figure in the table above.
  • Merck & Co. : Merck & Co. is a global healthcare company which provides prescription medicines, biologic therapies, vaccines, and animal health products.

Pharmaceutical Stocks With the Most Momentum

These are the three pharmaceutical stocks that had the highest total return over the past 12 months.

Pharmaceutical Stocks With the Most Momentum
  Price ($) Market Cap ($B) 12-Month Trailing Total Return (%)
Lantheus Holdings Inc. (LNTH) 86.05 5.9 250.1
SIGA Technologies Inc. (SIGA) 13.20 1.0 113.8
Amphastar Pharmaceuticals Inc. (AMPH) 29.62 1.5 64.7
S&P 500 N/A N/A -9.8
iShares U.S. Pharmaceuticals ETF (IHE) N/A N/A -2.6

Source: YCharts

  • Lantheus Holdings Inc.: Lantheus is a holding company that operates through subsidiaries, including Lantheus Medical Imaging and Progenics Pharmaceuticals. The company offers diagnostics, targeted therapeutics, and artificial intelligence solutions used to detect and evaluate a variety of diseases and conditions.
  • SIGA Technologies Inc.: SIGA Technologies is a commercial-stage pharmaceutical company. It is focused on health and security, which includes developing countermeasures for biological and chemical attacks as well as vaccines and therapies for emerging infectious diseases.
  • Amphastar Pharmaceuticals Inc.: Amphastar Pharmaceuticals is a biopharmaceutical company that develops, manufactures, and sells generic and injectable, inhalation, and intranasal products. It also sells an insulin-active pharmaceutical ingredient. In mid-August, Amphastar reported that its New Drug Application for Epinephrine pre-filled syringes had been approved by the FDA. Epinephrine injection is used in certain patients experiencing septic shock.

Trends in Pharmaceutical Stocks

Regulation: It is difficult to overstate the importance of the U.S. Food and Drug Administration (FDA) to companies in the pharmaceutical industry. In short, the FDA effectively gets to decide who is even allowed to compete in the market. It is illegal to sell a drug or device with advertised medical claims without FDA approval, and insurance companies will typically not pay for their use. As a result, investors cannot afford to ignore the workings, or the prevailing mood, of the FDA when considering investments in this sector. However, unfortunately for investors, the FDA is not constant. The agency does not necessarily maintain a consistent view of its own mission, nor how best to execute it. As a result, the regulatory environment can sway back and forth between lenient and stringent, with little recourse for pharmaceutical companies or their investors.

Consumer behavior: Pharmaceutical company executives in a 2020 survey conducted by global consulting firm Deloitte rated consumer behavior among their top challenges for the year ahead. Consumers are changing their attitudes and behaviors in numerous ways—from increased use of technology and willingness to share data, to their interest in using tools to make decisions about prescriptions and care.

Serving the needs of an aging population: About 3.65 million Americans turn 65 every year, according to the AARP. And by 2030, the U.S. will have more residents 65 and older than children, the Census Bureau has projected. This means more people needing healthcare and pharmaceutical drugs, which in turn is expected to make pharma stocks grow. Pharmaceutical stocks don't always follow the same trends as other stocks, because people need medications no matter what. This doesn't mean that pharma stocks always perform better than the broader market, only that they sometimes do not follow the same progression.

Risks of Pharmaceutical Stocks

The companies in this sector face a significant list of risks in addition to the possibility that failing to receive regulatory approval for a drug could depress their stock prices:

  • Increased competition from generic drugs
  • Legal liability for opioid addiction
  • Product liability
  • Technological innovations that must be made
  • Counterfeit drugs and quality control
  • Expiring patents, which can cause the sudden drop-off of sales of products that previously constituted a large percentage of the market

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  1. YCharts. "Financial Data."

  2. Embecta Corp. "Embecta Completes Spin-off from BD and Lists on NASDAQ as a Global Leader in Diabetes Care."

  3. Organogenesis Holdings Inc. "Organogenesis Receives FDA Clearance for Next Generation PuraPly Surgical Solution."

  4. SNDL Inc. "SNDL Announces Agreement to Acquire The Valens Company to Create Leading Vertically Integrated Cannabis Platform."

  5. Intra-Cellular Therapies Inc. "Intra-Cellular Therapies Reports Second Quarter 2022 Financial Results and Provides Corporate Update."

  6. Amphastar Pharmaceuticals Inc. "Amphastar Pharmaceuticals Receives FDA Approval for Epinephrine Pre-Filled Syringes."

  7. Deloitte. "Biopharma Leaders Prioritize R&D, Technological Transformation, and Global Market Presence."

  8. SoFi. "Investing in the Pharmaceutical Industry."

  9. Risk & Insurance. "6 Critical Risks Facing the Pharmaceutical Industry."

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