Top pharmaceuticals stocks for the second quarter include Madrigal Pharmaceuticals Inc. (MDGL), Pliant Therapeutics Inc. (PLRX), and Reata Pharmaceuticals Inc. (RETA). The share prices of all three have more than tripled in the last year.
Pharmaceutical stocks, represented by the iShares U.S. Pharmaceuticals ETF (IHE), have fallen 1% in the past 12 months compared with a 1% gain for the Russell 1000.
Here are the top three pharmaceutical stocks in each category: best value, fastest growth, and the most momentum. All data in the tables below are as of May 2.
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|
|Theravance Biopharma Inc. (TBPH)||10.95||0.7||0.9|
|Assertio Holdings Inc. (ASRT)||5.79||0.3||3.3|
|GSK PLC (GSK)||36.35||7.4||4.4|
- Theravance Biopharma Inc.: A biopharmaceutical company in the Cayman Islands that develops and manufactures respiratory medicines such as Yupelri and Trelergy to treat chronic obstructive pulmonary disease (COPD).
- Assertio Holdings Inc.: This is a pharmaceutical company that treats chronic diseases such as rheumatoid arthritis and psoriasis.
- GSK PLC: A U.K.-based company that develops specialty medications and vaccines to treat infectious diseases. In April, GSK acquired BELLUS Health, a late-stage biopharmaceutical company located in Canada, for an equity value of $2 billion. On May 3, the company announced the U.S. Food and Drug Administration (FDA) approval of Arexvy, a respiratory syncytial virus (RSV) vaccine for adults over the age of 60. Arexvy is the first vaccine approved to treat RSV in older adults.
Fastest-Growing Pharmaceutical Stocks
These are the top pharmaceutical stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and their most recent quarterly YOY earnings-per-share (EPS) growth.
Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one or the other figure unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 1,000% were excluded as outliers.
|Fastest-Growing Pharmaceutical Stocks|
|Price ($)||Market Cap ($B)||EPS Growth (%)||Revenue Growth (%)|
|Aclaris Therapeutics Inc. (ACRS)||8.95||0.6||N/A (see company description)||417|
|Collegium Pharmaceutical Inc. (COLL)||22.30||0.8||N/A (see company description)||374|
|Intra-Cellular Therapies Inc. (ITCI)||63.26||6.0||N/A (see company description)||243|
- Aclaris Therapeutics Inc.: A clinical-stage pharmaceutical company that develops and manufactures drugs for the treatment of immuno-inflammatory conditions. On March 6, Aclaris's stock plummeted by 45% after it said topline data from its 12-week study of zunsemetinib for the treatment of hidradenitis suppurativa, a chronic skin condition, didn't meet efficacy standards. Note Aclaris doesn't have an EPS growth figure in the table above because the company reported a net loss per share in the most recent quarter.
- Collegium Pharmaceutical Inc.: This is a pharmaceutical company that specializes in producing therapies for pain management. On May 4, the company released first-quarter earnings with a net loss widening to $17 million from $13 million a year ago. At the same time, it posted revenue growth of 73% from increased sales of Xtampza ER and Belbuca. Note Collegium doesn't have an EPS growth figure in the table above because it reported a net loss per share in the most recent quarter.
- Intra-Cellular Therapies Inc.: This is a biopharmaceutical company that develops and markets treatments for people living with complex psychiatric and neurologic diseases. Note Intra-Cellular doesn't have an EPS growth figure in the table above because the company reported a net loss per share in the most recent quarter.
Pharmaceutical Stocks With the Most Momentum
These are the three pharmaceutical stocks that had the highest total return over the past 12 months.
|Pharmaceutical Stocks With the Most Momentum|
|Price ($)||Market Cap ($B)||12-Month Trailing Total Return (%)|
|Madrigal Pharmaceuticals Inc. (MDGL)||303.00||5.5||324|
|Pliant Therapeutics Inc. (PLRX)||23.30||1.4||312|
|Reata Pharmaceuticals Inc. (RETA)||99.84||3.7||271|
|iShares U.S. Pharmaceuticals ETF (IHE)||N/A||N/A||-1|
- Madrigal Pharmaceuticals: A biopharmaceutical company that develops treatments for non-alcoholic steatohepatitis (NASH), a liver disease. In December, the company's share price quadrupled after the release of positive topline results from its Phase 3 clinical trial of Resmetirom to treat liver disease.
- Pliant Therapeutics: Pliant is a biopharmaceutical company that develops and manufactures oral medications to treat liver fibrosis and similar diseases. Its share price jumped by 60% in January of this year following positive news regarding its Phase 2a trial demonstrating the efficacy of bexotegrast (PLN-74809), an oral medication to treat idiopathic pulmonary fibrosis (IPF).
- Reata Pharmaceuticals: A clinical-stage pharmaceutical company that develops novel therapies to treat neurologic disorders and chronic kidney disease.
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 gets to decide who is 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 typically won't pay for their use.
As a result, investors can't afford to ignore the workings, or the prevailing mood, of the FDA when considering investments in this sector. The agency and the regulatory environment it oversees can at times shift from lenient and stringent.
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: 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 in value. 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, just that they sometimes don't 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
Theravance Biopharma Inc. "About Theravance Biopharma."
Assertio Holdings Inc. "Form 10Q for the Quarterly Period Ended March 31, 2023," Page 23.
GSK PLC. "GSK Reaches Agreement to Acquire Late-Stage Biopharmaceutical Company BELLUS Health."
GSK PLC. "US FDA Approves GSK’s Arexvy, the World’s First Respiratory Syncytial Virus (RSV) Vaccine for Older Adults."
Aclaris Therapeutics Inc. "Stock Information."
Aclaris Therapeutics Inc. "Aclaris Therapeutics Announces Preliminary Topline Data from 12-Week Phase 2a Study of Oral Zunsemetinib (ATI-450) for Moderate to Severe Hidradenitis Suppurativa."
Collegium Pharmaceutical Inc. "Collegium Reports First Quarter 2023 Financial Results."
Intra-Cellular Therapies Inc. "Company Overview."
Madrigal Pharmaceuticals Inc. "Madrigal Announces Positive Topline Results from the Pivotal Phase 3 MAESTRO-NASH Clinical Trial of Resmetirom for the Treatment of NASH and Liver Fibrosis."
Madrigal Pharmaceuticals Inc. "Stock Quote & Chart."
Pliant Therapeutics Inc. "Stock Chart."
Plant Therapeutics Inc. "Pliant Therapeutics Announces Positive Data from the INTEGRIS-IPF Phase 2a Trial Demonstrating Bexotegrast 320 mg was Well Tolerated and Achieved Statistically Significant FVC Increase in Patients with Idiopathic Pulmonary Fibrosis."
Reata Pharmaceuticals Inc. "Our Story."
GoodRx Health. "FDA Clearance vs. FDA Approval Process for Medical Devices."
Deloitte. "Biopharma Leaders Prioritize R&D, Technological Transformation, and Global Market Presence."
AARP. "Age 65+ Adults Are Projected To Outnumber Children by 2030."
Risk & Insurance. "6 Critical Risks Facing the Pharmaceutical Industry."