In this article, we will be taking a look at the 10 innovative healthcare stocks to watch in 2025.
In the US, healthcare costs and prices have been increasing. According to the Centers for Medicare & Medicaid Services, U.S. healthcare spending increased 7.5% from 2022 to $4.9 trillion in 2023. In 2023, the healthcare industry made up 17.6% of the US economy, an increase of 17.4% from 2022. The growth of Medicare and private health insurance is the two leading causes of this increase.
Impact of Tariffs on the US Healthcare Industry and China Relations
The impact of tariffs on this continuing trend has become a significant bone of contention in the healthcare industry as more and more US corporations turn to China for agreements on the next breakthrough chemical, whether in the areas of obesity or cancer. Carlo Rizzuto, managing director of Versant Ventures, spoke on CNBC’s “Fast Money” on February 7 about the impact of tariffs on healthcare. Rizzuto says that tariffs may impact the sector in two ways. Products made in China and sold in the US or other countries would be the first. The industry would need to watch how the tariffs are used in the market to comprehend how they would impact such trade operations.
Second, and more precisely, the US healthcare industry relies heavily on China as a basis for contract production and research. Consequently, anything that raises that price is probably going to make the market more difficult. Cost hikes won’t help the healthcare industry’s management, which is already under pressure from investors.
Speaking on China’s enormous impact in the pharmaceutical and healthcare sectors, Rizzuto said that the vast majority of healthcare companies use a Chinese CRO or manufacturing partner in some capacity during the research and development phase. As a result, it significantly affects how the nation’s biotech and pharmaceutical industries function. This trend is rather common in businesses of all sizes.
In other words, the lack of infrastructure to facilitate the transfer prevents healthcare corporations from reshoring all of their externalized R&D and production to the United States. Therefore, it is hard to imagine how such a large-scale reshoring might occur. The amount of tariffs imposed can be used to determine the expenses of achieving this objective linearly.
According to McKinsey, healthcare EBITDA will rise from a starting point of $676 billion in 2023 to $987 billion in 2028 at a 7% CAGR. Recovery from post-pandemic lows is anticipated to spur progress in several areas, even though development is anticipated to be faster in some (such as specialized pharmacy and HST). Software platforms are essential to the healthcare ecosystem because they let payers and providers operate more effectively in a complex environment.
By automating procedures, fostering data connectivity, and producing actionable insights, technological innovation (such as generative AI and machine learning) keeps providing opportunities for stakeholders from all industries. McKinsey predicts that increased utilization and pipeline expansion (as in cancer) will result in a considerable increase in specialty pharmacy income. Specialty pharmacy profit pools are continuing to grow as a result of the rise in the use of specialty medications.
With this in mind, we will now have a look at the 10 innovative healthcare stocks to watch in 2025.
A healthcare professional in a meeting with a patient discussing care options using digital technology.
Our Methodology
For this article, we began by screening the top holdings of the iShares U.S. Healthcare ETF (IYH) to focus on prominent companies within the U.S. healthcare sector. From this list, we selected the top 10 holdings based on their weight in the ETF portfolio. We then ranked these stocks according to the number of hedge funds holding positions in each company as of Q4 2024, based on data from Insider Monkey’s hedge fund tracking database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Here is our list of the 10 innovative healthcare stocks to watch in 2025.
10. Abbott Laboratories (NYSE:ABT)
Number of Hedge Fund Holders: 66
Abbott Laboratories (NYSE:ABT) discovers, develops, manufactures, and sells healthcare products. The company’s business segments include medical equipment, well-known pharmaceutical items, diagnostic products, and nutritional products. Its established pharmaceutical items business sells a wide variety of branded generic pharmaceutical products abroad. Products about electrophysiology, neuromodulation, structural heart, heart failure, rhythm management, and diabetes care are sold all over the world by the Medical Devices division.
The main business of Abbott Laboratories (NYSE:ABT) highlights several growth opportunities. The company’s FreeStyle Libre franchise, which offers a range of continuous glucose monitoring (CGM) devices and has the potential to grow its market share, has been one of its main growth engines in the diabetes care sector. The company’s cardiovascular products, especially its structural heart portfolio, should provide long-term growth as the world’s population ages.
In fiscal Q4 2024, the company’s operating cash flow was $8.5 billion, which it used to pay down debt, expand capacity, and distribute $5 billion in dividends and share repurchases to shareholders. Abbott Laboratories (NYSE:ABT) is in a strong position to generate strong growth in fiscal 2025, with an organic sales growth estimate of 7.5% to 8.5%. Its diverse business and industry knowledge, along with its creative skills, provide it with a competitive edge in the market, making it one of the best healthcare stocks to consider for long-term growth.
9. Amgen Inc. (NASDAQ:AMGN)
Number of Hedge Fund Holders: 72
Amgen Inc. (NASDAQ:AMGN) discovers, develops, manufactures, and markets human therapeutics. Especially in areas where many unmet needs exist, it offers patients complex, cutting-edge treatments. After fiscal Q4 2024, the company had 14 pharmaceuticals with annualizations of more than $1 billion each. Several of these are expected to be significant growth drivers for the company over the next ten years.
Furthermore, TEPEZZA, the first and only FDA-approved drug for the treatment of Thyroid Eye Disease (TED), may receive international regulatory clearance in 2025, adding to Amgen Inc. (NASDAQ:AMGN)’s strong rare illness portfolio. With the introduction of new indications for UPLIZNA, a treatment for neuromyelitis optica spectrum disorder (NMOSD), the company’s rare illness business is expected to continue to grow, making it one of the best healthcare stocks in the market.
Two drugs that continuously contribute to Amgen Inc. (NASDAQ:AMGN)’s strong growth are EVENITY, which treats osteoporosis in postmenopausal women, and Repatha, which treats heart disease and cholesterol. The value of the product Repatha has increased to billions of dollars. The biggest cause of death worldwide, heart disease, is contributing to its rise. Analysts are hopeful about the company because of the expected five-year payout from its October 2023 acquisition of Horizon Therapeutics.
PGIM Jennison Health Sciences Fund stated the following regarding Amgen Inc. (NASDAQ:AMGN) in its Q2 2024 investor letter:
“Amgen Inc. (NASDAQ:AMGN) is a large-cap global biotech company with a diverse portfolio of marketed and pipeline products. Amgen’s discovery pipeline has led the company to broaden its focus from oncology, immunology, and renal disease to include musculoskeletal, cardiovascular, and neurologic conditions. In addition, Amgen has turned its expertise in antibody manufacturing into a leading position in the development of biosimilars of competitor drugs. Most recently, Amgen shares advanced in 2Q following its announcement that its novel injectable GLP-1 agonist / GIPR antagonist, MariTide, for obesity, showed promising interim Phase 2 data and has shown enough promise to warrant advancement into pivotal trials as soon as late 2024. While Eli Lilly and Novo Nordisk will remain the market leaders in the diabetes/obesity space, we think there is room for Amgen to carve out a meaningful share of the market with its antibody-peptide conjugate approach that could enable monthly or better dosing for MariTide.”
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