In this article, we will look at the 11 Best Pharma Stocks to Buy According to Hedge Funds.

Why is China the Talk of the Town in the Pharma Industry?

The US pharmaceutical sector is experiencing a distinct trend never seen before with large American pharma companies continually looking for medicines in China. According to data from DealForma, as reported by CNBC, around 30% of Big Pharma deals with at least $50 million upfront in 2024 included Chinese companies. This was up from 20% the year before and almost 0% only five years prior.

Experts are attributing several reasons to this trend. Some believe that Chinese pharmaceutical companies are attracting attention because of their advanced development capabilities that are producing effective molecules in substantial quantities. These Chinese companies are also in a position to assign a lower price to these medicines compared to the US, and are capable of initiating their testing on human subjects quicker. According to CNBC, buyers have devised a business model allowing them to import medicines through licensing deals. Biotech companies are further pushed into making these deals due to the drying up of venture funding in China.

Although the potential reasons for this trend vary, experts believe this scenario is here to stay. While it is anticipated to affect the US pharmaceutical sector, how these repercussions might materialize is unclear. Some experts believe it could ruin American startups if large pharmaceutical companies stumble upon a promising Chinese drug at a low price; others believe the competition would be fruitful for the industry. CNBC reported that Tim Opler, a managing director in Stifel’s global healthcare group, said the following about the situation:

“It’s kind of a watershed moment where the pharma industry is like, ‘We don’t really need to buy U.S. biotechs necessarily. We will if it makes sense, but we can buy perfectly good biotech assets through licensing deals with Chinese companies.”

How Will the Pharma Industry Perform in 2025?

We talked about the potential performance of the pharma industry in a recently published article on 10 Oversold Pharma Stocks to Buy According to Analysts. Here is an excerpt from the article:

“On February 20, Emily Field, Head of European Pharma Research at Barclays, appeared on CNBC to discuss the dynamics of the pharmaceutical sector, the impact of US tariffs, and the performance of obesity drugs. She believed the industry may not underperform this year, at least in the first half. However, there are still several questions surrounding the performance of obesity drugs, as major players in the domain have exhibited contrasting previous year performance.

Talking about the tariffs, she said that their materialization poses a big open question for the pharmaceutical sector as some companies assemble their products in the US after manufacturing them abroad. Manufacturing costs are thus pretty low for these companies, which is a significant point to consider when determining the impact of tariffs. She believed that absorbing the additional cost of the tariffs would be very manageable for these companies. The market has reached the tail-end of the earnings season, and the situation hasn’t come up much on earnings calls over this quarter.”

With these trends in view, let’s look at the 11 best pharma stocks to buy according to hedge funds.

Our Methodology

We sifted through stock screeners, online rankings, and ETFs to compile a list of 25 pharma stocks. We then selected the top 11 with the highest number of hedge fund holders as of Q4 2024. We sourced the hedge fund sentiment data from Insider Monkey’s database. The list is sorted in ascending order of hedge fund sentiment.

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).

11 Best Pharma Stocks to Buy According to Hedge Funds

11. Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN)

Number of Hedge Fund Holders: 68

Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) is a pharmaceutical company that develops, discovers, and commercializes therapies for several diseases, including cancer, eye disorders, and allergic conditions. The company is advancing around 40 of its programs. It has relied on two primary products to drive top-line growth in the past years: Dupixent and Eylea. Dupixent is an eczema treatment whose rights Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) shares with Sanofi. Eylea, which Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) comarkets with Bayer, treats wet age-related macular generation.

While the company’s products are under pressure due to competition for its Eylea franchise, analysts believe Regeneron Pharmaceuticals, Inc.’s (NASDAQ:REGN) stock could grow by 50% from its current levels in the next year. This optimism is because, despite pressures, the company grew its total revenue by 10% year-over-year to $3.8 billion in fiscal Q4 2024. The positive performance was primarily due to Dupixent, which recorded a 15% year-over-year growth in its worldwide net sales to $3.7 billion in fiscal Q4 2024.

Dupixent ranked among the 10 best-selling drugs in the world last year. To continue this momentum, Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) and Sanofi are seeking a label expansion for the drug to treat a rare skin disease called bullous pemphigoid. If approved, Dupixent would become the first targeted drug in this narrow indication in the US.

10. Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX)

Number of Hedge Fund Holders: 68

Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) is a global biotechnology company that develops medicines for rare serious diseases. Its four approved medicines treat cystic fibrosis (CF), and one approved therapy treats severe sickle cell disease (SCD) and transfusion-dependent beta-thalassemia (TDT). The company’s product pipeline includes clinical-stage programs for various disorders, including TDT, SCD, CF, acute and neuropathic pain, APOL1-mediated kidney disease, type 1 diabetes, myotonic dystrophy type 1, and alpha-1 antitrypsin deficiency.

Despite struggles in the healthcare sector, Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) has outperformed the broader market and its biotech peers since 2022. It holds a dominant position in the cystic fibrosis market and is expanding its offerings beyond it. The company recently attained approval for Alyftrek to treat CF, further consolidating its presence in the market. It has low market competition and patents locked up into the 2030s, which is why investors are bullish on the stock.

Another reason behind this bullish sentiment is the recent regulatory approval Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) attained for Journavx (formerly known as suzetrigine) to treat acute pain. The drug does not have the addiction risks associated with opioid painkillers and delivers excellent pain relief, ranking this oral non-opioid pain signal inhibitor among the first new class of pain medicine in over 20 years.

Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) also has strong fundamentals. It delivered $2.91 billion in revenue in fiscal Q4 2024, representing 16% growth versus Q4 2023. For the full year 2024, revenue reached a record of just over $11 billion, reflecting a 12% growth versus 2023 and exceeding the company’s full-year product revenue guidance. Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) ranks tenth on our list of the 11 best pharma stocks to buy according to hedge funds.

9. Amgen Inc. (NASDAQ:AMGN)

Number of Hedge Fund Holders: 72

Amgen Inc. (NASDAQ:AMGN) is a biotechnology company that discovers, develops, manufactures, and markets human therapeutics. It delivers new therapies for patients with complex cancers, especially in areas with significant unmet needs. The company ended fiscal Q4 2024 with 14 medicines, each annualizing at more than $1 billion. Several of these are expected to be key growth drivers for the company through the decade.

Amgen Inc. (NASDAQ:AMGN) also has a strong portfolio for rare diseases, which is expected to expand in 2025 with the potential regulatory approval for TEPEZZA internationally, the first and only FDA-approved medicine to treat Thyroid Eye Disease (TED). Launches in new indications for UPLIZNA, which treats neuromyelitis optica spectrum disorder (NMOSD), are expected to further strengthen the growth trajectory of the company’s rare disease business.

Repatha, which treats cholesterol and heart disease, and EVENITY, which targets osteoporosis in postmenopausal women, are drugs continually delivering strong growth for the company. Repatha has developed into a multi-billion dollar product. Heart disease, the leading cause of death worldwide, is further driving its growth. Analysts are bullish on the stock as its October 2023 acquisition of Horizon Therapeutics is expected to pay off in the next five years.

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 had 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.”

8. Gilead Sciences, Inc. (NASDAQ:GILD)

Number of Hedge Fund Holders: 74

Gilead Sciences, Inc. (NASDAQ:GILD) is a biopharmaceutical company that advances medicines to prevent and treat serious diseases such as cancer, immunodeficiency virus (HIV), viral hepatitis, and COVID-19. Its portfolio of drugs focuses on medical areas with unmet needs and includes AmBisome, Atripla, Biktarvy, Cayston, Complera, and others. Gilead Sciences, Inc. (NASDAQ:GILD) operates in over 35 countries.

The company reported a 6% year-over-year growth in its fiscal Q4 2024 revenue, which reached $7.6 billion. Its GAAP EPS reflected a year-over-year increase of roughly 25%, while its adjusted EPS rose around 10.5% year-over-year to $1.90, surpassing analyst estimates.

The company’s HIV sales also present a positive picture, rising 8% in 2024 to $19.6 billion and exceeding its expectations of a 5% growth. Full-year sales for Biktarvy, an HIV treatment, rose 13%. Gilead Sciences, Inc. (NASDAQ:GILD) has established a track record of consistently strong growth in its HIV business, undergoing a 5% growth in 2022, 6% in 2023, and 8% in 2024. This growth is attributed to its strong execution and the strength of its innovation.

In addition to these strong results, Gilead Sciences, Inc. (NASDAQ:GILD) announced upbeat 2025 guidance, expecting significantly higher numbers and improved performance. Management expects non-GAAP diluted EPS of between $7.70 and $8.10, versus $4.62 for full-year 2024.

7. Zoetis Inc. (NYSE:ZTS)

Number of Hedge Fund Holders: 76

Zoetis Inc. (NYSE:ZTS) is a global animal health company that focuses on the discovery, development, manufacture, and commercialization of vaccines, medicines, biodevices, genetic tests, diagnostic products, and precision animal health. Its operations are divided into the United States and International segments. Each segment boasts a diversified product portfolio, including vaccines, parasiticides, pain and sedation, animal health diagnostics, and more.

The company markets its products in around 45 countries across the globe and specializes in products across eight core species: companion animals (dogs, cats, and horses), cattle, swine, livestock (sheep and fish), and poultry. Zoetis Inc. (NYSE:ZTS) delivered 11% revenue growth in fiscal Q4 2024, reflecting the strength and demand of its brands and its continued focus on execution to drive broad-based growth. Revenue in the US grew by 11%, while international revenue increased by 10% operationally, marking significant revenue milestones for the company in a competitive landscape.

It also drove operational revenue growth in its companion animal portfolio and 5% operational revenue growth for its livestock portfolio. Zoetis Inc. (NYSE:ZTS) is confident about the ability of its growth drivers to drive sustainable growth in 2025, positioning it for continued above-market growth in the mid-to-high single-digit range for 2025 and beyond. The diversity of its business model with multiple growth drivers supports this optimism.

6. AbbVie Inc. (NYSE:ABBV)

Number of Hedge Fund Holders: 85

AbbVie Inc. (NYSE:ABBV) is a research-based pharmaceutical company that develops and sells products to treat chronic diseases in oncology, gastroenterology, rheumatology, dermatology, virology, and various other serious health conditions.

It also has strong fundamentals and generated $15.1 billion in revenue in fiscal Q4 2024, reflecting a 5.6% growth and exceeding analyst expectations. This growth was attributed to its ex-Humira platform, a drug collection in the company’s pharmaceutical portfolio. The platform delivered more than 18% full-year sales growth, with revenue growth accelerating to 22% in fiscal Q4 2024.

Analysts are optimistic about AbbVie Inc.’s (NYSE:ABBV) growth, primarily because of its two blockbuster drugs, Skyrizi and Rinvoq. These drugs, which target dermatology, rheumatology, psoriatic diseases, and inflammatory bowel disorders, are projected to exceed $27 billion in annual sales by 2027. AbbVie Inc. (NYSE:ABBV) also announced a dividend increase of 5.8%, effective February 2025, continuing its trend of increasing dividends for 12 consecutive years.

Polaris Capital Management said the following about AbbVie Inc. (NYSE:ABBV) in its Q3 2024 investor letter:

“US biopharma/biotech companies topped the health care sector, with the majority of holdings posting returns in excess of 10%. AbbVie Inc. (NYSE:ABBV) showed positive top-line growth from its immunosuppressive drugs, Skyrizi and Rinvoq. Abbvie’s management continues to work through the loss of exclusivity from Humira, switching patients to Skyrizi or Rinvoq rather than Humira biosimilars.”

5. Bristol-Myers Squibb Company (NYSE:BMY)

Number of Hedge Fund Holders: 88

Bristol-Myers Squibb Company (NYSE:BMY) is a biopharmaceutical company that discovers, develops, and delivers advanced medicines for serious diseases. Its medicines fall into various therapeutic classes, including hematology, oncology, cardiovascular, immunology, and neuroscience.

The company has a strong drug portfolio and robust pipeline due to acquisitions and partnerships, forming a base of a wide economic moat. For instance, its acquisition of Celgene strengthened its pipeline, providing it with a strong entrenchment in blood cancer. Bristol-Myers Squibb Company’s (NYSE:BMY) recent acquisitions of oncology firms RayzeBio and Mirati and neurology firm Karuna have further bolstered its overall pipeline.

Bristol-Myers Squibb Company (NYSE:BMY) has also exhibited strong performance in dividend growth, with eight consecutive years of increases and outperforming the sector median of two years by 300%. It has maintained dividend payments for 35 consecutive years, surpassing the sector median of 15 years by 133%. This reflects the company’s strong financial health and ability to deliver value to shareholders. It ranks fifth on our list of the 11 best pharma stocks to buy according to hedge funds.

4. Merck & Co., Inc. (NYSE:MRK)

Number of Hedge Fund Holders: 91

Merck & Co., Inc. (NYSE:MRK) is a biopharmaceutical company that delivers health solutions to advance the treatment and prevention of diseases in animals and people. Its Pharmaceutical segment offers vaccines and human health pharmaceutical products, which typically consist of therapeutic and preventive agents. Its Animal Health segment develops, discovers, manufactures, and markets a range of vaccines and veterinary pharmaceutical products.

Merck & Co., Inc.’s (NYSE:MRK) pipeline lends it a competitive market advantage, with around 20 potential new growth drivers holding blockbuster potential. Its late-stage pipeline in infectious diseases, oncology, and cardiometabolic further bolsters its future outlook. The company’s strong commercial execution, diversified portfolio, and innovative pipeline lend it resilience against short-term headwinds, positioning it as an attractive investment with a solid long-term growth trajectory.

However, the company is experiencing some headwinds, negatively impacting its revenue outlook. For instance, it has temporarily stopped the shipments of its HPV vaccine Gardasil to China until mid-2025 due to weak discretionary spending. Despite these short-term challenges, Merck & Co., Inc. (NYSE:MRK) has strong operations, supported by robust demand for its diverse and innovative portfolio. Its Keytruda drug for cancer treatment is performing well, and the launch of Winrevair, a drug that treats pulmonary arterial hypertension (PAH), is also boosting revenue growth for the company.

GreensKeeper Asset Management, an investment management company, released its Q3 2024 investor letter. Here is what the fund said:

“Merck & Co., Inc. (NYSE:MRK) was our second-largest detractor this quarter, declining -8.3%. MRK’s leading HPV vaccine, GARDASIL 9, faced challenges internationally due to inventory buildup within its Chinese distributor, which is expected to reduce shipments for the remainder of 2024. Despite this short-term impact, the long-term outlook for GARDASIL 9 remains promising. Meanwhile, the company’s $27 billion Keytruda cancer juggernaut continues to grow at a healthy clip, powering earnings growth.”

3. Pfizer Inc. (NYSE:PFE)

Number of Hedge Fund Holders: 92

Pfizer Inc. (NYSE:PFE) is a global biopharmaceutical company that manufactures, develops, markets and sells biopharmaceutical products worldwide. It advances wellness, prevention, treatment, and cures in developing and emerging markets. The company’s goal is to become a world-class oncology leader. It is already the third-largest biopharma company in oncology in the United States and has plans to continue its progress in oncology for the rest of the decade.

Pfizer Inc. (NYSE:PFE) has an attractive dividend yield of 6.3%, higher than most blue-chip stocks. Its management has reiterated plans to support and raise this dividend periodically, recently announcing a 2.4% increase in early December.

Pfizer Inc. (NYSE:PFE) is focused on its oncology pipeline for future growth, with its 2030 goals entailing the addition of several new blockbuster drugs to its portfolio. The company is expected to continue looking for opportunities to acquire promising pharmaceutical companies to augment its pipeline further. It used a significant portion of its pandemic profits on the $43 billion acquisition of Seagen, a biotech company specializing in oncology.

This strategy is working well for Pfizer Inc. (NYSE:PFE) as management estimates earnings growth between 10% and 18% for 2025. Analysts also estimate the company’s earnings to grow by around 14% annually over the next 3-5 years.

2. Johnson & Johnson (NYSE:JNJ)

Number of Hedge Fund Holders: 98

Johnson & Johnson (NYSE:JNJ) develops, manufactures, and sells a range of products in the healthcare field through its subsidiaries. With a primary focus on products related to human well-being and health, the company operates through two segments: Innovative Medicine and MedTech. Its Innovative Medicine segment encompasses various therapeutic areas, including infectious diseases, immunology, neuroscience, metabolic and cardiovascular diseases, pulmonary hypertension, and oncology. The MedTech segment includes an elaborate range of medical devices and products used in cardiovascular intervention, orthopedic, interventional solutions, surgery, and vision fields.

On January 13, Johnson & Johnson (NYSE:JNJ) announced the $14.6 billion acquisition of neurological drugmaker IntraCellular. This acquisition will allow the company access to Caplyta, an oral drug for the treatment of bipolar disorder and schizophrenia.

Apart from that, the company has strong fundamentals. Johnson & Johnson (NYSE:JNJ) reported sales of $88.8 billion for fiscal year 2024, reflecting a 4.3% year-over-year growth. These strong results reflect the company’s high-growth strategy. It has a solid balance sheet and generates enough cash flow through its operations to cover its high-yielding dividend. Johnson & Johnson (NYSE:JNJ) ranks second on our list of the 11 best pharma stocks to invest in according to hedge funds.

1. Eli Lilly and Company (NYSE:LLY)

Number of Hedge Fund Holders: 115

Eli Lilly and Company (NYSE:LLY) develops, manufactures, discovers, and sells pharmaceutical products. These products span oncology, diabetes, immunology, neuroscience, and other therapies. Investors are bullish on Eli Lilly and Company (NYSE:LLY) due to its in-demand GLP-1 drugs, used to treat diabetes and obesity, which are still in their early growth stages, and the company’s strong financials.

The company has strong fundamentals. It reported a 32% revenue growth in fiscal 2024 compared to fiscal 2023, exceeding its first-time guidance by $4 billion. Eli Lilly and Company (NYSE:LLY) also made substantial progress across its strategic deliverables in fiscal Q4 2024, with revenue growing by 45% in the quarter, supported by strong uptake of its Mounjaro and Zepbound drugs. Its immunology, oncology, and neuroscience segments are also performing well, supporting bullish sentiments for the stock.

On February 10, the company announced a collaboration with AdvanCell to advance cancer treatment through targeted alpha therapies. By combining Eli Lilly and Company’s (NYSE:LLY) expertise in drug manufacturing with AdvanCell’s Pb-212 production technology and infrastructure, the collaboration aims to expedite clinical progress for innovative radiopharmaceuticals. This is expected to be a significant opportunity for the company to further strengthen its cancer treatment portfolio and explore Pb-212-based therapies.

Aristotle Atlantic Partners, LLC highlighted LLY in its Q4 2024 investor letter. Here is what the firm has to say:

“Eli Lilly and Company (NYSE:LLY) contributed to performance in the fourth quarter. While shares underperformed, our underweight position versus the benchmark resulted in a positive contribution to relative returns. Lilly shares were weak following an uncharacteristic third-quarter earnings miss driven by softer-than-expected sales of its blockbuster diabetes and obesity drugs. The company blamed this partly on wholesaler destocking. Lilly reinforced its view that end demand for the drugs remains strong”.

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