15 Best Drug Stocks To Buy Now

Published on May 30, 2022 at 10:01 am by Hamna Asim in Hedge Funds, News

In this article, we discuss 15 best drug stocks to buy now. If you want to see more drug stocks to invest in, click 5 Best Drug Stocks To Buy Now.

The pharmaceutical industry is thriving globally, and it was given a healthy boost by the COVID-19 vaccine rollouts around the world. Two of the leading global therapy areas are oncology and immunology, which are projected to grow with a 9–12% and 6–9% compound annual growth rate through 2026, respectively. The global oncology expenditure is expected to surpass $300 billion by 2026, however, growth will slow to 10% due to generic biosimilars. This data is compiled by IQVIA, the American multinational health information technology and clinical research corporation. Consistent research and development is also swiftly accelerating growth in therapeutic areas such as neurology and rare diseases.

The US pharmaceuticals segment remains robust in 2022, primarily due to mass COVID-19 vaccination and pent-up demand for essential and elective medical procedures. The aging population will also result in high demand for drugs in the mid and long-term. The global pharmaceutical active pharmaceutical ingredients (API) manufacturing market is projected to increase from $179.05 billion in 2021 to $195.29 billion in 2022 at a CAGR of 9.1%. Active pharmaceutical ingredients are used as a primary ingredient for the development of drugs.

The global pharmaceuticals market is forecast to grow from $1454.66 billion in 2021 to $1587.05 billion in 2022, at a CAGR of 9.1%. The market is expected to be valued at $2135.18 billion in 2026, implying a compound annual growth rate of 7.7%. To tap into the lucrative pharmaceutical and drugs industry, investors usually pick up stocks including Moderna, Inc. (NASDAQ:MRNA), Johnson & Johnson (NYSE:JNJ), and Bristol-Myers Squibb Company (NYSE:BMY).

Photo by Christina Victoria Craft on Unsplash

Our Methodology

We carefully screened pharmaceutical stocks that recently received positive analyst ratings and displayed strong business fundamentals for this list. Data from 900+ elite hedge funds tracked by Insider Monkey at the end of March 2022 was used to assess the hedge fund sentiment around the securities. This gives potential investors an insight into the portfolios of elite investors, and they can choose to replicate the strategies of the smart money.

Best Drug Stocks To Buy Now

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

Number of Hedge Fund Holders: 70

Bristol-Myers Squibb Company (NYSE:BMY) is a New York-based company that manufactures and markets biopharmaceutical products worldwide. It offers products for hematology, oncology, cardiovascular, immunology, fibrotic, neurology, and Covid-19 diseases.

On May 26, Citi analyst Andrew Baum raised the price target on Bristol-Myers Squibb Company (NYSE:BMY) to $90 from $75 and maintained a Buy rating on the shares. The analyst increased his estimate for Bristol-Myers Squibb Company (NYSE:BMY)’s share of risk-adjusted milvexian revenues to $6.5 billion, compared to the $2 billion consensus forecasts. He forecasts possible approval for the initial indication as early as 2026 and believes the Phase II AXIOMATIC-SSP data will reassure investors about risks.

According to Insider Monkey’s Q1 data, Bristol-Myers Squibb Company (NYSE:BMY) was part of 70 public hedge fund portfolios, up from 66 funds in the prior quarter. John Overdeck and David Siegel’s Two Sigma Advisors is the largest shareholder of the company, with 4.3 million shares worth $318.4 million.

Here is what Saturna Capital Amana Funds has to say about Bristol-Myers Squibb Company (NYSE:BMY) in its Q4 2021 investor letter:

“Given the likelihood of rising inflation and interest rates ahead, we anticipate adjustments to the portfolio to reduce exposure to highly valued stocks dependent on low interest rates to support terminal year valuations, while seeking investments in companies more correlated with a return to economic normalcy. We sold our positions in Bristol Myers. We believe there are better opportunities than Bristol in pharmaceuticals.”

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

Number of Hedge Fund Holders: 84

Merck & Co., Inc. (NYSE:MRK) was founded in 1891 and is headquartered in Kenilworth, New Jersey. Merck & Co., Inc. (NYSE:MRK) operates as a provider of pharmaceutical products in the areas of oncology, hospital acute care, immunology, neuroscience, virology, cardiovascular, and diabetes. In addition to providing pharmaceuticals, the company deals in animal health products as well.

On April 12, Barclays analyst Carter Gould raised the price target on Merck & Co., Inc. (NYSE:MRK) to $97 from $94 and reiterated an Overweight rating on the shares. The analyst noted that the Q1 prints are “unlikely to disrupt the momentum of macro-driven rotation to larger cap biopharma”.

Merck & Co., Inc. (NYSE:MRK) posted its Q1 results on April 28, reporting earnings per share of $2.14, beating market consensus estimates by $0.31. The revenue grew 31.63% year-over-year to $15.90 billion, outperforming analysts’ predictions by $1.25 billion.

Among the hedge funds tracked by Insider Monkey, 84 funds were bullish on Merck & Co., Inc. (NYSE:MRK) at the end of March 2022, up from 80 funds in the earlier quarter. Ken Fisher’s Fisher Asset Management is the leading shareholder of the company, with 11.8 million shares worth about $971 million.

In addition to Moderna, Inc. (NASDAQ:MRNA), Johnson & Johnson (NYSE:JNJ), and Bristol-Myers Squibb Company (NYSE:BMY), Merck & Co., Inc. (NYSE:MRK) is one of the most popular drug stocks among smart investors.

Here is what ClearBridge Investments Sustainability Leaders Strategy has to say about Merck & Co., Inc. (NYSE:MRK) in its Q4 2021 investor letter:

“Other pharma companies are providing solutions as well. Merck’s antiviral pill molnupiravir is less effective than Pfizer’s, but it will be a helpful alternative for patients who cannot take Pfizer’s due to drug-drug interactions. Merck is also helping to manufacture Johnson & Johnson’s COVID-19 vaccine, which has less stringent storage requirements than the mRNA vaccines do.”

13. Sanofi (NASDAQ:SNY)

Number of Hedge Fund Holders: 19

Sanofi (NASDAQ:SNY) is a French multinational healthcare firm that develops and manufactures therapeutic solutions in the United States, Europe, and internationally, operating through Pharmaceuticals, Vaccines, and Consumer Healthcare segments. Sanofi (NASDAQ:SNY) provides prescription drugs for multiple sclerosis, neurology, inflammatory diseases, immunology, rare diseases, oncology, rare blood disorders, and diabetes.

SVB Leerink analyst David Risinger on May 23 initiated coverage of Sanofi (NASDAQ:SNY) with an Outperform rating and a $64 price target. The analyst views Sanofi (NASDAQ:SNY) as an affordable undervalued stock, with solid growth prospects, limited loss of exclusivity exposure, and pipeline optionality.

On April 28, Sanofi (NASDAQ:SNY) reported its Q1 results, posting earnings per share of $1.02, beating estimates by $0.10. The revenue of $10.16 billion surpassed analysts’ predictions by $156.57 million.

According to the first quarter database of Insider Monkey, 19 hedge funds were bullish on Sanofi (NASDAQ:SNY), with collective stakes worth $1.5 billion, compared to the same number of funds in the earlier quarter, holding stakes in the company valued at $1.4 billion. Stephen Dubois’ Camber Capital Management is one of the largest shareholders of the company, with 4 million shares worth $205.3 million.

Here is what Dodge & Cox Funds has to say about Sanofi (NASDAQ:SNY) in its Q3 2021 investor letter:

“Sanofi (3.5% position) is a diversified, global pharmaceuticals company with leading positions in vaccines, consumer health products, rare diseases, and emerging markets. Despite a favorable business mix, Sanofi has underperformed its peers in new product development, commercial execution, and profit growth. A new management team, recruited in 2018-19, has made progress turning the company around. Its drug pipeline is improving, targets for higher margins are being met, and earnings per share are growing. Sanofi also pays a 4% dividend yield, maintains a strong balance sheet, and has relatively low exposure to potential pressures from U.S. drug pricing.”

12. Biogen Inc. (NASDAQ:BIIB)

Number of Hedge Fund Holders: 61

Biogen Inc. (NASDAQ:BIIB) was founded in 1978 and is headquartered in Cambridge, Massachusetts. It is a biotech firm that offers drugs and therapies for neurological and neurodegenerative diseases. The company’s Q1 revenue of $2.53 billion outperformed Street consensus by $28 million.

On May 4, Oppenheimer analyst Jay Olson maintained an Outperform rating on Biogen Inc. (NASDAQ:BIIB) but lowered the price target on the stock to $225 from $240. With swift changes in the macro environment, Biogen Inc. (NASDAQ:BIIB) posted mixed Q1 earnings results featuring a solid top line but missing the bottom line, the analyst noted.

In the first quarter of 2022, 61 hedge funds were bullish on Biogen Inc. (NASDAQ:BIIB), with collective stakes worth $2.4 billion, compared to 63 funds in the earlier quarter, holding stakes in the company valued at $2.3 billion. Jim Simons’ Renaissance Technologies is a significant shareholder of Biogen Inc. (NASDAQ:BIIB), with 1.04 million shares worth about $220 million.

Here is what Longleaf Partners Fund has to say about Biogen Inc. (NASDAQ:BIIB) in its Q4 2021 investor letter:

“Biogen (83%, 2.43%; 5%, 0.10%), a biotechnology company specializing in therapies for the treatment of neurological diseases, was a strong contributor before we exited the position in the first half. We began acquiring shares in January 2021, paying between 9- 11x FCF and a discount to our appraisal, even if the company’s promising drug pipeline turned out to be worth 0. After Biogen’s Alzheimer’s drug Aduhelm was approved in June, we quickly sold out after the stock’s price appreciated over 70% and briefly exceeded our appraisal of the value. We re-initiated a position in Biogen in December at a price below our original cost basis from January. The stock became very cheap once again after Aduhelm’s early sales disappointed due to its high initial cost before management correctly cut the price. We think Biogen’s core Multiple sclerosis (MS) and Biosimilars businesses are strong enough to create sustainable double-digit EPS growth, even if Aduhelm and the entire Alzheimer’s program is worth zero. We also expect a board led by large shareholders to continue the company’s accretive repurchase, while considering other beneficial corporate actions.”

11. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)

Number of Hedge Fund Holders: 38

Walgreens Boots Alliance, Inc. (NASDAQ:WBA) is an Illinois-based company that sells prescription drugs and retail items, such as health, wellness, beauty, personal care, consumable, and general merchandise products. Walgreens Boots Alliance, Inc. (NASDAQ:WBA) is on its way to becoming a dividend king, with 46 consecutive years of dividend increases under its belt.

On April 28, Walgreens Boots Alliance, Inc. (NASDAQ:WBA) declared a $0.4775 per share quarterly dividend, in line with previous. The dividend is payable on June 10, to shareholders of record on May 20. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)’s dividend yield on May 27 came in at 4.37%.

Cowen analyst Charles Ryhee on April 12 reiterated an Outperform rating on Walgreens Boots Alliance, Inc. (NASDAQ:WBA) but lowered the firm’s price target on the stock to $50 from $55. The analyst updated his estimates after commentary on Q2 results. He believes his long-term thesis is playing out but the short-term macro environment is a headwind.

According to Insider Monkey’s database, 38 hedge funds were bullish on Walgreens Boots Alliance, Inc. (NASDAQ:WBA) at the end of Q1 2022, compared to 42 funds in the last quarter. Jacob Mitchell’s Antipodes Partners reported a prominent position in the company, consisting of 2.36 million shares worth $105.6 million.

Here is what Aristotle Capital Management Global Equity has to say about Walgreens Boots Alliance, Inc. (NASDAQ:WBA) in its Q1 2022 investor letter:

“We first invested in Walgreens Boots Alliance in early 2013. Over our holding period, Walgreens merged with U.K.-based Boots Alliance, establishing itself as a global leading retail pharmacy chain. CEO Stefano Pessina set the company on a path of pursuing strategic partnerships (as opposed to vertical integration deals) to increase store traffic and to, over time, transform the business into a neighborhood health destination around a more modern pharmacy. Using its strong FREE cash flow generation, the company ramped up its investments in technology, aiming to accelerate the digitalization of health information. Mr. Pessina was not successful, however, at turning around the firm’s U.S. retail segment and had to deal with increasing prescription drug reimbursement pressures. He stepped down as CEO in 2020, and in 2021, Roz Brewer took the reins of the firm. We admire Ms. Brewer’s impressive track record at companies that include Starbucks (NASDAQ:SBUX) and Walmart (Sam’s Club). However, given management’s decision to divest core cash-generative businesses and redeploy capital to embryonic healthcare startups, we prefer to step aside while we follow the company’s progress.”

10. Novo Nordisk A/S (NYSE:NVO)

Number of Hedge Fund Holders: 31

Novo Nordisk A/S (NYSE:NVO) is a Denmark-based multinational pharmaceutical company, providing drugs and therapies for diabetes, obesity, chronic diseases, hemophilia, growth disorders, and hormone replacement. On May 12, Barclays analyst Emmanuel Papadakis raised the price target on Novo Nordisk A/S (NYSE:NVO) to DKK 875 from DKK 850 and kept an Overweight rating on the shares.

On April 29, Novo Nordisk A/S (NYSE:NVO) reported earnings for the first fiscal quarter of 2022. The company announced an EPS of $0.88, beating market estimates by $0.06. The revenue of $6 billion grew 9.93% year-over-year, topping analysts’ predictions by $464.24 million.

Among the hedge funds tracked by Insider Monkey, Novo Nordisk A/S (NYSE:NVO) was part of 31 public stock portfolios at the end of Q1 2022, up from 28 funds in the preceding quarter. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is a prominent shareholder of the company, with 1.2 million shares worth $142.8 million.

Like Moderna, Inc. (NASDAQ:MRNA), Johnson & Johnson (NYSE:JNJ), and Bristol-Myers Squibb Company (NYSE:BMY), elite hedge funds are monitoring Novo Nordisk A/S (NYSE:NVO) as a notable pharma play.

Here is what LRT Capital Management has to say about Novo Nordisk A/S (NYSE:NVO) in its Q4 2021 investor letter:

“Novo Nordisk is the global leader in insulin, which is, sadly, a growing business as more and more people around the world suffer from diabetes. Millions of people need daily injections of insulin to stay alive, a number that, unfortunately, is likely to continue to grow by millions more in the coming decade. It may seem at first glance that insulin should be a commoditized business, after all, it was discovered and synthesized over a hundred years ago, but nothing could be further from the truth. There are many types of insulin and Novo Nordisk has spent billions on R&D over the years to develop new products. On February 11th, the company reported favorable results from a phase-3 trial of Semaglutide, a drug that is currently used for Type 2 diabetes treatment. The study evaluated the use of Semaglutide for weight loss treatment in non-diabetic patients and found a significant impact on weight loss for patients receiving Semaglutide vs. the placebo control group. If Semaglutide is approved for weight loss treatment, we expect it will be meaningfully accretive to the company’s bottom line.

The company’s proprietary product line supports returns on invested capital of over 40%, and while sales growth is relatively slow (+6% annualized CAGR over the past decade), the company’s shares trade at a reasonable valuation of only 22x forward earnings. For a company with an extremely predictable business, high returns on capital, and an easily forecastable future, we believe this to be highly attractive.”

9. Eli Lilly and Company (NYSE:LLY)

Number of Hedge Fund Holders: 53

Eli Lilly and Company (NYSE:LLY) was founded in 1876 and is headquartered in Indianapolis, Indiana. The company develops and markets human pharmaceuticals worldwide, offering treatments for diabetes, oncology, depression and anxiety disorders, and migraines. On April 28, the company reported its Q1 financial results, posting earnings per share of $2.62, beating analysts’ consensus estimates by $0.32. The revenue grew 14.76% year-over-year to $7.81 billion, beating Street forecasts by $457.21 million.

Eli Lilly and Company (NYSE:LLY) declared on May 2 a $0.98 per share quarterly dividend, in line with previous. The dividend is payable on June 10, to shareholders of the company as of May 16.

SVB Leerink analyst David Risinger on May 23 initiated coverage of Eli Lilly and Company (NYSE:LLY) with an Outperform rating and a $341 price target. The analyst believes that consensus underappreciated the sales potential for Eli Lilly and Company (NYSE:LLY)’s recently approved drug for diabetes and obesity, and he forecasts upward estimate revisions to drive stock outperformance.

According to Insider Monkey’s first quarter database, 53 hedge funds were long Eli Lilly and Company (NYSE:LLY), compared to 61 funds in the last quarter. Rajiv Jain’s GQG Partners is a significant stakeholder of the company, with 1.6 million shares worth $485.3 million.

Here is what Saturna Capital Amana Funds has to say about Eli Lilly and Company (NYSE:LLY) in its Q4 2021 investor letter:

“Industrials and pharmaceutical companies were among the Amana Income Fund’s strongest performers in the fourth quarter. Industrials and pharmaceutical companies were among the Amana Income Fund’s strongest performers in the fourth quarter. Drugmaker Eli Lilly is represented in the 10 Largest Contributors.”

8. Moderna, Inc. (NASDAQ:MRNA)

Number of Hedge Fund Holders: 41

Moderna, Inc. (NASDAQ:MRNA) is an American pharmaceutical and biotechnology company that produces drug candidates and vaccines for infectious and rare diseases, immuno-oncology, cardiovascular diseases, and autoimmune diseases. Piper Sandler analyst Edward Tenthoff on May 17 reiterated an Overweight rating on Moderna, Inc. (NASDAQ:MRNA) but lowered the firm’s price target on the stock to $214 from $348 based on “pipeline adjustments reflecting current market conditions”.

On May 4, Moderna, Inc. (NASDAQ:MRNA) reported its Q1 financial results, posting an EPS of $8.58 and a revenue of $6.07 billion, exceeding market consensus estimates by $2.96 and $1.64 billion, respectively.

According to Insider Monkey’s database, 41 hedge funds were bullish on Moderna, Inc. (NASDAQ:MRNA) at the end of the first quarter of 2022, compared to 43 funds in the last quarter. Philippe Laffont’s Coatue Management is the leading shareholder of the company, with approximately 7 million shares worth $1.19 billion.

Here is what Carillon Tower Advisers has to say about Moderna, Inc. (NASDAQ:MRNA) in its Q3 2021 investor letter:

“Moderna is a biotechnology company pioneering messenger RNA (mRNA) therapeutics and vaccines. The stock proved to be an impressive contributor once again in the quarter, as investors continue to evaluate the potential for future growth driven primarily by the firm’s revolutionary COVID-19 vaccine. Strong global demand for the vaccine may persist for the foreseeable future in order to maintain immunity as well as provide protection against any additional future variants. The potential for the firm’s mRNA technology to be used in a number of other use cases, specifically influenza, could also provide an additional tailwind for future growth.”

7. Horizon Therapeutics Public Limited Company (NASDAQ:HZNP)

Number of Hedge Fund Holders: 56

Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) is an American biopharmaceutical company that produces medicines for rare, autoimmune, and severe inflammatory diseases. Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) posted Q1 results on May 4, reporting earnings per share of $1.34 and a revenue of $885.25 million, exceeding Street forecasts by $0.20 and $18.86 million, respectively.

On May 23, SVB Leerink analyst David Risinger initiated coverage of Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) with a Market Perform rating and a $95 price target. The analyst believes the company has executed extremely well and developed a compelling portfolio of rare disease drugs, and sees the stock as relatively inexpensive. He views SMID-cap biopharma sector weakness as a relative plus for Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) because the company can capitalize on lower valuations to possibly acquire attractive future growth drivers.

According to Insider Monkey’s database, 56 hedge funds held stakes in Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) at the end of Q1 2022, compared to 58 funds in the preceding quarter. Kurt Von Emster’s VenBio Select Advisor is the biggest stakeholder of the company, with 6.5 million shares worth $683.8 million.

In addition to Moderna, Inc. (NASDAQ:MRNA), Johnson & Johnson (NYSE:JNJ), and Bristol-Myers Squibb Company (NYSE:BMY), Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) is a notable drug stock on the radar of elite hedge funds.

Here is what Carillon Tower Advisers has to say about Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) in their Q1 2021 investor letter:

“Horizon Therapeutics is a biopharmaceutical company whose primary focus is research, development, and marketing of late-stage pharmaceutical products. After experiencing some unfortunate manufacturing hiccups in the later stages of 2020 for its key product Tepezza, which is used in the treatment of thyroid eye disease, the company recently received positive news that should relieve their supply issues going forward. With manufacturing of Tepezza back online after being forced to halt due to Operation Warp Speed’s COVID-19 vaccine production orders, Horizon expects patient treatments to resume in mid-April.”

6. Amphastar Pharmaceuticals, Inc. (NASDAQ:AMPH)

Number of Hedge Fund Holders: 17

Amphastar Pharmaceuticals, Inc. (NASDAQ:AMPH) is a California-based biopharmaceutical company that develops generic and proprietary injectable, inhalation, and intranasal products in the United States, China, and France. On May 9, the company posted earnings for Q1 2022, reporting an EPS of $0.47 and a revenue of $120.37 million, outperforming consensus estimates by $0.11 and $7.59 million, respectively.

Northland analyst Tim Chiang on April 11 raised the price target on Amphastar Pharmaceuticals, Inc. (NASDAQ:AMPH) to $43 from $33 and kept an Outperform rating on the shares. Amphastar Pharmaceuticals, Inc. (NASDAQ:AMPH) received approval for its Ganirelix injection, which will be launched in the second quarter of 2022, the analyst told investors. With multiple new product approvals and launches planned in 2022, the analyst believes the shares deserve to trade higher, even with the stock up approximately 70% year-to-date.

According to Insider Monkey’s data, Amphastar Pharmaceuticals, Inc. (NASDAQ:AMPH) was part of 17 public hedge fund portfolios in the first quarter of 2022, up from 13 funds in the prior quarter. Ken Griffin’s Citadel Investment Group held an $8.5 million position in the company.

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