In this article, we will be taking a look at the 7 Cheap Pharmaceutical Stocks to Buy According to Hedge Funds.

According to research, the U.S. pharmaceutical industry was estimated at $634.32 billion in 2024 and is expected to reach $883.97 billion by 2030. Strong momentum in customized medicine, which is expected to grow from $169.56 billion in 2024 to $307.04 billion by 2033, or a compound annual growth rate (CAGR) of 6.82% between 2025 and 2033, is supporting growth.

Improvements in next-generation sequencing, the growing demand for tailored treatments, and favorable legal frameworks in drug development and diagnostics are the main motivators. High development costs and a dearth of clinical standards remain obstacles, though.

The industry environment has also changed as a result of policy changes made during President Donald Trump’s second term. A 100% tariff on imported name-brand medications was implemented in 2025, along with a “Build It Here” mandate designed to encourage homegrown production. The goal of the implementation of Most-Favored-Nation pricing orders and the introduction of TrumpRx.gov is to bring American drug prices into line with those of other developed nations. A drive toward cost minimization and pharmaceutical self-reliance is further highlighted by regulatory changes to expedite generic and biosimilar approval processes.

There are still risks despite hope. The Boston Consulting Group warns of an upcoming $350 billion worldwide patent cliff when big medications like Keytruda and Eliquis lose exclusivity, even if it anticipates growth to continue through biologics, gene treatments, and AI-driven R&D. Deloitte, PwC, and S&P Global Ratings predict that there will be more mergers and acquisitions, stable credit conditions backed by sizable cash reserves, and continuous innovation.

Michael Yee of UBS recently observed robust early-year M&A activity and forecasted improved performance in 2026 for pharmaceutical and biotech companies, particularly in the cardiometabolic, obesity, cardiovascular, and cancer domains, as major patent cliffs approach in 2028 and 2029.

With this being said, let’s now take a look at the cheap pharmaceutical stocks. 

Our Methodology

For this list, we began by looking for pharma stocks that have a forward PE ratio of 20 or less. From this list, we selected the top 7 stocks and ranked them in ascending order based on their total number of hedge fund holders as of Q3 2025, as tracked by Insider Monkey 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 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).

Here is our list of the 7 cheap pharmaceutical stocks to buy according to hedge funds.

7. Phibro Animal Health Corporation (NASDAQ:PAHC)

Number of Hedge Fund Holders: 23

Forward PE Ratio: 17.28

The seventh stock on our list of cheap pharmaceutical stocks is Phibro Animal Health Corporation (NASDAQ:PAHC).

TheFly reported on February 6 that Morgan Stanley increased its price target on PAHC to $49 from $45 and maintained an Equal Weight rating. The firm cited strong operational performance in the company’s latest quarterly results and highlighted effective execution within the Animal Health segment and progress related to the Zoetis MFA transaction. The upgrade came after significant margin expansion, a better fiscal 2026 forecast, and a second-quarter profit beat. Disciplined cost control was also cited by Morgan Stanley as a significant element, pointing out that recent outcomes show strong momentum in several important business areas.

Adding to that, earlier on February 4, Phibro Animal Health Corporation (NASDAQ:PAHC) revealed fiscal second-quarter results for the fiscal year that ended on December 31, 2025. The report shows a significant improvement from year to year, with the net sales rising 21% to $373.9 million, while net income increased to $27.5 million. Adjusted EBITDA rose 41% to $68.1 million, while adjusted diluted EPS rose 58% to $0.87.

A good quarter led to an increase in the company’s fiscal 2026 estimate. PAHC has updated its full-year net sales estimates to $1.45 billion to $1.50 billion and adjusted EBITDA to $245 million to $255 million in light of improved operating momentum and increased profitability forecasts for the rest of the year.

Phibro Animal Health Corporation (NASDAQ:PAHC) is a global animal health and nutrition company that develops and markets vaccines, medicated feed additives, trace minerals, and specialty products to improve livestock and companion animal health.

6. Collegium Pharmaceutical, Inc. (NASDAQ:COLL)

Number of Hedge Fund Holders: 27

Forward PE Ratio: 6.13

Collegium Pharmaceutical, Inc. (NASDAQ:COLL) is placed sixth on our list of cheap pharmaceutical stocks.

TheFly reported on February 10 that Truist Securities analyst Les Sulewski raised its price target on COLL to $58 from $55 and gave it a Buy rating. The analyst emphasized the robustness of the company’s wider pain management portfolio and offered a positive assessment of its ongoing momentum with Jornay.

Additionally, Collegium Pharmaceutical, Inc. (NASDAQ:COLL) gave a business update and its full-year 2026 financial outlook in January. The company also highlighted expectations for continuing operational strength. The company says that it expects net product revenue to range from $805 million to $825 million for the year. Within that range, Jornay PM is anticipated to produce net sales of atleast $190 million to $200 million, which shows its importance to the overall expansion plan. Furthermore, according to COLL, adjusted EBITDA will range from $455 million to $475 million, indicating strong profitability and careful cost control. The company also has confidence in the longevity of its portfolio and its ability to sustain earnings momentum through 2026, as indicated by the updated projection.

Collegium Pharmaceutical, Inc. (NASDQAQ:COLL) is a U.S. pharmaceutical company focused on developing and commercializing innovative pain management therapies, including abuse-deterrent opioid formulations, leveraging science-based solutions to improve patient safety and treatment outcomes.