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.
5. Amneal Pharmaceuticals, Inc. (NASDAQ:AMRX)
Number of Hedge Fund Holders: 29
Forward PE Ratio: 18.53
The next stock on our list is Amneal Pharmaceuticals, Inc. (NASDAQ:AMRX).
TheFly reported on Feb 11 that JP Morgan raised AMRX price target by $4 and maintained a Buy rating.
Separately, on January 29, Amneal Pharmaceuticals, Inc. (NASDAQ:AMRX) announced that it would be added to the S&P SmallCap 600 Index. It is a popular benchmark for U.S. small-cap stocks and is composed of businesses that satisfy certain standards for sector balance, market size, liquidity, and long-term profitability. The corporation claims that its participation demonstrates consistent operational execution and financial performance. The management of the company thinks that being included in the index will increase its visibility to investors, potentially improve trading liquidity, and ultimately result in more shareholders.
Furthermore, KeifeRx and Amneal Pharmaceuticals, Inc. (NASDAQ:AMRX) inked a research collaboration and option agreement on January 9 to develop KFRX06, which is a preclinical candidate that targets the gene leucine-rich repeat kinase 2 (LRRK2). It is closely linked to Parkinson’s disease. As per the agreement, KeifeRx will lead research efforts to produce essential pre-IND data that will aid Amneal in assessing the program and guide potential future development decisions. The detailed financial details of the arrangement were not disclosed to the public.
Amneal Pharmaceuticals, Inc. (NASDAQ:AMRX) is a U.S. pharmaceutical company that develops, manufactures, and markets generic and specialty branded medicines across multiple therapeutic areas, emphasizing cost‑effective access, innovation in complex formulations, and scalable supply solutions for patients and healthcare providers.
4. Lantheus Holdings, Inc. (NASDAQ:LNTH)
Number of Hedge Fund Holders: 35
Forward PE Ratio: 12.44
Lantheus Holdings, Inc. (NASDAQ:LNTH) is given the fourth position on our list of cheap pharmaceutical stocks.
TheFly reported on January 29 that TD Cowen lowered its price target on LNTH to $75 from $80 and gave it a Buy rating. The firm also updated its financial model in anticipation of the company’s upcoming fourth-quarter results.
Earlier, on January 2, Lantheus Holdings, Inc. (NASDAQ:LNTH) officially announced the completion of its previously planned divestiture of the Single Photon Emission Computed Tomography (SPECT) business to SHINE Technologies. LNTH’ diagnostic agents, the SPECT product manufacturing area of its North Billerica, Massachusetts site, and SPECT-related activities in Canada were all included in the sale. LNTH may reorganize its operations and concentrate on regions with more growth potential and profits thanks to this strategic transaction.
The company’s growth of its commercial portfolio in PET radiodiagnostics, which comprises sophisticated imaging solutions, and its microbubble products used in contrast-enhanced ultrasound procedures, will be its top priorities going forward. In order to position the business for long-term growth in precision imaging and targeted treatments, LNTH will simultaneously keep investing in and developing its pipeline of radiopharmaceuticals. The company will use its knowledge of nuclear medicine to create novel diagnostic and therapeutic solutions for patients.
Lantheus Holdings, Inc. (NASDAQ:LNTH) is a U.S. radiopharmaceutical leader developing and commercializing innovative precision diagnostics and oncology imaging agents that help clinicians detect and monitor disease.
3. Viatris Inc. (NASDAQ:VTRS)
Number of Hedge Fund Holders: 55
Forward PE Ratio: 6.83
The third stock on our list of cheap pharmaceutical stocks is Viatris Inc. (NASDAQ:VTRS).
TheFly reported on February 9 that UBS upgraded VTRS to Buy from Neutral and raised the price target to $18 from $11. The company’s stronger growth prospects are reflected in the upgrade. VTRS’ new product pipeline and continuous cost-cutting initiatives are expected to increase shareholder value, according to investors. The company’s growing pipeline, rising profits, and efficient capital allocation are cited by the firm as the main reasons for the upgrade.
Additionally, earlier on January 20, Viatris Inc. (NASDAQ:VTRS) announced the launch of Inpefa (sotagliflozin) in the United Arab Emirates, which is the first market outside the U.S. to commercialize the treatment. Additional launches are planned globally.
Inpefa is a first-in-class dual SGLT1/2 inhibitor that has been approved to reduce the risk of cardiovascular death, heart failure hospitalizations, and urgent visits in people with heart failure, including those with type 2 diabetes or chronic renal illness.
With regulatory files already made in Canada, Australia, and Mexico, VTRS’s capacity to implement its innovative product pipeline is demonstrated by the UAE launch. Before a significant Investor Event on March 19, 2026, the business is anticipated to make this global rollout a primary focus when it releases its fourth-quarter and full-year 2025 results on February 26, 2026.
Viatris Inc. (NASDAQ:VTRS) is a global healthcare company providing access to medicines, including generics, biosimilars, and specialty products. It focuses on improving patient health worldwide through reliable manufacturing, distribution, and partnerships across various therapeutic areas.
2. Teva Pharmaceutical Industries Limited (NYSE:TEVA)
Number of Hedge Fund Holders: 60
Forward PE Ratio: 12.67
Teva Pharmaceutical Industries Limited (NYSE:TEVA) is given the second position on our list.
TheFly reported on February 9 that Goldman Sachs raised its price target on TEVA to $45 from $36, and gave it a Buy rating. The company’s enhanced business profile is reflected in the upgrade, which has been reinforced by advancements made throughout its branded portfolio and the elimination of prior overhangs. The firm sees the present level as justified, given TEVA’s potential for above-consensus, double-digit earnings growth driven by sales increase, margin improvement, and decreased debt, even though the stock now trades above historical valuation multiples.
Additionally, on January 28, Teva Pharmaceutical Industries Limited (NYSE:TEVA) said that, despite Revlimid being a $1.1 billion barrier, it anticipates making $16.4 to $16.4 billion in sales in 2026. Among TEVA’s long-term goals are a non-GAAP operating margin of 30% by 2027 and a mid-single-digit compound annual growth rate (CAGR) in revenue through 2030. A pipeline full of milestones that position the company for consistent, long-term growth, ongoing enhancements to the balance sheet, and developments in its main growth products—AJOVY, UZEDY, and AUSTEDO—all help to achieve these objectives.
Teva Pharmaceutical Industries Limited (NYSE:TEVA) is a global pharmaceutical company specializing in generic and specialty medicines. It develops, manufactures, and markets treatments across multiple therapeutic areas, aiming to improve patient access to high-quality, affordable healthcare worldwide.
1. Zoetis Inc. (NYSE:ZTS)
Number of Hedge Fund Holders: 72
Forward PE Ratio: 18.08
Zoetis Inc. (NYSE:ZTS) tops our list for being one of the cheap pharmaceutical stocks.
TheFly reported on February 13 that Bank of America raised its price target for ZTS to $140 from $135 and maintained a Neutral rating on the shares. The upgraded target was supported by the company’s fiscal 2026 projection and fourth-quarter performance, which were mostly in line with expectations.
Zoetis Inc. (NYSE:ZTS) released its fourth-quarter 2025 financial results earlier on February 12 and reported that adjusted EPS of $1.48 was higher than the $1.40 consensus forecast. The company also reported that with a 3% year-over-year increase to $2.4 billion, the quarter’s sales showed strong growth in both the U.S. and international regions.
The corporation provided projections for fiscal year 2026 as well and predicted revenue of $9.83 billion to $10.03 billion and adjusted EPS of $7.00 to $7.10, surpassing analyst forecasts. Global operational gains, growth in important parasiticide and dermatology portfolios, and ongoing momentum in companion animal and cattle goods all support the expectation. These outcomes demonstrate ZTS’s capacity to produce steady growth and solidify its standing as a world leader in animal health.
Zoetis Inc. (NYSE:ZTS) is a global animal health company specializing in medicines, vaccines, and diagnostic products for livestock and companion animals, aiming to enhance animal health, productivity, and well-being worldwide.
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