Top 3 Best Biopharma Stocks to Watch
The pharma industry is a massive one and encompasses several segments. Among those is biopharma, which is likely set to become increasingly popular in the health sector.
One of the fastest-growing segments within the pharma industry, biopharma is likely well-positioned to continue on the rise.
We are living in what’s been referred to, multiple times, as a “golden age” in pharmaceutics.
Thanks to technological advances, the pharma industry has made several groundbreaking discoveries, leading to innovative drugs and treatments.
In this context, it’s no wonder that biopharma stocks have been drawing plenty of interest from investors.
In this article, we will take a closer look at the biopharma industry, its definition, as well as how to invest in biopharma stocks, while also outlining their pros and cons.
If this sounds interesting, let’s get started.
Table of Contents
Best Biopharma Stocks: Introduction
Before we take a look at biopharma stocks, we first should look at the definition of biopharma itself. A biopharmaceutical is a product developed using living organisms - cells.
These cells are genetically manipulated to produce specific substances, such as proteins, sugars, and other complex molecules.
It’s worth noting that biopharmaceuticals are different from other biological treatments, such as blood and organ transplants. While the latter are directly extracted from living beings, biopharmaceuticals are substances produced by other living organisms.
Vaccines are an example: while regular vaccines are usually made of attenuated pathologic agents, such as weakened viruses, biopharmaceutic vaccines are developed by injecting specific genes into other cells, which will then produce certain proteins that will stimulate the organism’s immune response.
Such mRNA vaccines, like the COVID-19 vaccines developed by AstraZeneca and Moderna, are two examples of biopharmaceuticals.
Compared to regular pharmaceuticals, biopharma products offer some advantages, which can include reduced side effects, improved precision and efficiency, biodegradability, and personalized treatments that can target specific pathogens.
What are Biopharma Stocks?
Investors interested in the biopharma segment can invest in biopharma stocks.
The biopharma industry has grown significantly in size. Some of the biggest names from the pharma industry have made major investments in biopharma. But the segment also has plenty of medium-sized companies and smaller startups.
The biopharma industry has raised over $230 billion in investment every year since 2021. Research and development (R&D) in the pharma industry is expensive, and that’s especially true when it comes to biopharma.
On the other hand, the returns are potentially high and could justify the principal investment.
Treatments for cancer and other still incurable diseases, such as type-1 diabetes, are the leading areas in biopharma.
With the potential for breakthrough discoveries in the next few years, biopharma stocks could be worth a look if you want to diversify your portfolio.
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Best Biopharma Stocks: Advantages and Disadvantages
Before you decide to invest in biopharma stocks, it’s important to learn about their pros and cons.
All investments have advantages and disadvantages after all, and it’s no different for biopharma stocks.
Best Biopharma Stocks: Advantages
- The pharmaceutical industry has often been a favourite among investors, as it’s considered one of the top defensive stocks. In other words, these stocks tend to do well even in bear markets. That’s also the case for biopharma stocks since all major pharma companies are also part of the biopharma segment.
- As previously mentioned, there have been multiple groundbreaking discoveries in medical research. Major technological advances, such as Artificial Intelligence, are set to continue, which could lead to gains for biopharma stocks.
- Companies continue to ramp up investment in biopharma R&D, which has led to an increasing number of products either hitting the market or already in the late stages of development. This could also generate bigger returns to biopharma stocks.
Best Biopharma Stocks: Disadvantages
- R&D is very expensive. While most pharma companies can make up for their investments, there is always the risk of R&D investments not paying off - which does happen from time to time. Getting approval from regulatory agencies, such as the US Food and Drug Administration (FDA), is arguably the biggest obstacle.
- Some biopharmaceuticals have relatively limited usage and are aimed at extremely specific groups. As a result, these products tend to be extremely expensive, and that can potentially hinder returns.
- Because of R&D costs, the biopharma segment is made up mostly of big pharma companies, and a few mid-sized ones. Biopharma startups have a difficult time establishing themselves, which means that finding good growth stocks can be quite difficult.
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Top 3 Best Biopharma Stocks to Watch
We will now take a look at some of the best biopharma stocks available for you to invest in, as well as their advantages and disadvantages.
1. Pfizer (PFE)
The American pharmaceutical company has invested heavily in the biopharma segment, either acquiring other companies or establishing partnerships.
Advantage of Pfizer stocks:
- Pfizer can be considered a “buy and forget about it” stock. The American pharmaceutics giant has a consistent and stable dividend yield and tends to do well even when the market is trending down.
Disadvantage of Pfizer stocks:
- After experiencing impressive growth during the pandemic, driven largely by its COVID-19 vaccine, Pfizer stocks lost value over the past year. The company’s loss in revenue happened largely because of the drop in demand for COVID-related products.
You can trade PFE CFDs in both price directions, or invest in PFE shares directly with Admirals.
2. Johnson & Johnson (JNJ)
The world’s biggest pharmaceutical company by revenue, Johnson & Johnson has, unsurprisingly, invested heavily in biopharmaceuticals.
Most recently, the American multinational acquired Ambrx, a biopharma drug maker which specializes in cancer treatment.
Advantage of Johnson & Johnson stocks:
- Johnson & Johnson has been around for well over a century, and the company remains as stable as ever. The American multinational provides investors with stable and consistent dividend yields.
Disadvantage of Johnson & Johnson stocks:
- While Johnson & Johnson does provide relatively stable returns, it also means there is little room for growth. It’s been almost 15 years since Johnson & Johnson last registered growth rates in the double digits.
You can trade JNJ CFDs in both price directions, or invest in JNJ shares directly with Admirals.
3. AbbVie Inc. (ABBV)
AbbVie is best known for its flagship product, Humira - a biopharmaceutical for rheumatoid arthritis treatment. Humira was the world’s most prescribed and best-selling drug for nearly a decade.
The majority of AbbVie’s revenue comes from biopharmaceuticals as well.
Advantage of AbbVie stocks:
- Abbvie continues to strengthen its position in the biopharma segment with smart investments. The company recently acquired Cerevel Therapeutics and Immunogen, two important biopharma companies focused, respectively, on neurological and oncological treatment.
Disadvantage of AbbVie stocks:
- Abbvie’s patent for its flagship drug, Humira, expired in 2023. The company is set to experience the effects this year, however, as competition from generic biosimilars should take a toll on sales.
You can trade ABBV CFDs in both price directions, or invest in ABBV shares directly with Admirals.
How to Buy Biopharma Stocks
You can buy biopharma stocks through a reliable and regulated broker, like Admirals. This is the easiest and safest way to invest in biopharma stocks.
At Admirals, you can start with a demo account, which does not use real currency but instead, virtual funds.
This way, you can learn the ins and outs risk-free, without exposure to losses, while you develop your investing strategy.
After that, you can sign up for a live account to use your assets. At Admirals, you can start investing with as little as $1, with access to multiple markets.
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Best Biopharma Stocks to Watch: Conclusion
Biopharma stocks are a possible alternative if you want exposure to the pharma industry.
As one of the fastest-growing segments within the pharma industry, biopharma can potentially provide good returns (with always the possibility of risk, as well).
The biggest companies in the pharma industry are also present in the biopharma segment, so you will be able to find plenty of interesting stocks to invest in.
Keep in mind that, just like any other investment, biopharma stocks can have drawbacks as well.
The biopharma segment is considerably expensive, which makes it difficult for startups to thrive, so finding stocks with above-average growth can be tricky.
Costs and returns are both high, and it’s important to understand the risks and benefits of investing in bigger or smaller companies.
What kind of companies are considered biopharma?
Biopharma companies are those that focus on the research, development, manufacturing, and marketing of biological drugs or biologics, utilizing living organisms or biological substances in their drug development processes.
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