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Biotechnology is regularly advancing, with scientists finding new ways to cure diseases and eliminate deadly vaccines. The pandemic has highlighted the quick and innovative work that biotech companies do — including Pfizer, Moderna, AstraZeneca, and Johnson & Johnson, who then became household names.
The ingenuity of biotech companies has many people interested in investing in biotech stocks. While investing in the right biotechnology can be lucrative, investing in biotech companies can be more volatile than stock investing.
If you’re interested in investing in biotech companies, I’ll run you through what you need to know and the best companies to watch on the stock market.
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Why investing in biotechnology can be tricky
When you invest in a typical company that makes a product or service, your stock prices tend to ebb and flow based on product performance and the company’s future business goals. Investing in biotech companies, however, is a little bit different.
Biotech stocks can rise and fall quite often, especially while new drugs and medications are being run through clinical trials and awaiting FDA approval. Pharmaceutical companies whose drugs reach the clinical stage with success are worth investing in. Unfortunately, it’s still a bit of a gamble until their drugs have been thoroughly tested and shown to produce the positive results intended. You might also need to wait for newer companies to go the IPO route and make their debut on the market.
The good news is that many larger big pharma companies can invest in NASDAQ. These companies have a history of positive drug results, innovative technologies, and exciting future business goals. While these companies produce treatments to help us lead healthier, longer lives, you can also grow your funds by investing in the right candidates.
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Best biotech stocks
Not sure where to get started? Here are 10 of the best biotechnology companies worth investing in.
1. Pfizer (NYSE: PFE)
One of the top pharmaceutical companies worth investing in is biotech giant Pfizer. The company made big moves and gained popularity during the pandemic, but it is much more than the COVID-19 vaccine. The company is working on drugs for other diseases, including endometriosis and inflammatory bowel disease. While the company has seen a revenue drop due to the decline in vaccine sales, the demand for other products is expected to improve. It received 9 FDA approvals in 2023 and a full approval for cervical cancer drugs this year. Pfizer currently has a dividend yield of 6.10% if adding dividends is important to your portfolio.
2. Moderna (NASDAQ: MRNA)
Another top player in the coronavirus vaccine game is Moderna, who employed mRNA technology to develop a two-shot vaccination similar to Pfizer. Though Moderna was relatively new to the scene, its first commercialized product (the coronavirus 2-shot vaccine) was a huge success and a source of profit for this young biotech company.
Moderna focuses on developing a CMV (cytomegalovirus) vaccine to help pregnant women and those with weakened immune systems. This vaccine is a billion-dollar opportunity.
Other vaccines currently being developed include two cancer vaccines and a therapeutic drug for certain heart conditions. It has over 40 products in the development phase and expects to return to sales growth in 2025 and break even by 2026.
Investing in this biotech stock now makes good sense, as successful vaccination releases are likely to increase its price in the future.
3. Astrazeneca (NASDAQ: AZN)
Another biotech company that’s worth exploring as you build out your portfolio is AstraZeneca. The stock has been on a steady upward rally since the start of the year, and the company has an optimistic outlook for the rest of the year. Its cancer drugs, diabetes treatments, and asthma pharmaceuticals are expected to help the company grow and exceed profit forecasts.
While shares are beginning to rise, investors may have mixed feelings about investing in AstraZeneca. Although you aren’t likely to earn big bucks in the next few months, this biotech company could be a great long-term investment for the right investor. The company’s shareholder returns have grown 92% over the past five years, and many experts are recommending getting in now, with massive growth potential.
Related: How to Buy AstraZeneca Stock
4. Johnson & Johnson (NYSE: JNJ)
As one of the most popular biotech companies and a household name, Johnson & Johnson is set to benefit from MedTech and Innovative medicine. It has successfully spun off the consumer wellness segment, which will help the company report better financials starting in 2024.
The adjusted EPS in 2024 Q1 increased 12.4% over 2023. Johnson & Johnson is currently testing drugs and therapeutics for leukemia, prostate cancer, schizophrenia, and Crohn’s disease (to name a few). No matter what happens with the market, it’s a safe bet that this pharmaceutical giant will continue to grow and profit. J&J stock is also a dividend aristocrat, making it a solid bet for passive income investors.
Related: How to Buy Johnson & Johnson Stock
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5. Regeneron Pharmaceuticals (NASDAQ: REGN)
Regeneron Pharmaceuticals is perhaps best known for its cutting-edge eye treatment, Eylea, which can help treat serious conditions in the eye, such as macular degeneration and macular edema. Regeneron has been growing rapidly, expanding vastly since the 1990s. Regeneron became well known during the pandemic for its coronavirus cocktail, an antibody therapy that has shown impressive results in preventing COVID-19.
Regeneron continues to show consistent, strong growth and has a top-notch product line. Many financial experts believe investing now could lead to large returns down the road — just keep in mind that holding onto this stock long-term is expected to yield the best results.
6. Merck (NYSE: MRK)
Merck is another contender worth considering when adding biotech companies to your portfolio. That’s because this company has one of the top-selling pharmaceutical drugs on the market, Keytruda. Keytruda is used primarily to treat skin cancer (melanoma) but has recently been used for different types of cancer (such as breast and colon) since it boosts immunity. Although Merck is still fighting to get this drug approved for additional cancers, some predict this top-seller will become the number-one-selling drug within the next two years.
Since Keytruda is patented through 2028, rising to the top-selling drug spot could lead to tremendous growth and profitability for Merck. Of course, this biotech company also has other innovative drugs and anesthetics on its roster and has a robust selection of animal health pharmaceuticals. Merck saw steady growth last year, and it’s worth considering investing in this company this year.
7. Vertex Pharmaceuticals (NASDAQ: VRTX)
Vertex Pharmaceuticals owns the only FDA-approved treatment for cystic fibrosis, Trikafta. Approved in 2019, this drug is the main reason for Vertex’s success, though the company has much more in store. Vertex was working on an exciting treatment for sickle cell disease and transfusion-dependent thalassemia, which can help patients reduce the number of blood transfusions previously needed to survive. It recently received the US FDA approval for it.
Despite mixed reviews on its other drugs, Vertex remains the number one in cystic fibrosis treatment, so profits are still expected to grow this year. While Vertex is a bit riskier than other biotech companies, it could also offer major wins for investors.
8. Novo nordisk (NYSE: NVO)
Novo Nordisk has gained massive popularity for its weight loss drug Ozempic, and with the weight loss drug market expanding, the company is set to benefit. While the stock is trading at a premium, the company also sits at the top of the market. Besides Ozempic, it has several drugs in the pipeline and could have something more promising in the weight loss category. Obesity has become a public health crisis, and the biotechnology company is making the most of it.
9. Eli Lilly (NYSE: LLY)
Eli Lilly is a biotech giant that could have an edge in the industry. The company has a blockbuster weight loss drug that makes it a great long-term play. There is sky-high demand for weight loss drugs, and Eli Lilly has reported impressive fundamentals. However, there is more to the company than this drug. It has several drugs for multiple diseases, and its Alzheimer’s drug, Donanemab, could be an even bigger play than the weight loss drug.
10. Abbvie (NYSE: ABBV)
Abbvie is the fifth-largest pharmaceutical company in the world and is known for the most widely used drugs. Its biggest product and revenue generator is its autoimmune treatment. Abbvie is also known for producing Botox, which is gaining high popularity today. The stock offers a perfect combination of income and growth. It has a dividend yield of 3.67%, ideal for passive income investors.
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The bottom line
Investing in biotechnology, a sector at the forefront of healthcare innovation, is a wise decision, especially given these companies' vital role in guiding global communities through the pandemic. When considering investment in biotech stocks, often regarded as growth stocks, it's essential to look beyond their contributions to COVID-19 solutions. Delve into their broader product portfolios, ongoing clinical trials, and overall standing in the biotech industry. Exchange-traded funds (ETFs) focusing on healthcare and biotech can also be a strategic way to gain diversified exposure to this dynamic sector. The ten companies highlighted here represent some of the strongest and best-performing players in biotech.
If you're looking for more information regarding biotech stocks of interest, check out Motley Fool's Stock Advisor service.
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Writer
Courtney Johnston is a freelance writer, specializing in finance, travel, and health. She has written for The Chicago Tribune, Benzinga, BestReviews, Mashvisor, Fundera, MoneyGeek, and The Culture Trip. She also teaches writing instruction at the University of Indianapolis. Courtney currently resides in Indianapolis.
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