Ups & Downs: Top Pharmaceutical Stocks Post-COVID

There’s little argument that the COVID-19 pandemic reshaped the world. While families and governments continue to grapple with Omicron variants, back-to-school and flu season, the latest CDC guidelines have effectively eliminated masking and testing mandates, and reduced protocols down to staying up to date with vaccinations. Unofficially, we are living a post-COVID life now, at least culturally.

Here is a closer look at the biggest of big pharma today and how they’ve fared through COVID.

Modern pharmaceutical giants

Pfizer, Moderna, AstraZeneca, and Johnson & Johnson grabbed headlines when they released the most anticipated vaccines of all time. But these are not the only names to know in the industry. Here is a rundown of the top pharmaceutical stocks to know about, ranked by market capitalization:

• Johnson & Johnson: Around since long before COVID, Johnson and Johnson is a diverse medical, pharmaceutical, and consumer goods company. The New Jersey-based company was founded in 1886. The powerhouse business plans to spin off its consumer-health business into a new company. The old J&J will focus on pharmaceuticals and medical devices. The new spin-off will include brands like Band-Aid, Tylenol, Neutrogena, Aveeno, Motrin, and Johnson’s Baby Powder. Over the last two quarters, the stock is about flat. It’s down about 5% over the last month.
• Eli Lilly: Another big old company, Eli Lilly was founded in 1876. It offers a range of commonly prescribed medications for diabetes, cancer, and other conditions. One of the most recognizable brands owned by Eli Lilly is men’s health medication Cialis. It sells several varieties of insulin injections, a highly sought-after medication critical for patients to stay alive. Eli Lilly is up significantly over the last six months, offering impressive 28% gains with several periods of short-term gains. It’s downmodestly in the last month.
• Roche: Swiss-based healthcare company with major divisions focused on pharmaceuticals and diagnostics. The 125-year-old company focuses pharmaceutical research on blood disorders, infectious diseases, inflammatory bowel diseases, cancer, respiratory diseases, women’s health, and others. Roche is traded on a Swiss exchange or directly in the United States through an ADR. It’s up modestly over the last month and six month periods, though the stock went through a volatile period where returns were far less steady.
• Pfizer: Another big winner in the COVID vaccine race. Tracing its roots back to 1849, this pharmaceutical giant produces several blockbuster drugs, but all pale compared to the Pfizer and BioNTech vaccine, which generated nearly $60 billion in sales last year. It sells many other medications, including prescription blood thinners, cancer medications, and a pneumococcal vaccine. One-month and six-month performance leave investors about even.
• AbbVie: A relative newcomer, founded in 2013. However, it was spun off from major pharmaceutical company, Abbott Laboratories, so it didn’t start from scratch. Its top seller is Humira, which hit $20 billion in sales in 2021. However, the company is not without controversy. The pharma giant is among several drugmakers notorious for raising prices on critical medications, Humira included. Other noteworthy medications treat lymphoma, psoriasis, and arthritis. Well-known brands include Botox and Celexa. It’s down modestly over the last six-months, and one-month holders of this stock have seen a loss just shy of 5%.

These top five pharmaceutical stocks don’t include big names like Merck, Astrazeneca, Amgen, Moderna, or GlaxoSmithKline. About 500 companies participate in the pharma industry worldwide.

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GSK in the news

Formerly GlaxoSmithKline, GSK didn’t come out with the first COVID medication, but that doesn’t mean it’s not worth investigating. The stock tumbled on August 11, 2022, due to negative news regarding the heartburn medication Zantac.

Once upon a time, Zantac was a darling at GSK. The drug was removed from stores by a government order in 2020 over worries that Zantac may cause cancer. GSK maintains that there’s no evidence Zantac causes cancer. Regardless, GSK and two related pharma stocks, Sanofi and Haleon, tumbled on the news. An analyst at Deutsche Bank suggested a possible liability of billions of dollars.

Unique opportunities and risks of pharma stocks

A blockbuster drug can make or break a small pharmaceutical company. Many smaller drug companies come and go without making much of a splash. For larger pharmaceutical companies, spending millions or billions of dollars on a medication that doesn’t turn out to be a success is not uncommon.

When boutique pharmaceutical companies come out with a winning medication that draws in big sales, those small companies are often acquired by one of the larger pharmaceutical companies, offering its founders and investors a chance to cash in while adding production scale and marketing power to grow the drug’s value under its new owner.

For example, GSK agreed to acquire the biopharmaceutical firm Sierra Oncology for $1.9 billion, adding new medications to its approval pipeline, trials it hopes to submit to regulators in the United States and European Union by the end of 2022. That’s a big $1.9 billion gamble for GSK. If the drugs are approved, the purchase will likely pay off well. If the drug unexpectedly fails approval, that could be nearly $2 billion lost with little to show beyond patents.

Huge investment risks in pharma research

In 2021, the FDA approved around 50 new medications. With dozens of companies working around the clock to come up with the next highly profitable medication, there’s never a guarantee that a drug will succeed even after making it through late-stage trials.

The FDA published a study (PDF) of promising medications that succeeded in phase two trials but didn’t go on to approval. For example, Darapladib was an intended medication to treat heart attack risk but wasn’t approved due to a lack of efficacy. GSK also saw the MAGE-A3 vaccine turned down, an immune therapy lung cancer treatment, for the same reason.

Major pharma developments on the horizon

Just as bad news can tank a pharma company’s financial prospects, a winner can send a stock sky high. Here are some significant developments on the horizon that could change the world’s health and generate a healthy profit while doing it:

• CRISPR: CRISPR is a gene editing technology that has the potential to treat nearly any genetic illness. Early success aim at treating sickle cell disease, while others focus on cancer, diabetes, cardiovascular disease, and other conditions. Five stocks to know about in this industry include Beam Therapeutics, CRISPR Therapeutics, Editas Medicine, Intellia Therapeutics, and Verve Therapeutics.
• Alzheimer’s: The degenerative brain disease has several prospective treatments in the pipeline from major pharmas, including Eli Lilly and Roche.
• Diabetes: Eli Lilly has high hopes for a new diabetes medication it estimates will earn nearly $5 billion annually by 2026. As a growing health problem, diabetes meds are a growing market to watch.
• Cancer: While there may never be a universal “cure for cancer,” many large pharmaceutical and biotech companies have their research and development teams working hard on treatments to battle specific cancers.

If you’re serious about pharmaceutical investments, it’s important to cast a wider information net than the expected blockbuster drugs. Even smaller medications for lesser-known diseases sell to needing patients. Those sales add up to millions and billions of dollars per year. Depending on the drug and the company, that could be enough to influence a share price.

Bottom line on pharma stocks

While the companies may earn mixed consumer feedback over pricing practices, there’s no question that the pharmaceutical industry is vital to people’s lives and won’t be going away anytime soon. While legislation and news on new medications can quickly shift stock prices, savvy investors work to stay one step ahead.

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