In this piece, we will take a look at the 12 most profitable biotech stocks to invest in. If you want to skip our overview of the global biotechnology industry and the latest trends, then you can take a look at the 5 Most Profitable Biotech Stocks To Invest In.
Biotechnology is the riskiest and fastest growing segment of the pharmaceutical industry. The sector is typically made of firms that use biological ingredients to make their products, and since this requires vast amounts of investments, biotechnology stocks are among some of the riskiest that you're likely to find on the stock market. Naturally, this means that their performance as a category depends on investor risk appetite, and individual headwinds and tailwinds carry the potential of high volatility and significant upswings and downswings.
For instance, while most media attention is focused on the shares of NVIDIA Corporation (NASDAQ:NVDA) and Bitcoin, and perhaps rightly so due to sizeable tailwinds enjoyed by both in the form of potential demand for artificial intelligence products and global acceptance, biotechnology stocks have been quietly ticking along in the background. As an example, consider the shares of Vincerx Pharma, Inc. (NASDAQ:VINC), Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP), and Viking Therapeutics, Inc. (NASDAQ:VKTX).
These biotechnology stocks belong to different categories of the stock market in terms of market capitalization. They range from micro caps (stocks with a market capitalization lower than $300 million) in the case of Vincerx, to mid caps like Viking Therapeutics. However, despite this, all three biotechnology stocks have delivered triple digit share price appreciation this year. NASDAQ:VINC, NASDAQ:CRBP, and NASDAQ:VKTX are up by 446%, 134%, and 267% year to date, showing that the right biotechnology stocks are no less than artificial intelligence stocks when it comes to rewarding investors for their shrewdness.
Digging deeper into their share price performance to see what tailwinds end up benefiting biotechnology stock prices, let's take a closer look at Viking Therapeutics. Just like NVIDIA's GPUs and their usage for artificial intelligence workloads have got investors rushing in hand over fist in the technology and semiconductor segments of the stock market, in the world of pharmaceutical and biotechnology stocks, it's weight loss drugs that are causing all the hype. For Viking, the catalyst came just as February was ending after the firm revealed that patients part of a trial of its weight loss drug had ended up losing nearly 15% of their weight. This placed Viking right alongside pharma giants the likes of Eli Lilly and Company (NYSE:LLY) and Novo Nordisk A/S (NYSE:NVO) when it comes to targeting America's need for weight loss treatments - which some believe see as much as $33 billion in annual spending.
However, analyzing just one stock is unlikely to provide an accurate picture of how biotechnology stocks are faring as a category. For this, we have to look at the performance of either stock indexes made of such equities or exchange traded funds (ETFs) that provide investors the ability to invest in sectors instead of firms to narrow down the volatility faced by individual stocks. On this front, one such index that is well known is the NASDAQ Biotechnology PR USD (NASDAQ:NBI) biotechnology stock index. Our hypothesis at the start of this piece was that category wise, biotech stocks are among the riskiest on the market due to large capital expenditures and long product timelines, and looking at the NASDAQ Biotechnology stock index, it dropped 11% in the 24 months of 2022 and 2023. This era was marked by a rapid interest rate hike and high inflation - both of which aren't good for firms that rely on large amounts of capital and costly inputs for their business operations. Yet, as the investment climate starts to become rosier this year, the index gained 3% until February end before reversing the trend.
Finally, before we head into our list of the most profitable biotechnology stocks, it's also important to see what the hedge funds are saying. For Polen Capital, while its fourth quarter of 2023 investor letter did affirm confidence in the weight loss giant Novo Nordisk, it was the third quarter letter that dived into the rationale of the investment decision:
Regarding Novo Nordisk, we’ve covered the company for a long time and owned it many years ago, ultimately selling because of payor pricing pressure on the insulin business. What has changed the investment case for us, though, is the company’s innovation into GLP-1 drugs, which not only help diabetics control blood- sugar levels but have also shown significant efficacy in weight loss. Novo Nordisk’s best-known GLP-1 drugs, Ozempic (for diabetes) and Wegovy (for obesity), are already blockbusters, frequently grabbing headlines in global news publications for their significant results. GLP-1 drugs account for nearly 70% of Novo Nordisk’s sales today.
So, with these details in mind, let's take a look at some of the most profitable biotechnology stocks to invest in. A couple of notable picks are Novo Nordisk A/S (NYSE:NVO), Novartis AG (NYSE:NVS), and Johnson & Johnson (NYSE:JNJ). For a broader look at the biotechnology industry, you can also check out 20 Highest Paying Countries for Biotechnology.
12 Most Profitable Biotech Stocks To Invest In
A hand holding a vial containing a clear liquid, symbolizing the precision medicines developed by the company.
Our Methodology
To make our list of the most profitable biotechnology stocks we ranked all biotechnology companies that trade on U.S. exchanges by their trailing twelve month net income and picked out the top stocks.
For these most profitable biotechnology stocks, we used hedge fund sentiment. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
AbbVie Inc. (NYSE:ABBV) is a diversified pharmaceutical and biopharmaceutical company that also has a presence in the biotechnology industry. The diversification helps the company well in poor stock market conditions, as its shares weathered the storm in 2022 and 2023 despite the broader biotechnology sector's dips.
As of Q4 2023 end, 76 out of the 933 hedge funds covered by Insider Monkey's research had bought AbbVie Inc. (NYSE:ABBV)'s shares. Paul Marshall and Ian Wace's Marshall Wace LLP was the biggest investor through its $491 million stake.
Along with Novartis AG (NYSE:NVS), Novo Nordisk A/S (NYSE:NVO), and Johnson & Johnson (NYSE:JNJ), AbbVie Inc. (NYSE:ABBV) is a most profitable biotechnology stock.
GSK plc (NYSE:GSK) is a British pharma giant headquartered in Brentford. Alongside being a traditional drug manufacturer, the firm also has a presence in the biotechnology industry via genetic testing and mRNA vaccines. It expanded its biotechnology portfolio in January after signing an agreement for cell free DNA production.
During last year's fourth quarter, 40 out of the 933 hedge funds tracked by Insider Monkey had invested in the firm. GSK plc (NYSE:GSK)'s largest hedge fund shareholder is Ken Fisher's Fisher Asset Management as it owns 15 million shares that are worth $557 million.
Eli Lilly and Company (NYSE:LLY) is a pharma giant that made waves in 2023 by acquiring a biotechnology company for a billion dollar plus price tag and a $100 million announcement for investing in German biotech companies. Its weight loss drug has led to an average share rating of Buy with an average share price target of $790.
Insider Monkey dug through 933 hedge funds for their December quarter of 2023 shareholdings and found 102 Eli Lilly and Company (NYSE:LLY) shareholders. Out of these, Ken Fisher's Fisher Asset Management owned the biggest stake which was worth $2.6 billion.
Sanofi (NASDAQ:SNY) is another mega pharma firm making the pivot to biotechnology. Data from 2022 shows that nearly three quarters of its drug pipeline was focused on biological products, with the percentage increasing for late stage stage projects. The shares jumped in March 2024 when a collaboration with biotechnology firm AstraZeneca showed remarkable progress in helping infants with respiratory disease.
By the end of 2023's December quarter, out of the 933 hedge funds covered by Insider Monkey's research, 32 had invested in the firm. Sanofi (NASDAQ:SNY)'s largest hedge fund investor is Ken Fisher's Fisher Asset Management due to its $710 million stake.
Gilead Sciences, Inc. (NASDAQ:GILD) is an American healthcare firm with investments in several biotechnology companies and partnerships with others to develop treatments for deadly ailments such as tumors. The firm has struggled on the financial front as of late by having missed analyst EPS estimates in three of its four latest quarters.
Insider Monkey dug through 933 hedge fund portfolios for their fourth quarter of 2023 investments to find 55 Gilead Sciences, Inc. (NASDAQ:GILD) shareholders. Peter Rathjens, Bruce Clarke, and John Campbell's Arrowstreet Capital was the firm's biggest stakeholder through its $678 million investment.
AstraZeneca PLC (NASDAQ:AZN) is a British biotechnology company best known for its coronavirus vaccine. The firm expanded its biotechnology portfolio in December 2023 when it announced a massive $1.2 billion buyout of a Chinese biotechnology firm.
As of December 2023 end, 48 out of the 933 hedge funds tracked by Insider Monkey had invested in the firm. AstraZeneca PLC (NASDAQ:AZN)'s largest investor in our database is Rajiv Jain's GQG Partners as it owns $933 million worth of shares.
While Thermo Fisher Scientific Inc. (NYSE:TMO) is the last stock to cross one's mind when it comes to biotechnology, it is one of the few sizeable medical raw materials companies in the world that are capable of supplying biological reagents and other items to biotechnology companies. A tough market for biotechnology companies hurt the firm's revenue in 2023 after biotechnology companies reduced their orders due to high interest rates.
111 out of the 933 hedge funds profiled by Insider Monkey during Q4 2023 had bought Thermo Fisher Scientific Inc. (NYSE:TMO)'s shares. Chris Hohn's TCI Fund Management was the biggest shareholder due to its $1.6 billion investment.
Novo Nordisk A/S (NYSE:NVO), Thermo Fisher Scientific Inc. (NYSE:TMO), Novartis AG (NYSE:NVS), and Johnson & Johnson (NYSE:JNJ) are some highly profitable biotechnology stocks.