Got $500? 3 Pharma Stocks to Buy and Hold Forever
A sum of $500 might not seem like much of an investment, but if you select the right pharmaceutical stocks -- and are patient enough to hold them forever -- history shows you'll have a very high chance of ending up with many times more money than at the start.
With that in mind, let's examine three leading pharma stocks that are ripe for buying today and holding for the foreseeable future.
1. Vertex Pharmaceuticals
Vertex Pharmaceuticals (NASDAQ: VRTX) is worth buying today and holding forever because it has dominance in one of its core markets, cystic fibrosis (CF) therapies. This in turn gives it the resources it needs to take risks and diversify into other lucrative markets to stimulate more growth.
In the first quarter, its CF medicines brought in nearly $2.7 billion in sales, up 13% from a year prior. It currently treats all but 20,000 eligible patients with the condition, and it has a roadmap for how to access them, as well as how it plans to develop additional therapies for those who aren't eligible. By continually testing new combinations and tweaks based on its existing medicines, it has a long runway to continue commercializing new products without spending too much on research and development (R&D).
It's also on the verge of competing in the market for acute pain therapies. Regulators at the U.S. Food and Drug Administration (FDA) will be considering the company's approval application for its acute pain program before the end of the second quarter of this year. If it succeeds there, it'll be raking in cash for years to come. If it fails, it can still fall back on its growing CF business, as well as on the soon-to-ramp-up sales of the gene therapy called Casgevy that it recently commercialized with the help of CRISPR Therapeutics.
And there's not much better in a pharma stock than a defensible core business with multiple growth initiatives that are about to crest beyond the cusp of maturity.
2. Eli Lilly
Eli Lilly's (NYSE: LLY) market of the moment is cardiometabolic medicines, where it competes with its drugs Mounjaro, which is indicated for type 2 diabetes, and Zepbound, which is indicated for obesity. The stock is worth buying because there is a very good chance that the company will be able to profit from this trend for years and years to come, making investors richer along the way.
In Q1, which was its first full quarter on the market, Zepbound brought in $517 million in sales. Mounjaro, on the other hand, brought in a whopping $1.8 billion, up from about $568 million a year prior. Given that both are in an acute state of shortage in the U.S., these drugs are in hot demand.
But Eli Lilly isn't done with attempting to develop even better contenders in the same segment. It has a pair of molecules that are in phase 3 clinical trials, and both are being investigated for their effectiveness in treating type 2 diabetes and obesity. It's also working on expanding the approved indications for Mounjaro and Zepbound to increase the size of their addressable market even further.
In other words, it can't manufacture its medicines in this segment fast enough to serve demand, and it's already most of the way through doing actions that will blow open the door for even more demand. The synthesis is that its factories could be playing catchup for years to come. That's highly bullish for the stock.
3. Pfizer
The investing thesis for buying Pfizer (NYSE: PFE) right now is a bit different than the ones for Eli Lilly and Vertex. Whereas those players are diving into hot markets and queueing up others on deck, Pfizer's big plans will take a bit longer to cook.
Specifically, it's aiming to become a leading developer of oncology medicines via a combination of internal R&D, acquisitions, collaborations, and licensing deals. Management would like for those moves to lead to it generating an additional $45 billion in annual revenue by 2030. Given that it expects to report revenue of between $58.5 billion and $61.5 billion for 2024, it could be bringing in more than $100 billion per year within the next six years.
Ambitious plans like those could fall short for a lot of reasons, and it is unlikely that every pipeline program or licensing deal will lead to a profitable medicine on the market. Nonetheless, given the scope of the plan and management's willingness to embark on a major pivot, as well as the company's longstanding tradition of successful execution, the balance of risk and reward is on Pfizer's side.
Should you invest $1,000 in Vertex Pharmaceuticals right now?
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Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CRISPR Therapeutics, Pfizer, and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.
