Investing in Life Sciences Stocks

COVID-19 vaccines, cancer immunotherapies, glucose monitors, and pacemakers -- what do these have in common? All were developed by life sciences companies, many of which have achieved tremendous scientific breakthroughs. Life sciences companies have also made many shareholders wealthy along the way.

What is it?

A look at the life sciences industry

Life sciences is the study of living organisms, but it's not limited to just biology. Life sciences also encompasses biochemistry, biotechnology, botany, neuroscience, physiology, zoology, and more.

Such a broad definition means that a wide range of companies fits into the life sciences category. These companies develop and market products that include:

• Biological products (those made from living organisms)
• Diagnostic systems
• Gene-sequencing systems
• Medical devices
• Nutraceuticals
• Pharmaceuticals

Because of the diversity of companies in the life sciences industry, the total market size is not well defined. The value of the global pharmaceutical market alone approaches $1.5 trillion, and the worldwide market for life sciences tools (including chemical reagents and instruments) is valued at roughly $120 billion.

5 stocks to watch

Five life sciences stocks to watch in 2025

Life sciences stocks can generate fantastic long-term returns. These five large-cap stocks in the industry are worth watching:

1. Abbott Laboratories (ABT 1.31%)
2. Intuitive Surgical (ISRG 0.58%)
3. Johnson & Johnson (JNJ 1.09%)
4. Moderna (MRNA -3.77%)
5. Vertex Pharmaceuticals (VRTX 1.69%)

1. Abbott Laboratories

Abbott Laboratories' business stretches across several areas of life sciences. The company markets diagnostics, medical devices, nutrition products, and pharmaceutical drugs.

Abbott's FreeStyle Libre continuous glucose monitoring (CGM) system is a key growth driver. New versions of the CGM device are proving tremendously popular with individuals seeking to manage their diabetes better. Abbott has several other products in its lineup enjoying solid sales momentum, such as its Amplatzer Amulet devices used to treat patients with non-valvular atrial fibrillation.

Abbott's diagnostics revenue has fallen due to declining sales of COVID-19 diagnostic tests. However, the company's Alinity family of laboratory diagnostics products continues to enjoy strong adoption. Income investors really like Abbott, which is a Dividend King. The company has paid a quarterly dividend since 1924 and has increased its dividend for 52 consecutive years.

2. Intuitive Surgical

Intuitive Surgical pioneered the robotic surgical systems market more than two decades ago. Its da Vinci systems have been used in more than 15.4 million procedures so far, and more than 9,800 are installed worldwide.

Aging demographic trends should serve as a significant tailwind for Intuitive in the coming years as the baby boomer generation requires more surgeries. Innovation, though, is an even more important growth driver for Intuitive Surgical.

The company believes new systems in development and regulatory clearances potentially on the way could increase its addressable market for soft-tissue surgeries from around 7 million procedures per year to 21 million.

Intuitive faces more competition now than it has in the past. Big companies, including Johnson & Johnson, Medtronic (MDT 0.56%), and Stryker (SYK -0.03%), have entered the robotic surgical systems market, as have smaller companies, such as Asensus Surgical (NYSEMKT:ASXC), Globus Medical (GMED -0.44%), and Titan Medical (NASDAQ:TMDI).

However, Intuitive's big head start and extensive track record of success should give the company a significant competitive advantage over its rivals.

3. Johnson & Johnson

There's arguably no better bellwether in the healthcare sector than Johnson & Johnson (J&J), one of the world's biggest life sciences companies. J&J sells pharmaceuticals, including the cancer drug Imbruvica and the anti-inflammatory drug Stelara. The company also markets a wide range of medical devices.

J&J's business changed significantly in 2023 when it spun off its consumer health unit into a separate publicly traded entity -- Kenvue (KVUE -0.72%). This move positioned the company to deliver stronger growth with its pharmaceutical and medical device segments.

Prostate cancer drug Darzalex, psoriasis and psoriatic arthritis drug Tremfya, and anti-depressive drug Spravato stand out as especially important growth drivers for the company.

Johnson & Johnson's acquisitions of Abiomed and Shockwave Medical have bolstered its medical device segment. The Abiomed deal added industry-leading cardiovascular medical technology to J&J's product lineup, while the Shockwave purchase added intravascular lithotripsy devices for treating artery disease.

Like Abbott, Johnson & Johnson is a Dividend King, having increased its dividend for 62 years in a row.

4. Moderna

Moderna vaulted onto the world stage in 2020 due to its rapid progress in developing a COVID-19 vaccine. In December 2020, the biotech company's COVID-19 vaccine mRNA-1273 became the second to win emergency use authorization in the U.S.

The company's COVID-19 vaccine sales peaked in 2022 and have declined since. However, Moderna won U.S. Food and Drug Administration (FDA) approval for its second product, the respiratory syncytial virus (RSV) vaccine mResvia, in May 2024.

Moderna hopes to win 10 additional product approvals through 2027. The first of these could be for its next-generation COVID vaccine and its combination flu/COVID vaccine. The company's other promising pipeline programs include cytomegalovirus (CMV) vaccine mRNA-1647 and cancer therapy mRNA-4157.

5. Vertex Pharmaceuticals

Vertex Pharmaceuticals is a leader in treating the underlying cause of cystic fibrosis (CF), a rare genetic disease characterized by lung infections and breathing problems. The biotech company currently markets four CF drugs, with Trikafta/Kaftrio generating the majority of its sales.

Vertex and its partner CRISPR Therapeutics (CRSP -7.32%) won FDA approval in December 2023 for the gene-editing therapy Casgevy. This therapy is a one-time treatment for two rare blood disorders: sickle cell disease and transfusion-dependent beta-thalassemia.

The company's next product on the market could be its vanzacaftor triple-drug combination in treating CF. Suzetrigine, a non-opioid therapy for alleviating acute pain, could follow closely behind.

Vertex's pipeline also features several promising programs. They include inaxaplin, which targets APOL1-mediated kidney disease, and povetacicept, which is in late-stage testing as a potential treatment for the kidney disease IgA nephropathy.

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Risks & rewards

Risks and rewards of life sciences investing

Life sciences stocks can be highly risky investments since the path to regulatory approval or clearance is uncertain. Clinical tests of drugs can end in failure, especially in early-stage studies. Even if clinical testing seems to go well, regulatory agencies may find reasons not to approve a product.

When a product does make it to market, it's not always a commercial success. Many life sciences companies must be reimbursed by governments and private payers, which can be time-consuming and challenging. Rival companies that develop better products can capture substantial market share.

Some life sciences products can generate billions of dollars each year. At the same time, aging populations across the globe are driving the growth of practically every part of the industry. Many investors are taking a favorable view of the risk-reward profiles of top life sciences companies.

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