Investing in Pharmaceutical Stocks

For years, the top-selling blockbuster drug -- defined as one that generates more than $1 billion in annual sales -- for AbbVie (NYSE:ABBV) was Humira, which is approved for treating rheumatoid arthritis and several other autoimmune diseases. However, Humira's sales are sinking as it faces competition after losing patent exclusivity in 2023.

The good news is that AbbVie prepared in advance for the challenges it would face once Humira went off-patent. The company has two successors to Humira on the market: Skyrizi and Rinvoq. Skyrizi already generates sales that are greater than Humira's. The two drugs combined should eclipse Humira's peak annual sales within the next few years.

Meanwhile, AbbVie's lineup features other big winners. Sales for cancer drug Venclexta and antipsychotic medication Vraylar continue to climb. The company's migraine drugs, Qulipta and Ubrelvy, are also enjoying strong market momentum.

Investors also have a lot to like about AbbVie's dividend. The company belongs to the elite group of stocks called Dividend Kings, which have increased their dividends for at least 50 consecutive years. In just the past five years, AbbVie has increased its dividend by almost 40%.

Eli Lilly (NYSE:LLY) ranks as the largest healthcare company in the world based on market cap. Lilly vaulted to the top primarily because of soaring sales for its type 2 diabetes drug Mounjaro and obesity drug Zepbound.

These two products (which share the same active ingredient) could be on track to become among the most successful drugs of all time, according to some analysts. Lilly hopes to expand its Mounjaro/Zepbound franchise into other indications as well, including obstructive sleep apnea and heart failure with preserved ejection fraction.

Perhaps the greatest threats to Mounjaro and Zepbound come from Lilly's own pipeline. The company is evaluating two other drugs -- orforglipron and retatrutide -- in late-stage clinical trials targeting diabetes and obesity.

Lilly's lineup includes other successful products, too. Sales continue to soar for cancer drug Verzenio, diabetes drug Jardiance, and autoimmune disease drug Taltz.

Johnson & Johnson (NYSE:JNJ) is a healthcare giant that derives the majority of its growth from its pharmaceutical business. J&J boasts a large product lineup that includes immunology drugs Stelara and Tremfya and cancer drugs Darzalex and Erleada.

The company's pipeline features 40 programs in late-stage clinical testing.. These clinical trials are testing new drug candidates and seeking additional approvals for drugs such as Stelara and Tremfya.

Johnson & Johnson spun off its consumer health unit into a stand-alone entity in 2023. This left the company with its two fastest-growing segments -- pharmaceutical and medical devices.

Like AbbVie, J&J is a Dividend King, having raised its annual dividend for 63 consecutive years. The company is also highly resilient, surviving and thriving since beginning operations in 1886.

Pfizer (NYSE:PFE) markets several blockbuster products. These include cancer drugs Ibrance and Xtandi, blood thinner Eliquis (which Pfizer co-markets with Bristol Myers Squibb), Prevnar pneumococcal vaccines, and COVID-19 products Comirnaty and Paxlovid.

The big drugmaker faces some challenges. Its COVID-19 vaccine sales have declined sharply. Several of Pfizer's top-selling products will lose patent exclusivity over the next few years.

However, Pfizer has invested heavily in research and development. The company has also made several key acquisitions, including the purchase of Seagen in 2023. These moves have put Pfizer in a solid position to deliver long-term growth.

The drugmaker's pipeline includes 108 candidates. Almost one-third of these programs are either in late-stage testing or awaiting approval. The company also has promising drugs in earlier-stage development.

Pfizer has long been a favorite among income-seeking investors. Its forward dividend yield is among the highest in the pharmaceutical industry.

The global pharmaceutical market totals roughly $1.7 trillion and continues to grow. This huge sector improves the quality of life for many people while creating attractive opportunities for long-term investors.

Before you invest in pharmaceutical companies, find out some top picks and learn how to choose the best stocks in the pharmaceutical sector.

The average cost for major companies to develop a new drug is around $2.3 billion, according to Deloitte. The average elapsed time between drug discovery and regulatory approval is 10 to 15 years. But the payoff for developing an effective treatment, especially for a common ailment, can be massive. Owning an important patent can generate significant profits for a pharmaceutical company for many years, with little or no competition from other drugmakers.

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