Pharmaceuticals are a critical part of our healthcare system. These companies provide vaccines and medications that treat thousands of diseases and medical conditions.
Investing in pharmaceutical stocks is an aggressive and sometimes risky strategy. But when that strategy pays off, it can be extremely lucrative. Here are our choices for Canada’s five best pharmaceutical stocks for 2024.
- Knight Therapeutics (GUD.TO)
- HLS Therapeutics (HLS.TO)
- Cipher Pharmaceuticals (CPH.TO)
- Bausch Health Companies (BHC.TO)
- Fennec Pharmaceuticals (FRX.TO)
5 Best Pharmaceutical Stocks in Canada
1. Knight Therapeutics Inc.
Here are some key facts about this company:
| Ticker Symbol | GUD.TO |
| Market Cap | $557.29 million |
| PE Ratio | 71.43 |
| 52-Week Trading Range | $4.28 to $5.50 |
| Dividend Yield | N/A |
Knight Therapeutics is a Montreal-based company that does not do research and development on new medications and drugs like other pharmaceutical companies. Instead, Knight partners with other pharmaceutical companies and provides investment capital and funding to develop drugs.
Its primary markets are Canada and Latin America, and Knight has offices in 10 different countries across those regions. Knight has a strong portfolio of drugs, including oncology treatments. It already has established partnerships with companies like Bristol Myers Squibb and AstraZeneca.
2. HLS Therapeutics Inc.
Here are some key facts about this company:
| Ticker Symbol | HLS.TO |
| Market Cap | $113.85 million |
| PE Ratio | N/A |
| 52-Week Trading Range | $3.37 to $11.22 |
| Dividend Yield | N/A |
HLS Therapeutics is similar to Knight Therapeutics in that it does not manufacture any of the medications that it sells. Instead, it focuses on mergers and acquisitions and analyzes the industry for undervalued companies or treatments.
Two of its best-selling drugs include Vascepa and Clozarilm, the former of which has established a promotional agreement with Pfizer. One potential concern is that the company recently stopped paying out its dividend. The last distribution came on June 15, 2023, and as of now, there is no indication that HLS is bringing it back.
3. Cipher Pharmaceuticals Inc.
Here are some key facts about this company:
| Ticker Symbol | CPH.TO |
| Market Cap | $149.42 million |
| PE Ratio | 15.60 |
| 52-Week Trading Range | $3.11 to $6.35 |
| Dividend Yield | N/A |
Yet another Canadian pharmaceutical company that does not produce medications but acquires them for distribution. Cipher focuses mostly on North and South American markets and has a strong product pipeline that fulfills unmet medical needs.
The company’s top product is Epuris, an oral acne treatment. Most of its drugs treat dermatological issues like rashes, acne, and impetigo. Cipher has a relatively strong financial position for being such a small company and is entirely debt-free as of 2023.
4. Bausch Health Companies
Here are some key facts about this company:
| Ticker Symbol | BHC.TO |
| Market Cap | $3.41 billion |
| PE Ratio | 1.75 |
| 52-Week Trading Range | $7.56 to $13.81 |
| Dividend Yield | N/A |
Bausch Health Companies is the largest company on this list by market cap. The stock is dual-listed on both the TSX and the NYSE. It also might be the closest thing to a traditional pharmaceutical company because Bausch researches and develops their own pharmaceutical products.
The company manufactures a wide range of generic and branded medications and over-the-counter products. These treatments are sold in more than 90 countries worldwide and treat everything from gastrointestinal problems to dental issues to vision care.
5. Fennec Pharmaceuticals Inc.
Here are some key facts about this company:
| Ticker Symbol | FRX.TO |
| Market Cap | $321 million |
| PE Ratio | 24.57 |
| 52-Week Trading Range | $9.27 to $14.41 |
| Dividend Yield | N/A |
Fennec Pharmaceuticals trades on the TSX but is a company headquartered in North Carolina. This company focuses on a single product called PEDMARK, an FDA-approved injection for pediatric patients with non-metastatic solid tumours.
The treatment works to reduce the ototoxicity associated with cisplatin which is a chemotherapy medication. PEDMARK’s orange book patents are protected until at least 2039, providing the company long-term stability over its sole product. Both UK and EU approval for PEDMARK has also been granted in 2023.
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Pharmaceutical Stocks Explained
Pharmaceutical stocks are companies that research, develop, manufacture, and distribute medical treatments. These can include drugs, medications, and vaccines.
There is a wide range of companies in the pharmaceutical sector. They range from blue-chip companies like Johnson & Johnson to early-stage companies still seeking regulatory approval.
How to Choose Pharma Stocks in Canada
For the most part, Canadian pharma companies are small, especially compared to the large American pharma firms. Choosing stocks requires researching their existing products and pipeline of potential drugs in the future.
Other factors you will want to look at include the lifespan of current patents and the company’s history with obtaining regulatory approvals. As always, looking at fundamentals like the company’s balance sheet and current and forward-looking financial position doesn’t hurt.
Are Pharma and Biotech Stocks Good Investments?
They can be but are also considered some of the riskier investments you can make. Small-cap biotech and pharma stocks have been some of the largest gains and you only need to be right on a few of them to make the sector worth investing in.
On the other end of the spectrum, blue-chip pharma stocks can be incredibly stable. Some of the biggest blue-chip companies in the world are pharma stocks that also have a long history of paying out and increasing their dividends.
Downsides of Pharmaceutical Stocks
Pharma stocks can be incredibly risky. They have as much of a chance of going to zero as they do tripling in price. If anything impacts a pharma company’s products or pipeline, the stock can take a massive hit.
Often, when a company does not achieve regulatory approval, you will see a major decline in the stock’s price. Failure or rejection of just one product can seriously alter a pharma stock’s investment thesis and by the time it happens, it is often too late.
Are there Pharmaceutical ETFs
The closest thing to a pharmaceutical ETF that trades on the TSX is probably the iShares Global Healthcare Index ETF (CAD-Hedged) (XHC.TO). This fund holds some of the world’s largest blue-chip pharma stocks, like Eli Lilly, AbbVie, and Johnson & Johnson.
A few US-listed pharmaceutical ETFs include:
- VanEck Pharmaceutical ETF (NASDAQ: PPH)
- Invesco Pharmaceuticals ETF (NYSEARCA: PJP)
- iShares US Pharmaceuticals ETF (NYSEARCA: IHE)
- SPDR S&P Pharmaceuticals ETF (NYSEARCA: XPH)
Methodology
Choosing pharma stocks has a lot to do with your personal risk tolerance. If you are seeking safety and stable dividends then consider some of the blue-chip big pharma companies.
But if you want to hit the potential home run, then you can consider the early-stage biotech companies.
As we mentioned, some of the most important aspects of pharma stocks to consider are the current portfolio of drugs, the pipeline of up-and-coming drugs, and the lifetime of those patents.
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