The pharmaceutical industry is sizable, with the US commanding the largest slice of the market. But competition within the sector is cutthroat and regulatory approval is an ongoing hurdle.
Pharmaceutical stocks are stocks from companies that research and produce pharmaceutical drugs and medical equipment.
The industry is dominated by big names like Pfizer, Johnson & Johnson and GlaxoSmithKline — famous for blockbuster drugs netting over USD$1 billion in annual sales, like Advair, Lipitor and Zoloft.
But there are numerous up-and-comers in the industry offering a spectrum of entry points for investors, like livestock medicine manufacturer Zoetis or Neoleukin Therapeutics, a biopharmaceutical company that targets immunological disorders.
The global pharmaceutical industry is massive, generating an estimated US$2.4 trillion in revenue in 2025. The US holds the largest share of the market, while Canada accounted for 2.1% of global pharmaceutical spending, or about CA$50 billion annually.
According to Statista, the US also happens to have some of the highest prescription drug prices in the world — bad news for the general public but profitable for well-established drug companies like Pfizer and its shareholders. Given that drug prices in Canada and many other countries are much lower than drug prices in the US, millions of American residents import drugs from outside the country each year to save money.
And if the potential for profit isn’t incentive enough, investors also have the opportunity to back potentially groundbreaking, life-saving medicine — medicine that they or a loved one may one day rely on.
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Pharmaceutical stocks present a potentially lucrative investment opportunity but carry significant risks, including competition from generic drugmakers, product patent expirations and the substantial cost of research and development (R&D).
It’s estimated that pharmaceutical companies spend approximately 20% of their revenue on research and development. In fact, in 2018, US companies collectively spent $80 billion on R&D, according to Statista. Between 2004 and 2019, anywhere from $790 million and $1.33 billion was spent each year on drug research in Canada.
What makes this expense especially unpalatable is the risk drug companies face in having their products rejected by regulatory authorities like the Health Products and Food Branch (HPFB) of Health Canada and the US Food and Drug Association (FDA). A company could spend millions researching and developing a product, only to have it rejected by the FDA.
Pharma companies also face steep competition from generic drugmakers attempting to undercut brand-name products with cheaper alternatives — especially for drugs with patent expirations on the horizon.
The industry is far from foolproof, and while pharma stocks could be a potentially profitable addition to your portfolio, make sure you understand the risks involved before you invest.
These pharmaceutical stocks hail from companies headquartered in the US and around the globe.
Pharmaceutical ETFs contain baskets of stocks from a range of businesses within the industry, including pharmaceutical companies, medical device manufacturers and more.
To invest, you’ll need a brokerage account. Explore your options below.
To make comparing even easier we came up with the Finder Score. Trading costs, account fees and features across 10+ stock trading platforms and apps are all weighted and scaled to produce a score out of 10. The higher the score, the better the platform—it's that simple.
Pharma stocks offer investors the opportunity to back groundbreaking drug research, but competition in this industry has the potential to threaten profits.
To invest in pharmaceutical companies, you’ll need a brokerage account. Compare your platform options to find the brokerage that fits your budget and investment goals needs.
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