Among the five largest biotechnology companies in the world, as measured by market capitalization, Eli Lilly and Co. (LLY, Financial) has given shareholders the biggest bang for their buck. The stock of the Indianapolis-based pharmaceutical giant has climbed 78% in the past year and more than 260% since August 2016.
Eli Lilly, with a market value of $255.5 billion, was fourth among the top five companies with the biggest biotechnology businesses, according to Insider Monkey. It was the first pharma to use biotech processes, which the company applied to make the polio vaccine and human insulin in large quantities.
About one-third of Eli Lilly’s drugs are biotech therapies. To further its diabetes treatments, last month the company acquired Protomer Technologies in a deal valued at $1 billion. The stock is included in the portfolio of 55 hedge funds, good enough for the third-most among the five leading biotechs.
Wealth Daily reported that Acumen Research and Consulting expects the global biotech market to grow at a compound annual rate of about 15.5% from 2020 to 2027 and reach a market value of over $850.5 billion, bringing potentially large returns to investors who identify those companies most likely to bring innovative drugs to market.
Thanks to its Janssen subsidiary’s biotech business, Johnson & Johnson (JNJ, Financial) earned the top spot with a market value of $457.3 billion. Janssen’s area of expertise is in monoclonal antibodies and is focused on six areas of treatment, including cancer and heart disease. The company’s purchase of Momenta Pharmaceuticals bolstered its autoimmune disorder treatments and gave it access to other of the company’s products.
Eighty-one hedge funds own Johnson & Johnson stock, the most among the top five. They have seen their investments jump 16% in the past year and 47% in the past five years. By comparison, the Invesco Dynamic Pharmaceuticals ETF (PJP) has gained 24% during the past 12 months and 33% in the last five years.
The laggard in the group is Novartis AG (NVS, Financial), whose shares have grown just 8% in the past year but have done substantially better since 2016, registering a gain of 30%.
Oakmark Global Fund sees better days ahead for Novartis. Insider Monkey reported that the fund, in its fourth-quarter 2020 investor letter, expressed optimism about the company’s prospects, pointing out that short-term problems provided “an attractive entry point to invest in a leading pharmaceutical franchise with compelling economics.” Oakmark thinks investors are completely overlooking Novartis’s strong pipeline and how well the company has done in developing new drugs.
Not everyone is so bullish on Novartis. The company, which has a market cap of $207 billion, is held by only 19 hedge funds, well off its high of 34.
Third on the list with a market cap of $257.3 billion is Pfizer Inc. (PFE, Financial), a favorite of 65 hedge funds. The New York-based company’s shares have increased 28% in the past year and 44% in the past five.
Biotech forms the basis of the company’s research and manufacturing. Pfizer has become even more well known in the past year thanks to the Covid vaccine it developed in conjunction with BioNTech SE (BNTX, Financial). To expand its role in biotech, Pfizer is investing up to $500 million in companies to continue its clinical development programs through the Pfizer Breakthrough Initiative.
Capturing the second spot on the list is Roche Holding AG (RHHBY, Financial) with a market value just short of $343 billion. The Swiss company’s one- and five-year stock gains are 15% and 58%, respectively.
As measured by sales, Roche is the biggest biotech in the world. Brown Capital Management, for one, doesn’t think the company is a good buy, stating in an investor letter that it’s putting its money elsewhere, owing to the view that the company is “facing an uncertain growth path and pressure from generics in its mature drugs.”
