Putting money into pharmaceutical companies comes with its own set of risks. It's often difficult to predict which medications will achieve major commercial success for their makers. Because of this uncertainty, investors may have to wait several years before seeing meaningful returns from these investments.
However, you can improve your chances by choosing companies with strong drug pipelines and proven histories of innovation and expansion. Two businesses that fit this description well are Eli Lilly ( LLY -0.97%) and AstraZeneca ( AZN -1.23%).
Here’s why these two pharmaceutical giants could be smart choices to buy and hold for many years, if not decades.
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Eli Lilly
Eli Lilly stands out as a top healthcare stock that’s suitable for long-term holding. Known for its innovative approach and broad drug pipeline, this Indianapolis-based pharmaceutical company boasts impressive financials and promising prospects for future expansion.
Currently, Eli Lilly’s business is largely driven by two leading injectable GLP-1 medications: Mounjaro, used for diabetes, and Zepbound, for weight management. Both products contain tirzepatide as the active ingredient, which shows significant promise for treating additional health conditions.
For instance, recent clinical studies have indicated tirzepatide could be effective in treating fatty liver disease. There’s also evidence that GLP-1 drugs may help reduce addictive behaviors. In the near future, Eli Lilly aims to introduce a weight loss pill, potentially as soon as next year.
What’s particularly promising is that the company is already delivering outstanding financial performance. This year, Eli Lilly expects to generate between $60 billion and $62 billion in revenue, which is about 36% higher than last year’s $45 billion. That figure is nearly double the $34 billion it reported in 2023.
Eli Lilly continues to fuel its growth by investing in its pipeline, whether through internal research or acquisitions, making it a formidable growth stock for the long term. While its current price-to-earnings (P/E) ratio is above 50, this may become less of an issue as the company’s earnings are likely to rise substantially over time.
AstraZeneca
AstraZeneca, based in the U.K., is another major healthcare player worth considering for a long-term portfolio. The company is working on nearly 200 projects, offering significant diversification across therapeutic areas such as oncology, respiratory and immunology, rare diseases, vaccines, immune therapies, cardiovascular, and more.
One particularly promising field for AstraZeneca is radioconjugates, which are designed to be more precise than traditional chemotherapy. Unlike chemotherapy, which can harm healthy cells, radioconjugates aim to specifically target cancer cells.
To advance its efforts in this area, AstraZeneca acquired Fusion Pharmaceuticals, a clinical-stage company, last year. Although this is a long-term initiative, it holds great potential to transform cancer treatment if successful.
AstraZeneca has been making substantial investments in its future, projecting annual revenue of around $80 billion by 2030. This would be a 48% jump from the $54 billion it reported last year.
With a P/E ratio of 32, AstraZeneca is more affordable than Eli Lilly, but both companies offer compelling growth prospects that make them attractive options for long-term investors.
