The pharmaceutical market reached a total value of US$1.48 trillion in 2022, according to Statista, up significantly from US$888 billion in 2010. By 2028, that value is expected to increase even further to an estimated US$1.6 trillion.
Experienced and novice investors alike may want to consider pharmaceutical exchange-traded funds (ETFs) as a way to gain exposure to the top pharma companies. Like all ETFs, pharmaceutical ETFs are a good option for those who want to trade a set of assets in the pharmaceutical industry instead of focusing solely on individual pharmaceutical stocks.
The main advantage of pharma ETFs is the fact that they provide exposure to an overarching sector, but still trade like a stock; they also offer less market volatility and lower fees and expenses.
The pharmaceutical ETFs on this list are arranged by their total assets as of October 28, 2023.
1. iShares US Pharmaceuticals ETF (ARCA:IHE)
Total assets under management: US$484.3 million
Created on May 5, 2006, this iShares ETF tracks some of the top US pharma companies. In total, the iShares US Pharmaceuticals ETF has 36 holdings, with the vast majority being large-cap stocks.
Of its holdings, Eli Lilly (NYSE:LLY) and Johnson & Johnson (NYSE:JNJ) are by far the largest portions of its portfolio, coming in at weightings of 25.6 percent and 23.6 percent, respectively. Rounding out the top five are Merck (NYSE:MRK), Royalty Pharma (NASDAQ:RPRX) at 4.62 percent and Pfizer (NYSE:PFE) at 4.49 percent.
2. VanEck Vectors Pharmaceutical ETF (NASDAQ:PPH)
Total assets under management: US$389.4 million
Established in late 2011, the VanEck Vectors Pharmaceutical ETF tracks the MVIS US Listed Pharmaceutical 25 Index. It has the capacity to provide big returns, even though there are some risks attached to the ETF. An analyst report indicates that investors looking for ‘tactical exposure’ to the pharma sector might consider this ETF as an investment option.
The ETF has 26 holdings, with the top five being Eli Lilly, Novo Nordisk (NYSE:NVO), Johnson & Johnson, Sanofi (NASDAQ:SNY) and AbbVie (NYSE:ABBV); each has a weighting of over 5 percent.
3. Invesco Pharmaceuticals ETF (ARCA:PJP)
Total assets under management: US$248.04 million
The Invesco Pharmaceuticals ETF is primarily focused on providing exposure to US-based pharma companies. An analyst report states that this ETF chooses individual securities based on certain investment criteria, namely stock valuation and risk factors. Invesco changed the fund’s name from the Invesco Dynamic Pharmaceuticals ETF in August 2023.
This ETF was started on June 23, 2005, and currently tracks 25 companies. Its top holdings are Amgen (NASDAQ:AMGN), Eli Lilly, Gilead Sciences (NASDAQ:GILD), Merck and AbbVie, each weighing between 6.07 and 6.58 percent.
4. SPDR S&P Pharmaceuticals ETF (ARCA:XPH)
Total assets under management: US$170.99 million
The SPDR S&P Pharmaceuticals ETF came into the market on June 19, 2006, and represents the pharmaceutical sub-industry sector of the S&P Total Markets Index. An analyst report for the ETF suggests that due to its narrow focus — which includes pharma giants that post ‘big returns’ during times of consolidation — it should not be considered for a long-term portfolio.
This pharma ETF tracks 39 holdings; its top five are Eli Lilly and Merck at 5.07 percent each, Jazz Pharmaceuticals (NASDAQ:JAZZ) with 4.94 percent, Royalty Pharma with 4.89 percent and Johnson & Johnson with 4.86 percent.
5. KraneShares MSCI All China Health Care Index ETF (ARCA:KURE)
Total assets under management: US$61.57 million
The KraneShares MSCI All China Health Care Index ETF was launched in February 2018 and tracks an index of large- and mid-cap Chinese stocks in the healthcare sector, all weighted by market capitalization. According to an analyst report, the fund provides investors with ‘exposure to a relatively small slice of the Chinese economy that tends to be dominated by pharmaceuticals.’
The ETF tracks 90 holdings, and its top five are WuXi Biologics (OTC Pink:WXIBF,HKEX:2269) at 9.39 percent, Shenzhen Mindray Bio-Medical Electronics (SZSE:300760) at 6.2 percent, Jiangsu Hengrui Medicine (SHA:600276) at 5.59 percent, WuXi AppTec (OTC Pink:WUXIF,SHA:603259) at 4.39 percent and BeiGene (OTC Pink:BEIGF,HKEX:6160) at 4.37 percent.
Securities Disclosure: I, Meagen Seatter, hold no investment interest in any of the companies mentioned in this article.
