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5 Best Pharmaceutical ETFs to Buy in Q1 2025
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Pharmaceutical ETFs are funds that invest in companies that form part of the $1 trillion pharma industry. They often contain businesses that manufacture some of the world’s most used drugs. This guide picks five of the top pharma ETFs for the year ahead.
What are the top pharmaceutical ETFs to buy?
Copy link to sectionOur experts have selected five of the most promising pharma ETFs for this year listed in the table below. To find more information on each one, scroll down to keep reading.
# | ETF symbol | ETF name | Learn more |
---|---|---|---|
1 | IHE | iShares US Pharmaceuticals | Learn more > |
2 | XPH | SPDR S&P Pharmaceuticals ETF | Learn more > |
3 | PPH | VanEck Pharmaceutical | Learn more > |
4 | PJP | Invesco Dynamic Pharmaceuticals | Learn more > |
5 | PILL | Direxion Daily Pharmaceuticals & Medical Bull | Learn more > |
1. iShares US Pharmaceuticals (IHE)
Copy link to section- Assets: $686 million
- Expense ratio: 0.40%
- Year of inception: 2006
- 5-year performance: 31%
- Dividend yield: 1.51%
The IHE ETF gives exposure to US companies that manufacture prescription or over-the-counter drugs and vaccines. Created in 2006, the ETF seeks to track the performance of the Dow Jones US Select Pharmaceuticals index.
The biggest companies in the fund are the likes od Eli Lilly, Johnson & Johnson, Merck, Pfizer, Bristol-Myers Squibb, Viatris, and Zoetis. All these firms have a leading market share in their respective industries.
Eli Lilly is a market leader in diabetes treatment and weight loss, where it is the second-biggest player after Novo Nordisk. Pfizer has a big market share in cancer treatment while Johnson & Johnson has a presence in most illnesses.
The biggest con for this fund is that it is highly concentrated, with Eli Lilly and Johnson & Johnson accounting for over 25% of its portfolio. That could be a big risk when these companies are not doing well.
2. SPDR S&P Pharmaceuticals ETF(XPH)
Copy link to section- Assets: $195 million
- Expense ratio: 0.35%
- Year of inception: 2006
- 5-year performance: -0.13%
- Dividend yield: 1.57%
The SPDR S&P Pharmaceuticals ETF is another pharmaceutical funds to consider. It tracks the S&P Pharmaceuticals Select Industry Index, which focuses on pharmaceutical companies in the S&P 500 index. It is a modified weighted index that invests in companies of all sizes.
The biggest company in the fund is Axsome Therapeutics, Intra Celullar Therapies, Eli Lilly, Zoetis, Viatris, and Catalent. It also has other giant companies like Pfizer, Organon, and Bristol Myers Squibb.
This is a good fund because it is not concentrated and that it has a relatively low expense ratio of about 0.35%.
3. VanEck Pharmaceutical (PPH)
Copy link to section- Assets: $598 million
- Expense ratio: 0.36%
- Year of inception: 2011
- 5-year performance: 55%
- Dividend yield: 1.72%
The VanEck ETF aims to track the performance of an index called the MVIS US Listed Pharmaceutical. It is the smallest ETF on our list in terms of holdings, with just 25, however many of its companies are large-cap stocks.
Unlike the previous two ETFs on our list, PPH includes companies from around the world, with the majority located in the US or Europe. The ETFs top ten holdings account for 50% of its total weighting and included companies like Eli Lilly, Novo Nordisk, Johnson & Johnson, Merck, AbbVie, and Novartis.
Although PPH holds a small number of companies, it favours the largest businesses in the pharmaceutical industry based on market capitalisation. Due to its stable and consistent growth since its inception in 2000, our analysts believe it is one of the top pharma ETFs to invest in in the long term. It is also a good rewarder of shareholders through dividends.
4. Invesco Dynamic Pharmaceuticals (PJP)
Copy link to section- Assets: $275 million
- Expense ratio: 0.57%
- Year of inception: 2005
- 5-year performance: 36%
- Dividend yield: 0.94%
The Invesco Dynamic Pharmaceuticals ETF is the best performing on our list. Since its inception in 2005, it has seen an increase of over 400%. Like PPH above, it’s the joint smallest on our list with just 25 holdings.
It tracks the performance of an index called Dynamic Pharmaceutical Intellidex and is focused on giving investors exposure to US-based pharma companies. Its top three holdings account for nearly 20% of its total size. They includes companies like Eli Lilly, AbbVie, Regeneron, Amgen, Merck & Co, and Abbott Laboratories.
Similarly to most ETFs on our list, it took a hit during the coronavirus pandemic but has quickly recovered. It takes fourth place due to its concentration of large industry-leading companies, its strong dividends, and
5. Direxion Daily Pharmaceuticals & Medical Bull (PILL)
Copy link to section- Assets: $12.75 million
- Expense ratio: 1.01%
- Year of inception: 2017
- 5-year performance: -75%
- Dividend yield: 1.97%
The final ETF on our list is the Direxion Daily Pharmaceuticals & Medical Bull. Its aim is to track an index called the S&P Pharmaceuticals Select Industry Index. However, unlike the others on our list, PILL is a leveraged ETF.
While unlevered ETFs track an index’s performance long term, PILL has an investment objective that is 300% the return of the index it tracks per day. Investing in this ETF is a riskier choice compared to the four we have listed prior. Its top ten holdings amount to 50% of its total and are all US-based companies.
Its largest holding is Cassava Sciences, which is a clinical-stage biopharm company that focuses on neuroscience. Although risky, PILL takes the last spot on our list because of the potential short term gains on offer. Out of the five ETFs, PILL was the strongest performer during the pandemic, returning over 300% to investors.
Where to buy the best pharmaceutical ETFs
Copy link to sectionIf you are ready to invest in pharmaceutical ETFs, finding a reliable platform key. Below we’ve listed three of our expertly selected brokers. You can click on any and be taken directly to their website and start investing and you can read more about them in this article: best ETF platforms.
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What is a pharmaceutical ETF?
Copy link to sectionPharmaceutical exchange-traded funds offer investors exposure to some of the largest pharma companies in the world. These include businesses that research, discover, develop, and manufacture drugs used to cure diseases and vaccines among others.
ETFs are an easy way for investors to generate returns from a specific sector without having to buy individual stocks. The pharmaceutical industry is one of the most popular amongst investors with large returns on offer. It’s currently a $1 trillion market and benefited in recent times from heavyweights competing to deliver a covid vaccine.
Are pharmaceutical ETFs a good investment?
Copy link to sectionYes they can be, especially if you’re looking for slow and steady growth rather than explosive gains. The pharmaceutical industry includes some of the largest companies in the world, many of which have led the race in producing a covid vaccine.
Pharmaceutical ETFs have an advantage over other industries, in that they offer stability and often perform better during times of economic downturn. This was highlighted during the pandemic which saw the pharma sector outperform other industries. Investing in pharma ETFs is a great way to balance a portfolio while reducing risk.
Much of the industry is based around research and development of new drugs and vaccines and it can be difficult to keep track of new information. That’s why it’s a good idea to stay informed about the latest news which you can do so by clicking on the links below and by reading more on how to buy ETFs.
Methodology: How we choose the best pharmaceutical ETFs
Copy link to sectionAt Invezz, we are dedicated to helping investors make informed decisions by providing authoritative, accessible, and engaging advice and recommendations. Our curated section of the best Exchange-Traded Funds (ETFs) is carefully selected by our team of experienced market analysts and reviewed by a sub-editor. This methodology outlines the rigorous process we follow to ensure our ETF recommendations are up-to-date, reliable, and insightful.
- Analyst research & recommendations: Our seasoned market analysts use their in-depth sector knowledge to identify ETFs with strong potential, ensuring they meet high standards of performance, liquidity, and market potential.
- ETF evaluation: We evaluate ETFs based on their underlying assets, historical performance, expense ratios, and tracking accuracy, alongside macroeconomic factors and sector trends.
- Fund performance reports: We assess ETFs through the latest performance reports, analyzing key metrics like returns, volatility, expense ratios, and assets under management (AUM).
- Sector analysis and external recommendations: Our detailed sector analysis, combined with recommendations from reputable sources like Barron’s and Zacks, provides an additional layer of validation for our selections.
- Quarterly review & refresh: We update our curated ETF list quarterly, re-evaluating each ETF based on the latest reports, industry developments, and market conditions to ensure our recommendations reflect the most current information available.