Best pharmaceutical ETFs to buy in 2021

Pharmaceutical ETFs offer investors exposure to some of the best and most profitable pharma companies in the world. The guide picks five of the top ETFs you can invest in right now.
By: Prash Raval
Prash Raval
When not researching stocks or trading, Prash can be found either on the golf course, walking his dog or… read more.
Updated: Dec 2, 2021
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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?

Our experts have selected five of the most promising pharmaceutical ETFs for this year listed in the table below. To find more information on each one, scroll down to keep reading. 

#ETF symbolETF name
1IHEiShares US Pharmaceuticals
2CHNALoncar China BioPharma
3PPHVanEck Pharmaceutical
4PJPInvesco Dynamic Pharmaceuticals
5PILLDirexion Daily Pharmaceuticals & Medical Bull
List selected by our team of analysts, updated 16 November 2021

1. iShare US Pharmaceuticals  (NYSEARCA: IHE)

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. 

IHE is composed of just under fifty companies and is heavily weighted towards large cap stocks. Its top two holdings, Johnson & Johnson, and Pfizer account for over 40% of its invested capital. Both are large well known companies, with Pfizer bolstering the ETFs performance in 2020 after its covid vaccine rollout. 

The reason the iShare UK Pharmaceuticals takes the top spot on our list is due to its solid prior growth of nearly 300% since inception. It also holds some of the largest pharma companies in the world and its strong performance during the pandemic confirms its ability to hold up in all economic conditions. 

2. Loncar China BioPharma (NASDAQ: CHNA)

The second spot on our list goes to the Loncar China BioPharma ETF, which contains both Chinese and US pharmaceutical companies. It seeks to track the performance of the Loncar China BioPharma Index. While it holds companies on both the NASDAQ and Hong Kong Stock Exchanges, it has a larger weighting towards Chinese companies. 

Around 80% of the ETF comprises pharma companies located in China and it has an equal weighting across all of its holdings, amounting to an average of about 2%. Its largest two holdings are BeiGene ADR and CARsgen Therapeutics Holdings. BeiGene engages in the development of cancer drugs while CARsgen develops antigen receptor cell therapies. 

It’s one of the youngest ETFs on our list and was created in 2018. Since its inception it has performed well, especially during the covid pandemic which saw its price increase in excess of 100%. It has since slowed down but takes the second place due to its heavy exposure to the growing Chinese pharmaceutical market. 

3. VanEck Pharmaceutical (NASDAQ: PPH)

The VanEck ETF aims to track the performance of an index called the MVIS US Listed Pharmaceutical. It is the joint 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 Glaxosmithkline, Johnson & Johnson, and Merck and Co. 

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 the coming year. 

4. Invesco Dynamic Pharmaceuticals  (NYSEARCA: PJP)

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 include Merck & co, Pfizer, and Abbott Laboratories

Similarly to most ETFs on our list, it took a hit during the coronavirus pandemic, but has quickly recovered in the time since. It takes fourth place due to its concentration of large industry leading companies and previous growth. 

5. Direxion Daily Pharmaceuticals & Medical Bull  (NYSEARCA: PILL)

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

If 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. 

1
Min. Deposit
$50
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User Score
10
Trade/invest in stocks with just $50
Invest for dividends and get payout on stocks on Ex-Dividend day
Over 11 payment methods, including PayPal
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Description:
eToro is a multi-asset investment platform with more than 2000 assets, including FX, stocks, ETF’s, indices and commodities. eToro users can connect with, learn from, and copy or get copied by other users. Buying stocks on eToro is free and you can invest with as little as $50.
Payment Methods
Bank Transfer, Wire Transfer
Full regulations list:
CySEC, FCA
eToro USA LLC does not offer CFDs and makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity specific information about eToro. Your capital is at risk.
2
Min. Deposit
$1
Promotion
User Score
9.3
0 Commissions and no deposit minimums
Registered with and regulated by SEC and FINRA
Loss of cash protection
Start Trading
Description:
Financial company driven by technology and offering all-in-one self-directed investment platform that provides excellent user experience.
Payment Methods
Full regulations list:

What is a pharmaceutical  ETF?

Pharmaceutical exchange traded funds offer investors exposure to some of the largest pharma companies in the world. These include businesses who 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 the 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?

Yes 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 its a good idea to stay informed about the latest news which you can do so by clicking on the links below. 

Latest pharmaceutical news

On Tuesday, Healthequity Inc. (NASDAQ:HQY) shares declined by 24% after announcing its most recent quarterly results. The company reported its FQ3 revenue and earnings Monday after markets closed, missing the consensus for analyst expectations. Healthequity also issued a full-year 2022 revenue guidance below the consensus Street…
HealthEquity Inc. (NASDAQ: HQY), a top HSA (health savings account) non-bank custodian, dropped by 25% and announced its third-quarter financial results for 2021.  How does top management feel? HealthEquity’s Chief Executive Officer and President, Jon Kessler, said that their team helped deliver another solid financial quarter of HSA growth.
When CDC confirmed the first case of Omicron in California at the start of this week, Dr Anthony Fauci – chief medical advisor to the U.S. President, said the individual had “mild symptoms”. If that continues to be true, the new variant could mark a positive turning point in…
Wall Street indices are giving up intraday gains after the Centre for Disease Control and Prevention (CDC) confirmed the first case of the new COVID variant of concern in the United States. Symptoms are mild and improving Dr Anthony Fauci – chief medical advisor to the U.S. President, said the…
A day after Moderna CEO Stephane Bancel said the existing COVID-19 vaccine might be “materially” less effective against Omicron, Dr Scott Gottlieb says there’s no reason to believe that vaccines will lose efficacy against the new variant. Highlights from Dr Gottlieb’s interview on CNBC’s ‘Squawk Box’ On CNBC’s…
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Prash Raval
Financial Writer
When not researching stocks or trading, Prash can be found either on the golf course, walking his dog or teaching his son how to kick a… read more.