In this piece, we will take a look at the 11 best small cap pharma stocks to invest in. If you want to skip our overview of the global pharmaceutical and healthcare industry, which is one the most unique sectors in the world, then you can check out 5 Best Small Cap Pharma Stocks to Invest In.
The global pharmaceutical industry is simultaneously one of the most stable and most dynamic in the world. While high growth sectors such as semiconductors and artificial intelligence computing are quite size-ably at the mercy of global risk appetite and macroeconomic winds, others, often dubbed consumer defensive have an aura of stability due to operating in markets that are indispensable to global well being.
For pharma stocks, these can be either big ticket and stable names such as Pfizer Inc. (NYSE:PFE) and Johnson & Johnson (NYSE:JNJ) can leverage markets for developed pharmaceutical products, high growth players the likes of Intra-Cellular Therapies, Inc. (NASDAQ:ITCI) can try to develop treatments for tricky ailments such as bipolar depression, leukemia, and multiple sclerosis. These pharma stocks, like other healthcare firms such as biotechnology stocks, are dependent on the performance of their products. Stable revenues mean stable share price performance, and if any products are delayed, then the impact of considerable money spent on R&D costs leads to sharp drops in the stock market.
As an example, consider some of the worst performing healthcare stocks in 2024, year to date. Most of this group is populated by biotechnology stocks, and if we narrow our focus on pharma stocks, then the performance of niche stocks is significantly worse off than general pharma stocks such as Pfizer and Sanofi (NYSE:SNY). Similarly, while established global pharmaceutical stocks such as Eli Lilly and Company (NYSE:LLY) are up by nearly 30% year to date, their share price percentage gains cannot be matched by penny pharma stocks such as Cardiol Therapeutics Inc. (NASDAQ:CRDL).
Speaking of which, when it comes to pharma stocks, just like artificial intelligence has disrupted semiconductor stocks, weight loss drugs and treatments have proven to be quite a catalyst. Along with Eli Lilly, others such as Merck & Co., Inc. (NYSE:MRK) and Novo Nordisk A/S (NYSE:NVO) have seen significant share price gains over the past twelve months. Among the trio, Eli Lilly's stock has delivered the strongest returns, while Merck's shares have remained stable.
Shifting gears, while sizeable catalysts like weight loss drugs and GPUs can inject new life into large cap stocks and make them deliver triple digit percentage share price growth, as we've shown above, it's high growth areas such as small cap pharma stocks that carry the potential for the greatest returns. The nature of modern medicine means that there are countless diseases that could use better treatments, and the small cap pharma industry is filled with countless companies looking to establish strongholds in markets for treatments or management of diseases of the nerves, liver, and other areas.
For instance, let's take a look at some top performing small cap pharma stocks in 2024. A handful of such stocks that stand out are Collegium Pharmaceutical, Inc. (NASDAQ:COLL) and Evolus, Inc. (NASDAQ:EOLS). Among these, Evolus is the truly striking name as the price has appreciated by 32% on the market year to date. The uptrend started in mid January after the small cap pharma stock's preliminary figures for its latest earnings report which highlighted $61 million in revenue for the quarter. This overshot FactSet analyst estimates of $59.3 million, and the stock hasn't looked back since then. Interestingly, a MarketBeat report also suggests that Evolus short interest also ticked up by 17% in January, so perhaps there's trouble brewing under the hood. For some stocks that aren't on the short seller radar, you can check out 15 Best Least Shorted Stocks to Buy Now.
Before we head to our list of the best small cap pharma stocks, a brief mention of the biotechnology firm Moderna, Inc. (NASDAQ:MRNA) is necessary. Its shares soared by more than 13% after Moderna's fourth quarter results stunned analysts and saw the firm deliver a profit of 55 cents per share - the complete opposite of a 99 cent loss that analysts were expecting.
So, which small cap pharma stocks are worth looking at according to hedge funds? We took a look, and some notable picks are Esperion Therapeutics, Inc. (NASDAQ:ESPR), Dynavax Technologies Corporation (NASDAQ:DVAX), and Pacira BioSciences, Inc. (NASDAQ:PCRX).
A pharmaceutical sales rep holding a medicine pack, highlighting the drug candidate products.
Our Methodology
To make our list of the best small cap pharma stocks to invest in, we ranked all small cap pharmaceutical stocks by the number of hedge funds that had bought the shares during Q4 2023 and chose the top 11 stocks.
For these best small cap pharma stocks, we have also mentioned hedge fund sentiment. Hedge funds' top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That's why we pay very close attention to this often-ignored indicator.
11. Harrow, Inc. (NASDAQ:HROW)
Number of Hedge Fund Investors In Q4 2023: 14
Harrow, Inc. (NASDAQ:HROW) is a small American pharmaceutical company headquartered in Tennessee. It develops products for eye diseases, and investment firm SRK Capital's latest investor letter came with a rather interesting set of reflections, as the fund regretted not selling all of the shares when they were trading at $20 last year.
By the end of December 2023, 14 out of the 933 hedge funds tracked by Insider Monkey had held Harrow, Inc. (NASDAQ:HROW)'s shares. It joins Dynavax Technologies Corporation (NASDAQ:DVAX), Esperion Therapeutics, Inc. (NASDAQ:ESPR), and Pacira BioSciences, Inc. (NASDAQ:PCRX) in our list of the best small cap pharma stocks.
10. Supernus Pharmaceuticals, Inc. (NASDAQ:SUPN)
Number of Hedge Fund Investors In Q4 2023: 16
Supernus Pharmaceuticals, Inc. (NASDAQ:SUPN) is a specialized pharmaceutical company that makes treatments and medicines for ailments such as epilepsy. Its latest earnings report is due later this month, and heading into the event, the average share price target for the firm is $41.50.
During 2023's fourth quarter, 16 out of the 933 hedge funds covered by Insider Monkey's research had bought the firm's shares. Steven Boyd's Armistice Capital was the biggest Supernus Pharmaceuticals, Inc. (NASDAQ:SUPN) hedge fund investor as it owned $134 million worth of shares.
9. PetIQ, Inc. (NASDAQ:PETQ)
Number of Hedge Fund Investors In Q4 2023: 19
PetIQ, Inc. (NASDAQ:PETQ) marks a shift in our list of the best small cap stocks since its medicines deal with animal health. Its shares haven't done well this year, and are down year to date. It's also quiet on the news front, with PetIQ, Inc. (NASDAQ:PETQ) upcoming earnings the only notable event so far.
By the end of 2023's December quarter 19 out of the 933 hedge funds part of Insider Monkey's database had invested in PetIQ, Inc. (NASDAQ:PETQ). Richard Driehaus's Driehaus Capital owned the largest stake which was worth $14.4 million.
8. ANI Pharmaceuticals, Inc. (NASDAQ:ANIP)
Number of Hedge Fund Investors In Q4 2023: 19
ANI Pharmaceuticals, Inc. (NASDAQ:ANIP) provides a diversified set of medicines and pharmaceutical products such as hormonal treatments, steroids, and others. Its shares have performed well over the past 12 months, by having gained 41% and undoubtedly helped by earnings beats in all four latest quarters.
During last year's final quarter, 19 out of the 933 hedge funds surveyed by Insider Monkey were the firm's shareholders. ANI Pharmaceuticals, Inc. (NASDAQ:ANIP)'s biggest stakeholder in our database is David Rosen's Rubric Capital Management as it owns 1.1 million shares that are worth $62 million.
7. Evolus, Inc. (NASDAQ:EOLS)
Number of Hedge Fund Investors In Q4 2023: 24
Evolus, Inc. (NASDAQ:EOLS) is one the best performing small cap pharma stocks in 2024 as its shares are up by 31% year to date. However, this might not be the end of the returns if we consider what the analysts are saying. This is because Evolus, Inc. (NASDAQ:EOLS)'s shares are rated Strong Buy on average, and the average share price target of $21.57 prices in a hefty upside over the current share price of $13.16.
After digging through 933 hedge funds for their December quarter of 2023, Insider Monkey discovered that 24 had bought a stake in Evolus, Inc. (NASDAQ:EOLS). Timothy P. Lynch's Stonepine Capital was the largest investor through its $56 million stake.
6. Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH)
Number of Hedge Fund Investors In Q4 2023: 24
Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH) is a small Massachusetts based company that develops drugs to help cancer patients manage their disease. Like several other high growth healthcare companies, it has also elicited an average share price rating of Strong Buy. Had you bought the shares in November 2023, it would have been the perfect timing and the investment would be up by 54%.
During Q4 2023, 24 out of the 933 hedge funds tracked by Insider Monkey were the firm's investors. Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH)'s biggest stakeholder in our database is James E. Flynn's Deerfield Management as it holds $93 million worth of shares.
Esperion Therapeutics, Inc. (NASDAQ:ESPR), Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH), Dynavax Technologies Corporation (NASDAQ:DVAX), and Pacira BioSciences, Inc. (NASDAQ:PCRX) are some top hedge fund small cap pharma stock picks.
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Disclosure: None. 11 Best Small Cap Pharma Stocks To Invest in is originally published on Insider Monkey.
