Did Eli Lilly Just Get a Leg Up on Novo Nordisk?

Pharmaceutical giant Eli Lilly (LLY 1.53%) has gotten off to an incredible start in 2024.

The company’s diabetes and obesity care treatments, Mounjaro and Zepbound, continue to support unprecedented growth for Lilly in a heated race with its rival Novo Nordisk, the maker of glucagon-like peptide 1 (GLP-1) agonists Ozempic, Wegovy, Rybelsus, and Saxenda.

Although GLP-1 medications are in the spotlight for Lilly, investors should be keen to learn that the company just achieved another milestone.

Let’s dig into the catalysts propelling Lilly right now, and why I think the company may have just leapfrogged Novo Nordisk as a superior investment.

Eli Lilly’s weight loss treatments are on the rise

GLP-1 medications have gained significant traction in recent years. A research report from J.P. Morgan suggests that 9% of the U.S. population could be prescribed a GLP-1 treatment by 2030, equating to a market size of more than $100 billion.

While this forecast may appear overly bullish, my take is that it could be conservative. Mounjaro was approved by the Food and Drug Administration (FDA) roughly two years ago. In 2023, Mounjaro eclipsed $5 billion in sales for Lilly. Moreover, during the first quarter of 2024, Mounjaro generated $1.8 billion in revenue — implying an annual run rate of more than $7 billion.

Zepbound was commercialized more recently, having attained FDA approval in November. Nevertheless, Zepbound is on pace to become a $2 billion blockbuster drug this year in its first full year on the market.

Considering the company is actually struggling to fulfill demand for both Mounjaro and Zepbound, it’s reasonable to believe that Lilly hasn’t even scratched the surface when it comes to the full potential of its GLP-1 portfolio.

The company just notched another big win

Lilly has several other successful treatments outside of its GLP-1 medications. The company has a cancer drug called Verzenio, as well as a plaque psoriasis and psoriatic arthritis treatment called Taltz.

However, Lilly’s biggest opportunity beyond the weight loss market appears to be in treating Alzheimer’s disease. About a week ago, the FDA approved Lilly’s Alzheimer’s candidate, Kisunla, the brand name for donanemab.

This is a huge breakthrough for Lilly. Unlike other medical conditions, the Alzheimer’s market is incredibly fragmented due to a lack of mainstream treatments.

With Kisnula approved, Lilly has entered yet another multibillion-dollar market and could quickly emerge as a leader.

Eli Lilly vs. Novo Nordisk: Is there a clear winner?

There are a couple of important themes to keep in mind when it comes to assessing investing in Eli Lilly over Novo Nordisk.

Although Lilly has gained significant traction in the GLP-1 market, Novo is the clear leader at the moment. According to Novo Nordisk’s estimates, it has 70% of the international GLP-1 market and 54% in North America.

Considering that Wegovy was just granted approval in China, I suspect Novo’s market position will continue to strengthen.

With that said, Lilly has proven that Mounjaro and Zepbound can compete at a high level with Novo’s robust line of GLP-1 treatments. Moreover, I think Lilly’s diversification makes it a more desirable investment choice.

Today, Novo Nordisk is primarily known for its weight loss and insulin treatments. As explored above, Lilly’s medicines are used in patients across a much broader spectrum. Now, with the addition of Kisunla in its portfolio, Lilly is continuing to evolve into a prolific healthcare provider.

I’ll admit that the one drawback with Lilly stock is its valuation. The company’s forward price-to-earnings (P/E) ratio of 68 is high, even for a growth stock. This could imply that some of the upside from GLP-1 growth is already priced into the stock.

However, I wouldn’t be overly cautious when investing in Lilly. Trying to time the perfect moment to buy the stock is an exercise in false precision. Rather, investors should buy the stock over a long-term time horizon using dollar-cost averaging.

I think Lilly has a bright future and its best days are ahead. Considering its position in the GLP-1 market is nascent, coupled with the potential of treating Alzheimer’s Disease, Lilly looks well positioned to remain a top name in the pharmaceutical industry for years to come.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Adam Spatacco has positions in Eli Lilly and Novo Nordisk. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.