These healthcare stocks are up more than 400% in the past five years, thanks to their dominance in the anti-obesity market.
Eli Lilly (LLY -3.36%) and Novo Nordisk (NVO -3.75%) are the two big names dominating the anti-obesity market today. They’ve been generating billions in revenue from their treatments, and there’s still a lot of growth for these companies.
However, the weight loss drug that proves to be more effective could ultimately determine which company will capture the lion’s share of the market. That’s an important consideration for investors, as that could also dictate which of these healthcare stocks is the better buy in the long run. A recent study suggests that there could be a winner already emerging in this race.
Eli Lilly’s weight loss drug may be more effective
A recent study from the JAMA Internal Medicine journal compared the effectiveness of tirzepatide (Eli Lilly’s drug, which is the active ingredient in Zepbound and Mounjaro), versus semaglutide (Novo Nordisk’s drug, which is the active ingredient in Wegovy and Ozempic). It found that patients who took tirzepatide were more likely to experience significant weight loss than if they used semaglutide.
The study, however, shouldn’t come as a big surprise. In clinical trials, tirzepatide has demonstrated some truly incredible numbers. Last year, Eli Lilly reported that in an 84-week study, patients were able to lose up to 26.6% of their body weight, on average, when using the drug. With semaglutide, patients lost an average of about 14.9% over a 68-week period.
The trials weren’t identical, and without an apples-to-apples comparison, it’s difficult to ascertain which of the two drugs has a more favorable outcome under identical circumstances. Given the clinical results and this recent study, however, it appears probable that tirzepatide is the more effective treatment.
The bigger battle is still to be determined
While this recent study is encouraging for Eli Lilly investors, it may not be the ultimate battleground between these two companies. These are both injectable treatments, and the greater opportunity may be in oral weight loss pills. Whichever company comes out on top with the better weight loss pill could end up being in the best position to capture the most market share in the future.
In a report released last year, Novo Nordisk said that an oral version of semaglutide helped people lose 15.1% of their body weight over a 68-week period. That’s comparable to the performance of the injectable version. One promising oral weight loss drug Eli Lilly has been developing, orforglipron, achieved up to 14.7% weight loss for patients in just 36 weeks.
While it’s tempting to draw conclusions from these results, this appears to be a much closer race — at least for now.
Does this news make Eli Lilly the better stock to own?
Eli Lilly appears to have the more effective weight loss drugs in its portfolio. But with a massive market for anti-obesity drugs that could top $100 billion, it may not mean that Novo Nordisk is in trouble. For many patients, it may come down to which drug they tolerate better and results in fewer side effects. Since patients will likely need to be on these treatments for the long haul, it’s not just sheer weight loss alone that will matter to patients — they need to be able to tolerate the medications well.
Both Eli Lilly and Novo Nordisk have been generating terrific results due to their GLP-1 products, and there’s still much more growth in the future for these companies. This recent news, while promising, doesn’t necessarily make Eli Lilly a better stock to buy right now.
Both of these stocks are good long-term investments. Shares of Novo Nordisk trade at 44 times trailing earnings, versus more than 110 times earnings for Eli Lilly, which makes Novo Nordisk stock a more attractive investment right now. It’s hard to go wrong with either stock, however, given the potential in the lucrative GLP-1 market.
