Eli Lilly, Novo Nordisk get growth stock status on weight-loss drug boost (Feb 16)
Repeats Feb 16 story with no changes to text
By Medha Singh and Manas Mishra
Feb 16 (Reuters) -U.S.-based Eli Lilly LLY.O and Denmark's Novo Nordisk NOVOb.CO have struck gold with their weight-loss drugs, sending their shares to stratospheric levels and putting them on par with some high-growth tech stocks.
Retail and institutional investors alike have flocked to the two stocks in the past year, as they bet on explosive demand for the companies' obesity drugs, called GLP-1 agonists, in a market that some analysts expect could breach $100 billion.
Shares of both companies trade near record highs, with their valuation multiples at a significant premium to their healthcare peers and almost matching those of high-flying technology and growth stocks.
Lilly shares trade 56.17 times the earnings estimates for the next 12 months, while Novo has a price-to-earnings (PE) multiple of 35.84, according to LSEG data.
The S&P 500 healthcare sector .SPXHC has a PE multiple of 18.7, according to LSEG Datastream. Meanwhile, popular growth stocks - Tesla TSLA.O and Nvidia NVDA.O - trade at a PE multiple of 57.78 and 33.89, respectively.
"We believe that Eli Lilly and Novo Nordisk are properly called growth stocks even as they inhabit the large-cap pharmaceutical space, which is more typically a home for value stocks," said Jason Benowitz, senior portfolio manager at CI Roosevelt.
Eli Lilly overtook electric automaker Tesla's market value last month to make it the ninth-largest U.S.-listed company. Novo briefly knocked off luxury French luxury retail giant LVMH LVMH.PA as the most valuable European company last year
Eli Lilly, which makes GLP-1 drugs Mounjaro and Zepbound, was worth $719 billion as of Thursday's close.
Novo Nordisk, the maker of blockbuster obesity drug Wegovy and diabetes treatment Ozempic, sports a market capitalization of about $550 billion, including unlisted shares, according to LSEG data.
Lilly's revenue is expected to jump 76% over the next three years to $60.39 billion, while that of Novo is expected to rise 68% to 390 million Danish crowns for the same period, according to LSEG data.
Indeed, Wall Street's sell-side analysts on average expect Eli Lilly's market capitalization to swell 7.4% in the next 12 months, while Novo's valuationis likely to dip 3%.
CFRA Research's Sel Hardy thinks Lilly's diversification due to a spate of recent acquisitions, its investments in research and development and rising sales of cancer drugs are an advantage.
"Since 2023, we're seeing a lot of retail interest in the stock being driven by the GLP-1 boom. But we don't think Lilly is just a GLP-1 story," she said.
The blistering share rally is pinned on the success of the weight loss drugs, and the ability of the companies to grow the rest of their portfolio, although it could sputter if the companies' sales disappoint.
"As with any new blockbuster drug, it is always difficult to appropriately estimate what the total addressable market will be in the coming years," said Art Hogan, chief market strategist at B. Riley Wealth in New York.
Risks to the recent rally include "spiraling costs to expand production capacity, and any indication that product prices could fall sharply," said Dan Coatsworth, investment analyst at AJ Bell.
Eli Lilly PE and stock price https://tmsnrt.rs/3SG2lAv
Eli Lilly and Novo Nordisk market value surge in the past year https://tmsnrt.rs/48i2SOL
Lilly, Novo Nordisk sales boosted by newer weight-loss drugs https://tmsnrt.rs/3OKTaO6
Wall St estimates for Lilly, Novo Nordisk's revenue growth https://tmsnrt.rs/3wjIGPr
Reporting by Medha Singh and Manas Mishra in Bengaluru; Editing by Sweta Singh and Anil D'Silva
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
