We recently compiled a list of the 10 Best GLP-1 and Weight Loss Stocks to Buy Now. In this article, we are going to take a look at where Eli Lilly and Company (NYSE:LLY) stands against the other GLP-1 and weight loss stocks.
According to WHO, more than one billion people worldwide are obese, including 650 million adults, 340 million adolescents, and 39 million children. A brand-new class of weight-loss drugs that don’t require diets or intense exercise appears to be revolutionary. With the help of these revolutionary drugs, overweight and obese individuals can reduce their body weight by 15% to 20%. “This could be the biggest opportunity that we’ve ever seen in the pharma industry,” says Andy Acker, portfolio manager at Janus Henderson Investors. Without question, weight-loss drugs are popular. Investors are comparing the US weight-loss medicine pioneer, to the leader in artificial intelligence chips.
Morgan Stanley Research, in light of this surge in demand, now projects that the global obesity drugs market will reach $105 billion in 2030, up from a previous estimate of $77 billion. In 2023, branded obesity drugs generated $6 billion in sales.
In 2023, the obesity drug market leader Semaglutide (the generic name for Ozempic, Wegovy, and Rybelsus) was the most prescribed Glucagon-Like Peptide-1 GLP-1 agonist , accounting for more than 88% of all new prescriptions, as per Forbes. The only GLP-1 drugs for weight control that have FDA approval to date are tirzepatide, liraglutide, and semaglutide.
J.P. Morgan Research estimates that the GLP-1 market will reach $100 billion by 2030, fueled equally by diabetes and obesity. By 2030, there may be 30 million GLP-1 users in the United States, or around 9% of the total population. The growing demand for obesity medications will have a wide-ranging impact, benefiting sectors such as biotech while generating headwinds for others, including food and beverage.
Chris Schott, a Senior Analyst covering the U.S. Diversified Biopharma sector stated:
“GLP-1s have been used to treat T2D since 2005, starting with the approval of Byetta, with follow-on products continually improving on efficacy. The most recent, Ozempic and Mounjaro, offer significant advantages over previous products and have accelerated class growth,” “Indeed, the newest generations of GLP-1s and combos lead to 15-25+% weight loss on average, well above prior generations of products.”
Regarding the treatment of obesity, some are hailing the newest generation of GLP-1 medications as “miracle drugs.” However, not everyone with obesity can use GLP-1s due to their high cost and restricted insurance coverage. According to Jonathan Gruber, Professor of Economics and Chairman of the Economics Department at MIT, if 40% of Americans with obesity took these treatments at present pricing (about $15,000 per person), the annual cost would exceed $1 trillion. This nearly equals the amount of money the government spends on the whole Medicare program. That’s an astounding number, then.
Over the past ten years, the usage of GLP-1 drugs, such as semaglutide, for weight loss has doubled, but among those with type 2 diabetes, its use has decreased by almost 10%, according to research published on Monday in the Annals of Internal Medicine. The prolonged medication scarcity that followed, the researchers caution, may restrict the medications’ accessibility to those with diabetes. Dr. Yee Hui Yeo, a clinical fellow in the Karsh Division of Gastroenterology and Hepatology at Cedars-Sina, highlighted that as demand for obesity medications rises, it is critical to guarantee that diabetic patients have access to GLP-1 medicines.
The FDA claims that the shortages are the result of rising demand. Not only do the shortages impact the United States: The European Medicines Agency cautioned that the GLP-1 drug shortage is a “major public health concern” that is unlikely to be remedied in 2024. People with diabetes have struggled to obtain their prescriptions due to shortages, with some limiting their drugs to manage, according to NPR.
The experts on the panel “Weighing the Future of Obesity Drugs,” including Debra Netschert of Jennison Investments, Julia Angeles of Baillie Gifford, and Gentry Lee of Fayez Serofim, discussed the potential of GLP-1 drugs, which were initially developed for treating diabetes but are now being used to treat obesity. Netschert emphasized the progression of GLP-1 medication delivery, ranging from weekly dosages to several daily injections, as well as continuous attempts to reduce injection frequency further and minimize adverse reactions. Netschert pointed out that 1.5 million out of the 110 million eligible patients in the United States are currently undergoing treatment with GLP-1 drugs, despite their outstanding performance, because of production limitations. Netschert and Angeles argued over who pays the expense, with Angeles claiming that the majority of patients pay out of pocket while Netschert cited considerable reimbursement from Medicare/Medicaid and insurance. Netschert stated that outside the borders of the United States, these drugs may be needed by as many as 700 million individuals worldwide. Notably, the panel discovered that U.K. payors, who are typically strict, authorized GLP-1 drugs faster than any other country, highlighting their perceived value.
The obesity drugs market is a high-growth industry and since it’s in its early innings, now may be a time to add some weight loss stocks to your watchlists.
Our Methodology
We sifted through holdings of weight loss ETFs and online rankings to form an initial list of 20 weight loss and GLP-1 stocks. Then we selected the 10 stocks that were the most popular among institutional investors. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them.
We used the companies’ year-over-year revenue growth as a tie-breaker in case two or more stocks had the same number of hedge fund holders. Also, we only considered stocks that received “Buy” or “Strong Buy” recommendations from analysts.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
An array of pharmaceutical pills with the company’s logo on the bottle.
Eli Lilly and Company (NYSE:LLY)
Number of Hedge Fund Investors: 109
Eli Lilly, a leading obesity medicine manufacturer and one of the top insulin producers, is involved in the drug manufacturing industry. The company is involved in the discovery, development, manufacturing, and marketing of pharmaceutical products for human use. It makes therapies for obesity, diabetes, and cardiometabolism.
With its weight loss medications being a major factor, Eli Lilly and Company (NYSE: LLY) has had one of the most impressive rises in recent years. The stock has shot up by more than 79% over the past 12 months. FDA-approved Tirzepatide, the GLP-1 receptor agonist marketed under the names Zepbound for managing weight and Mounjaro for diabetes, is largely responsible for this rise.
Tirzepatide received approval for long-term weight control on July 19th from the National Medical Products Administration in China. This comes after the European Union approved weight control and Type 2 diabetes in April 2024. Eli Lilly’s market penetration outside of the US, where it made up 63.9% of its sales in 2023, has increased dramatically as a result of these approvals.
Since 2004, China’s adult obesity rate has risen by 14.1%, with 34.8% of the population being overweight. Overweight or obese adults make up 52.7% of the adult population in the European Union. Consequently, there are market opportunities for Eli Lilly and Company (NYSE:LLY).
Here’s what management had to say about Mounjaro and Zepbound during the Q1 2024 earnings call:
“Lilly’s first quarter performance reflects solid year-over-year revenue growth with strong sales of Mounjaro and Zepbound,” said David A. Ricks, Lilly’s chair and CEO. “Our progress in addressing some of the world’s most significant health care challenges has resulted in increased demand for our medicines. As we continue to make pipeline investments that position us for future growth, we are rapidly expanding manufacturing capacity to make our incretin medicines available to more patients.”
LLY has demonstrated robust financial performance overall driven by strong sales of FDA-approved obesity medications. The company has $2.59 billion in cash and cash equivalents, which is ample to fund growth.
Eli Lilly is currently facing a serious supply shortage as a result of its inability to construct enough facilities to produce enough dosages to meet the rapidly increasing demand. According to the U.S. FDA, there will be a scarcity of Zepbound and Mounjaro dosages through Q2 2024. Despite this, a solid portfolio of current drugs and a promising R&D pipeline make LLY one of the best GLP-1 and weight loss stocks to buy now.
Eli Lilly’s obesity treatments are part of a family of drugs called GLP-1 agonists that were first created for the treatment of diabetes. Patients who take these medications can lose up to 20% of their body weight on average. Tema ETF investing associate David Song stated, “I would say Lilly’s doing a good job in trying to address the situation. There’s a lot of demand for these… therapies.” Furthermore, Lilly and its primary competitor are striving to present clinical proof that their GLP-1 drugs offer health advantages beyond diabetes and weight loss, as well as heart-protective capabilities that may increase insurance coverage.
Analysts are bullish on the stock and rate it as a Strong Buy. In the first quarter of 2024, 109 hedge funds out of 920 reported holding an ownership stake. Joe Dimenna’s ZWEIG DIMENNA PARTNERS is the largest stakeholder in the company, with 19,680 shares worth $17.82 million.
Baron Health Care Fund stated the following regarding Eli Lilly and Company (NYSE:LLY) in its first quarter 2024 investor letter:
“Eli Lilly and Company (NYSE:LLY) is a global pharmaceutical company that discovers, develops, manufactures, and sells medicines in the categories of diabetes, oncology, neuroscience, and immunology, among other areas. Stock performance was strong due to robust fourth quarter sales of Mounjaro/ Zepbound, better-than-anticipated initial guidance for fiscal year 2024, and ongoing enthusiasm surrounding the company’s obesity and diabetes franchises. We continue to think Lilly is well positioned to grow revenue and earnings at attractive rates through the end of the decade and beyond.”
In conclusion, tirzepatide’s introduction by Eli Lilly into China and the European Union has created new opportunities for the company. On the other hand, investors might want to wait and see until the forthcoming financial reports, given the supply issues.
Overall LLY ranks 1st on our list of the best GLP-1 and weight loss stocks to buy. You can visit 10 Best GLP-1 and Weight Loss Stocks to Buy Now to see the other GLP-1 and weight loss stocks that are on hedge funds’ radar. While we acknowledge the potential of LLY as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than LLY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
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