The pharmaceutical industry is thriving due to the increasing incidence of chronic diseases, the rising number of elderly individuals, higher healthcare spending by governmental bodies worldwide, and extensive initiatives aimed at enhancing the affordability and availability of pharma products.
The U.S. pharmaceutical market is expected to grow at a CAGR of 5.5% from 2024 to 2030. Meanwhile, the IQVIA Institute predicts that global spending on medications is expected to hit $2.3 trillion by 2028 as more patients get access to new and better medicines.
Furthermore, the integration of cutting-edge technologies such as AI is transforming the pharma sector. AI is facilitating the acceleration of drug discovery, cost reduction, analysis, and optimization of medical research, as well as the streamlining and expedited development of new therapeutic options.
The generative AI in the drug discovery market is expected to reach $1.44 billion by 2033, expanding at a CAGR of 27.1%.
Against this backdrop, let’s compare two pharma stocks, Eli Lilly and Company (LLY) and Novo Nordisk A/S (NVO), to analyze which pharma stock is driving long-term profits.
The Case for Eli Lilly and Company Stock
Valued at $763.09 billion by market cap, Eli Lilly and Company (LLY) discovers, develops, and markets human pharmaceuticals. The company offers Basaglar, Humalog, insulin lispro, insulin lispro protamine, Humulin, Humulin N, Humulin R, and Humulin U-500 for diabetes; Jardiance, Mounjaro, and Trulicity for type 2 diabetes; and Zepbound for obesity.
LLY’s stock has gained 45% over the past nine months to close the last trading session at $802.91. Over the past year, the stock has surged 85%.
On May 21, 2024, in LLY pivotal Phase 3 VIVID-1 study, patients with moderately to severely active Crohn's disease, with or without previous biologic failure, achieved statistically significant and clinically meaningful improvements across multiple clinical and endoscopic endpoints at one year with mirikizumab compared to placebo.
On May 16, LLY announced positive topline results from the QWINT-2 and QWINT-4 phase 3 clinical trials evaluating once-weekly insulin efsitora alfa (efsitora) in adults with type 2 diabetes using insulin for the first time (insulin naïve) and those who require multiple daily insulin injections.
In the treat-to-target clinical trials, efsitora showed non-inferior A1C reduction compared to the most commonly used daily basal insulins globally.
For the first quarter that ended March 31, 2024, LLY’s revenue increased 26% year-over-year to $8.77 billion. Its non-GAAP gross margin rose 32.5% from the year-ago value to $7.23 billion. Also, the company’s non-GAAP net income and non-GAAP EPS were $2.34 billion and $2.58, up 59.5% and 59.3% from the previous year’s quarter, respectively.
According to its updated 2024 financial guidance, LLY expects revenue to range between $42.40 and $43.60 billion, up from the prior guidance of $40.40 to $41.60 billion. Its non-GAAP earnings per share are expected to be from $13.50 to $14, compared to the previous guidance of $12.20-$12.70.
Street expects LLY’s revenue for the second quarter (ending June 2024) to increase 20.4% year-over-year to $10.01 billion. Its EPS for the current quarter is expected to grow 32.9% year-over-year to $2.80. Moreover, the company surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.
LLY’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
LLY has an A grade for Sentiment and a B for Growth. It is ranked #31 among 158 stocks in the Medical - Pharmaceuticals industry.
Click here for the additional POWR Ratings for LLY (Value, Stability, Quality, and Momentum).
The Case for Novo Nordisk A/S Stock
With a $598.14 billion market cap, Novo Nordisk A/S (NVO) is a global healthcare company that engages in the research, development, manufacture, and marketing of pharmaceutical products worldwide. The company operates in two segments: Diabetes and Obesity care; and Biopharm. The company is headquartered in Bagsvaerd, Denmark.
NVO’s stock has gained 57.2% over the past year and 44.9% over the past nine months to close the last trading session at $134.03.
On May 13, NVO announced the results from the FRONTIER 2 trial, a pivotal phase 3a, 26-week open-label, randomised, controlled, multi-arm trial in 254 people. The trial investigated the efficacy and safety of once-weekly and once-monthly subcutaneous Mim8 versus no prophylaxis and prior coagulation factor prophylaxis treatment in adults with haemophilia A.
The trial achieved its co-primary endpoints by demonstrating a statistically significant and superior reduction of treated bleeding episodes with both once-weekly and once-monthly Mim8 versus no prophylaxis treatment and prior coagulation factor prophylaxis treatment.
On March 25, NVO announced its plans to acquire Cardior Pharmaceuticals for up to €1.03 billion ($1.12 billion), enhancing its cardiovascular disease pipeline with Cardior’s RNA-targeting therapies, notably the lead compound CDR132L, which is in phase 2 development for heart failure treatment.
For the first quarter that ended December 31, 2023, NVO’s net sales increased 22.4% year-over-year to DKK 65.35 billion ($9.50 billion). Its operating profit and net profit rose 27.3% and 28.3% from the prior-year quarter to DKK 31.85 billion ($4.63 billion) and DKK 25.41 billion ($3.69 billion), respectively. Also, the company’s EPS stood at DKK 5.68, up 29.4% year-over-year.
Analysts expect NVO’s revenue for the second quarter (ending June 2024) to increase 24.7% year-over-year to $9.98 billion. Likewise, its EPS for the same quarter is projected to grow 31.7% year-over-year to $0.84. Additionally, the company surpassed the consensus EPS and revenue estimates in three of the trailing four quarters.
NVO’s promising fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, translating to a Strong Buy in our proprietary rating system.
The stock has an A grade for Sentiment and a B for Quality. NVO is ranked #9 in the same industry.
In addition to the POWR Ratings I’ve just highlighted, you can see NVO’s ratings for Growth, Momentum, stability, and Value here.
Eli Lilly (LLY) vs. Novo Nordisk (NVO): Which Pharma Stock Is Driving Long-Term 2024 Profits?
The pharmaceutical sector is thriving owing to the rising healthcare needs of an aging population and the growing prevalence of chronic and rare diseases, ongoing advancements in drug development and discovery processes, and the integration of cutting-edge technologies like AI.
Leading pharma companies LLY and NVO stand to capitalize on the industry’s optimistic growth prospects. However, NVO’s strong financial performance and promising near-term outlook favor it as the better pharma stock pick.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Medical – Pharmaceuticals industry here.
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LLY shares rose $3.17 (+0.39%) in premarket trading Thursday. Year-to-date, LLY has gained 38.75%, versus a 12.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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