LLY vs NVO: Which One is Likely to Become a $1T Company First
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LLY vs NVO: Which One is Likely to Become a $1T Company First

Tackling growing waistlines is expected to yield much shareholder value.
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Near the end of January, pharma developer Eli Lilly and Company (NYSE: LLY) surpassed Tesla’s market cap at $697.12 billion. Since the beginning of the year, LLY stock is up 23%, continuing its 71% gain streak during 2023.

Due to its drug pipeline’s popularity for obesity, Alzheimer’s, and diabetes, Eli Lilly’s rapid growth delivered a 111.56 price-to-earnings (P/E) ratio. Novo Nordisk (NYSE: NVO) followed with similar success for similar reasons. Up 17% year-to-date, followed by 55% gains during 2023, NVO stock delivered a 43.56 P/E ratio.

The large price-to-earnings ratio gap between the two pharmaceuticals shows that investors are willing to pay for a significantly higher premium on each dollar Eli Lilly earned. What does their demand for drugs show for their future growth?

Eli Lilly and Company Earnings

In 2022, the company’s Trulicity drug for treating type 2 diabetes continued to be the main revenue driver, accounting for $5.68 billion in revenue out of a total diabetes drug offering of $9.91 billion. For comparison, Eli Lilly’s cancer drugs pipeline, led by Verzenio, delivered $3.2 billion in revenue. 

Eli Lilly generated $18.2 billion in revenue in 2022, boosted by $2 billion from COVID-19 antibody drugs (bamlanivimab and etesevimab). On February 6th, the company reported its Q4 2023 earnings. Diabetes treatments, Jardiance and Mounjaro, boosted sales growth by 28% year-over-year, alongside Zepbound for obesity and Verzenio for cancer.

With earnings up 19% year-over-year, Eli Lilly beat the Zacks Consensus Estimate of $8.86 billion in revenue at $9.35 billion. For 2023, the company delivered $5.80 earnings per share (EPS). Mounjaro sales ramped significantly, from $1.41 billion in the prior quarter to $2.21 billion, following approval in May 2022.

Generating full-year 2023 sales of 20% to $34.1 billion, Eli Lilly exceeded Zacks Consensus Estimate of $33.63 billion. At the same time, adjusted earnings per share at $6.32 missed the estimate of $6.34, down 20% YoY.

Eli Lilly’s Drug Lineup Moving Forward

Trulicity’s sales were down 14% year-over-year in Q4, delivering $1.67 billion in revenue, which missed the Consensus Estimate of $1.72 billion. The slack was picked up by the surge in Jardiance sales, up 30% to $798.1 million, Taltz (psoriasis), up by 11% to $784.6 million, and Verzenio, up by 42% YoY to $1.15 billion.

Olumiant for treating rheumatoid arthritis was another outlier, with an 18% sales increase. In addition to Trulicity’s decline in sales by 14%, other drug losers were Humalog (-33%) for blood sugar control and Cyramza (-9%) for various cancer treatments as a last-stop resort. 

Expectedly, COVID-19 revenue winded down without any revenue reported. Following the FDA approvals of Zepbound (obesity) and Jaypirca (leukemia), these new products contributed to 11% of the Q4 volume increase. The EU and Japan-approved Ebglyss for dermatitis and Mounjaro and Omvoh (ulcerative colitis) are in that mix of new drug lineup.  

Eli Lilly is advancing phase 3 research in key areas: chronic weight management (tirzepatide, retatrutide, orforglipron), remternetug for early Alzheimer’s disease, and mirikizumab for Crohn’s disease. Tirzepatide continues to be explored for obstructive sleep apnea, which is linked to obesity.

For 2024, Eli Lilly is projecting ~20% total growth to the $40.4 – $41.6 billion range, ahead of Zacks’ estimate of $39.6 billion. 

Novo Nordisk Earnings

The Danish multinational Novo Nordisk increased its net profit margin by 36% for the full year 2023 and 51% net profit growth from 2022, largely driven by obesity care with GLP-1 medications. Its products are sold under various brands, such as Rybelsus and Wegovy, with Ozempic standing out.

In total, Novo Nordisk generated $33.5 billion in net sales (up 31%), $14.8 billion in operating profit (up 37%), and $9.8 billion in free cash flow (up 19%). Moving forward, Novo Nordisk expects 18% to 26% sales growth. Within 12 months, the company will begin a new share repurchase program worth $2.89 billion.

Considering the growing global obesity problem, weight-loss drugs like Ozempic/Wegovy alone are expected to reach $100 billion in demand by 2035, according to BMO Capital Markets analyst Evan David Seigerman. 

Eli Lilly and Novo Nordisk Price Targets

Per Zacks Investment Research data, Eli Lilly is estimated to hold a 2.24 price-to-earnings growth (PEG ratio) in 2024. Based on 24 analyst inputs pulled by Nasdaq, the average LLY price target is $716.07 vs the current $728. The high estimate is $850, while the low forecast is $535 per share.

For NVO, the PEG ratio is projected to be 1.93 in 2024, moving 12 months forward, indicating that Novo Nordisk is undervalued among the two pharma companies. Based on 13 analyst inputs pulled by Nasdaq, the average NVO price target is $115.38 vs the current $119. The high estimate is $140, while the low forecast is $67 per share. 

NVO could gain a 17.6% boost at their most optimistic levels compared to LLY at a 16.7% boost 12 months ahead. NVO stock could lose 43.7% of its value at the lowest projections, while LLY could lose 26.5%, given Eli Lilly’s much larger market cap weight.

Do you think drug reliance to address obesity is positive or negative in the long run? Let us know in the comments below.

Disclaimer: The author does not hold or have a position in any securities discussed in the article.