The momentum should continue for Eli Lilly, Novo Nordisk, and Vertex Pharmaceuticals.
What’s better than a stock that has delivered huge gains? That’s easy: A stock that has delivered huge gains and still has a lot of room to run.
We asked three Motley Fool contributors to look among recently high-flying stocks for those that they believe could soar by significantly more. Here’s why they picked Eli Lilly (LLY -0.13%), Novo Nordisk (NVO 0.35%), and Vertex Pharmaceuticals (VRTX 1.36%).
Just getting started
Keith Speights (Eli Lilly): In 2023, Eli Lilly’s shares skyrocketed 59% higher. So far this year, the big pharma stock is up nearly 40%. I think Lilly is just getting started.
Why am I so optimistic about Lilly? For one thing, it’s still only the early innings for the company’s weight-loss drug, Zepbound. Lilly won U.S. approval for the drug in November 2023. In the first quarter of 2024, Zepbound raked in over $517 million in sales.
Zepbound and Mounjaro, which is approved in the U.S. for treating type 2 diabetes and in Europe for treating obesity, are different brand names for the same underlying drug (tirzepatide). Mounjaro’s sales more than tripled year over year in Q1 to $1.8 billion.
There’s even more good news. Lilly recently reported positive results from a late-stage study evaluating tirzepatide as a treatment for obstructive sleep apnea. The company plans to soon file for regulatory approvals in that indication. It’s also evaluating tirzepatide in a late-stage study for treating heart failure with preserved ejection fraction and in a phase 2 study targeting metabolic disorder-associated steatohepatitis (MASH), which is also known as nonalcoholic steatohepatitis (NASH). Some Wall Street analysts predict that the market for MASH/NASH treatments could be worth more than $100 billion annually.
A Food and Drug Administration (FDA) advisory committee is scheduled to review Lilly’s candidate donanemab as a treatment for Alzheimer’s disease in June. If the drug wins FDA approval, Lilly will almost certainly have another blockbuster on its hands.
If that isn’t enough, Lilly’s pipeline is chock-full of other promising programs. These include other obesity and Alzheimer’s disease candidates, plus experimental drugs targeting autoimmune diseases, multiple sclerosis, Parkinson’s disease, and more. As I said, Lilly is just getting started.
It’s not too late to invest in this scorching-hot stock
David Jagielski (Novo Nordisk): This year has gotten off to a great start for Novo Nordisk — shares of the Danish healthcare company are already up 28% thus far. And since 2022, the stock’s total returns (including reinvested dividends) have exceeded 140%.
The company behind the popular diabetes drug Ozempic and weight loss treatment Wegovy (both formulations of semaglutide) still has plenty of room to grow, however. Novo Nordisk’s sales rose by 22% year over year in Q1 to 65.3 billion Danish kroner ($9.8 billion), while earnings increased by 28% to 25.4 billion Danish kroner ($3.8 billion). For the full year, the company projects that its operating profit will rise by 22% to 30% (excluding the impact of foreign currency exchange rate shifts). In the long run, there may be even more growth ahead for the business as the company rolls out Wegovy to more markets, invests in more capacity for its manufacture, and health insurers start providing coverage to eligible Medicare recipients for the treatment.
Another potential catalyst that could add fuel to the fire under Novo Nordisk’s already hot stock is weight loss candidate amycretin. Participants in an early-stage trial taking the pill daily lost an average of 13% of their body weight after just 12 weeks. A phase 2 trial is planned for later this year, and if results continue to be encouraging, the stock could soar even higher.
Multiple catalysts on the horizon
Prosper Junior Bakiny (Vertex Pharmaceuticals): It’s hard to argue against results like those produced by Vertex Pharmaceuticals, a biotech that specializes in developing medicines for cystic fibrosis. It has relied entirely on this single therapeutic area for more than 10 years. So one could say the drugmaker has been a one-trick pony — but that’s not an issue when the trick is this good.
In fact, Vertex Pharmaceuticals has a monopoly in the cystic fibrosis market, with the only approved drugs for the condition, and has delivered excellent financial results and stock market performances over the past decade. But it has been expanding its horizons. Its latest regulator-approved treatment is for Casgevy, a gene-editing therapy that can provide a functional cure for sickle cell disease and beta-thalassemia, two rare blood disorders. The sales potential of this medicine is massive, although it will take some time to get to its peak.
Vertex Pharmaceuticals is also developing several medicines that should soon help expand its lineup further. It is in the process of submitting an application to regulatory authorities in the U.S. for suzetrigine as a treatment for acute pain. It just started the phase 3 portion of a phase 2/3 study of Inaxaplin, a candidate treatment for APOL1-mediated kidney disease. And several other drug candidates are in the earlier phases of development.
The biotech should make meaningful clinical and regulatory progress on some of these fronts in the next year, and sales of Casgevy should gain steam in the meantime. Given all that, it looks like Vertex Pharmaceuticals isn’t finished delivering above-average returns. The biotech still has plenty of upside left.
David Jagielski has no position in any of the stocks mentioned. Keith Speights has positions in Vertex Pharmaceuticals. Prosper Junior Bakiny has positions in Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Vertex Pharmaceuticals. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
