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These Top 2 Healthcare Companies Are In a Race to Riches

By Jeff Little - Updated May 6, 2021 at 9:05AM

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Which diabetes drug maker will win this photo finish for investors?

For patients who go through the rigors of daily insulin shots to treat diabetes, the costs and logistics of adhering to a scheduled plan are a lot to keep up with. When not treated properly, low blood sugar levels can sometimes lead to seizures, loss of consciousness, and death. In 2020, two top healthcare companies performed admirably during phase 2 trials in a fight to help patients better manage diabetes.

Novo Nordisk A/S (NVO 1.74%) and Eli Lilly (LLY 1.91%) both completed separate and successful phase 2 trials of new once-a-week insulin injection products that could potentially be game-changers in the insulin market for patients as well as investors. Those studies have now moved on to phase 3 trials, and if all goes well, we could see one or more new products available to consumers by 2023.

Young lady monitoring diabetes

Image source: Getty Images.

What's at stake

The insulin market in the U.S. is estimated to grow by more than 30% to nearly $36 billion by 2027, representing an average compound annual growth rate (CAGR) of 4.2%. The number of diabetes patients needing insulin is at 7.4 million -- 25% of all diabetes patients in the nation -- and growing. Across the world, the number of adults (ages 20 to 79) living with diabetes is expected to grow by 50% by 2045 to 700 million people, leading to a high increase in demand for insulin.

That rise in demand, combined with low supply, has been driving drug prices higher. Due to elevated costs, many patients often ration their insulin or switch to cheaper forms without proper medical supervision. Many deaths from diabetes can be attributed to the lack of affordable insulin. Now comes word of two potential once-a-week insulin injections.

The players

Icodec, the product developed by Novo Nordisk, recently produced promising results that showed that when it was used together with current Sanofi product Lantus, the number of patients whose blood sugar levels were kept in check improved by 8%, to just shy of 75% in total. That sign of improvement was welcomed by the study's lead investigator, endocrinologist Dr. Harpeet Bajaj, who said that it "demonstrates the potential benefit insulin Icodec could offer to people with type 2 diabetes in need of insulin therapy, aiding easy transition onto a new treatment option." Phase 3 trials of Icodec are currently under way, and results may be available by the second half of 2021.

If Icodec reaches the market, it may have the potential to steal significant market share from current insulin products, such as Lantus. The company is also exploring trials of a complimentary drug to use in combination with Icodec. Successful approval would further solidify Novo Nordisk as a dominant company in the diabetes space while making it a leader in the once-weekly insulin injection market for type 2 diabetes.

Meanwhile, Eli Lilly may have something to say about which company will be the leader, as it is also developing a once-weekly insulin injection it calls Basal Insulin Fc (BIF). In looking at 399 patients, BIF had results similar to those of current commercially available daily injections, showing that it can successfully, and significantly, reduce rates of hypoglycemia.

When comparing the companies' two main products for 2020, Eli Lilly is the leader. Its Trulicity, which is a non-insulin injectable used for lowering blood sugar and the risk of cardiovascular events, accounted for $5 billion in 2020 sales, following fourth-quarter and full-year growth of 24%. Market share for Trulicity grew to 48% in 2021, with the number of prescriptions doubling from 160,000 to 360,000 per week, and the company sees the potential for Trulicity to hit $7.43 billion in sales by 2026.

Novo Nordisk is seeing an uptake in both Ozempic and Rybelsus, leading to a 6% increase year over year -- to $17 billion -- in sales of its diabetes and obesity care products. Within those numbers, $3.4 billion is attributed to Ozempic, while Rybelsus was responsible for another $300 million in only it's first year on the market. What's more amazing is that Ozempic sales overtook those of an older drug, Victoza, for Novo Nordisk, whereas in 2019 Victoza's sales had doubled Ozempic's. Projections show Novo Nordisk quickly closing the gap on Eli Lilly, hitting $9.4 billion by 2024 for its two primary products, Ozempic and Rybelsus, while Eli Lilly is projected to be at $10.4 billion in combined sales for its top two products, Trulicity and Jardiance.

Photo finish

 Novo Nordisk is swinging for the fences in 2021. The company gained 0.7% market share in 2020 for insulin products, driven by gains outside the U.S. Total gain since 2019 has been 3% thanks to new launches including Ozempic and Rybelsus. A planned 2021 launch of Rybelsus in Japan may lead to greater global market share gains, as Japan makes up 8% of the total worldwide diabetes market.

While projections are an excellent tool for long-term planning, current share prices and dividends are also relevant. A share of Eli Lilly currently costs $185, and with an average analyst price target of $215, investors could see a 16% gain over the next 12 months. I also like Eli Lilly's consistent dividend payouts -- averaging 2.1% over the past few years -- and its seven-plus years of consecutive quarterly payouts, with the most recent annual payout reaching $3.40 per share.  

Meanwhile, Novo Nordisk has paid its dividends inconsistently, skipping them entirely during some quarters, over that same time frame. Its current share price already sits at analysts' 12-month average of $75.

It looks like a photo finish may be on the horizon for the first product to market. Eli Lilly is exhibiting strong dividends and share price, along with stability. On the other hand, Novo Nordisk is displaying endurance and come-from-behind abilities.

I don't think investors could go wrong with adding either of these top healthcare companies to their portfolio for the long term, but you might want to keep an eye on those phase 3 trials later this year for an extra nudge in either direction. For now, I'd give a slight nod to Novo Nordisk based on momentum and upside.

Jeff Little does not own shares of any company listed. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Eli Lilly and Company Stock Quote
Eli Lilly and Company
$322.77 (1.91%) $6.05
Novo Nordisk A/S Stock Quote
Novo Nordisk A/S
$104.55 (1.74%) $1.79

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