Obesity is a serious and worsening health concern. According to the World Health Organization, at least 2.8 million annual deaths are attributable to being overweight or obese. Thankfully, many companies are developing various medicines that could make a difference. And a recent report from Bloomberg Intelligence predicts that branded anti-obesity drugs could generate $44 billion in risk-adjusted sales by 2030, up from just $2.5 billion in 2022.
The two companies that are almost certain to dominate this space are Eli Lilly (LLY -2.68%) and Novo Nordisk (NVO -4.02%) -- two biotechs that have significantly outperformed the market over the past year. But there is more upside left for both companies, not just thanks to their dominance in the obesity drug market. Let's consider why Eli Lilly and Novo Nordisk can still deliver solid returns from here on out.
1. Eli Lilly
Eli Lilly is a longtime leader in the market for diabetes and obesity drugs. Last year, the company earned approval for Mounjaro, a novel treatment for type 2 diabetes (T2D) that almost instantly became a hit. Mounjaro recorded $568.5 million in sales in the first quarter, already becoming the fourth-best selling product for Eli Lilly despite being granted the green light in May 2022.
But Mounjaro will almost certainly earn label expansions in treating obesity. In April, Eli Lilly reported that the medicine achieved weight loss of up to 15.7% in T2D patients in a phase 3 clinical trial. Mounjaro will be one of the main growth drivers behind Bloomberg Intelligence's projected ballooning sales of anti-obesity therapies. Last year, some analysts estimated that it could eventually hit peak annual revenue of $25 billion.
But there are more promising products Eli Lilly is working on. In May, the company reported positive results from a phase 3 clinical trial for donanemab in treating early Alzheimer's disease (AD). There are more than 6 million AD patients in the U.S. alone. With the world's aging population, that number will continue to grow. However, developing medicines in this area has proved elusive. Eli Lilly looks likely to join this market.
Elsewhere, mirikizumab is another promising candidate in immunology that could meaningfully move the needle on the top line for Eli Lilly. While it failed to earn approval from the U.S. Food and Drug Administration (FDA) earlier this year, that was because of manufacturing issues. The medicine will undoubtedly make it to the market eventually. Eli Lilly's revenue in the first quarter dropped by 11% year over year to almost $7 billion as the company's sales of its COVID-19 medicines declined.
But the company's top line, excluding its coronavirus portfolio, increased by 10% year over year. Once pandemic-related disruptions to its financial results subside, Eli Lilly will deliver solid sales and earnings growth, largely thanks to Mounjaro and its growing lineup of newer products. Investors can expect Eli Lilly to continue to deliver above-average returns.
2. Novo Nordisk
Novo Nordisk has also made a name for itself in developing products to help diabetes patients. In February, it held a 32.2% share of the global diabetes care market, up from 30.5% a year ago. Novo Nordisk's most important products include Ozempic, which treats type 2 diabetes, and Wegovy and Saxenda, which are indicated as weight loss treatments.
In the first quarter, sales of Ozempic soared by 63% year over year to 19.6 billion Danish kroner ($2.8 billion). Saxenda's revenue increased by 64% year over year to 3.3 billion DKK ($474.4 million), and Wegovy's sales of 4.6 billion DKK ($660.1 million) skyrocketed by 225% compared to the year-ago period.
Per Bloomberg Intelligence's report, Wegovy and Saxenda should maintain their momentum through the end of the decade. However, the rest of Novo Nordisk's current lineup isn't very impressive. Most of its insulin products are losing steam -- with their sales dropping -- while its rare disease unit is also seeing declining revenue.
Novo Nordisk's total sales in the first quarter increased 27% year over year to 53.4 billion DKK ($7.7 billion). What's more, Novo Nordisk is inching closer to some significant approvals. Perhaps the most promising of the bunch is icodec, a potential once-a-week insulin medicine.
The company is also working on programs in Alzheimer's disease, sickle cell disease, non-alcoholic steatohepatitis, and more. That's why Novo Nordisk has outperformed the market recently: A rapidly growing top line and promising pipeline programs. There is likely plenty of upside left for the biotech stock through 2030 and beyond.
