Novo Nordisk (NVO 0.84%) and Eli Lilly (LLY 1.19%) are two of the hottest pharmaceutical stocks of the past three years. Both companies have marked returns far in excess of the market's, thanks to popular demand for their freshly launched medications that treat obesity as well as type 2 diabetes. Both medicines are blockbuster drugs -- defined as those that generate annual sales totaling more than $1 billion. Blockbuster medicines tend to generate a lot of buzz, and the businesses that can get more drugs with blockbuster potential out the door are likely to outperform those with fewer.
So which of these two giants has more blockbuster potential on its roster? Let's answer that question by examining each pharma's portfolio to identify the most likely candidates for billion-dollar drugs.
The case for Novo Nordisk
Novo Nordisk has more than one billion-dollar drug today, with even more on the way. The most recent star performer you've probably already heard of is called Ozempic, which treats type 2 diabetes and is based on a molecule called semaglutide. The company's leading obesity medicine, Wegovy, is based on the same compound, and it's a similarly big earner. Around 90% ($31.2 billion) of Novo Nordisk's revenue in 2023 was derived from sales of diabetes and obesity medicines.
In the future, Novo Nordisk is hoping to apply semaglutide to other indications that could also end up minting blockbuster drugs if they get approved. It has a phase 3 program investigating whether it can treat metabolic dysfunction-associated steatohepatitis (MASH, also known as NASH), a liver disease. One group puts the market for such drugs as large as $16.3 billion by 2030. There's also another phase 3 trial targeting its use in Alzheimer's disease.
But semaglutide is far from the only lucrative vein in the company's portfolio. It has a couple of late-stage programs for treating atherosclerotic cardiovascular disease (ASCVD) and heart failure, as well as a late-stage program for chronic kidney disease (CKD). All of those candidates could easily become blockbuster drugs, given the massive sizes of their target markets.
So Novo Nordisk has no shortage of potential big winners that'll be stepping up for approval in the next couple of years. That means investors will have plenty of catalysts to possibly power outsized returns if things go as planned with the Food and Drug Administration (FDA).
The case for Eli Lilly
Much like Novo Nordisk, Eli Lilly's pipeline is chock-full of near-term opportunities to launch winning therapies, and it has a few strong performers in hand as well. Its rising star of the moment is Zepbound, an obesity medicine that began coasting toward blockbuster status shortly after its sibling medicine Mounjaro, targeted at type 2 diabetes, reached it. Mounjaro brought in $5.1 billion in 2023, and Zepbound sold $175.8 million in its first months on the market.
Both Mounjaro and Zepbound are based on the molecule tirzepatide. In addition to testing it in phase 2 trials for MASH, Eli Lilly is testing tirzepatide in phase 3 trials for treating cardiovascular disease. So it could soon pick up at least two more blockbuster-ready indications, which is a bullish sign for the stock, to say the least.
It's also trying to enter the Alzheimer's disease market, and regulators are reviewing whether to grant approval to one of its candidates right now. As if that weren't enough, its pipeline features mid- to late-stage programs for pain, arthritis, Crohn's disease, psoriasis, and cardiovascular disease -- all of which are large and growing markets with annual spending in the tens of billions of dollars annually. It won't need to succeed with all of its attempts in order to have multiple new valuable medicines in hand in the near term.
The verdict isn't the most meaningful
Based on comparing their pipelines, Eli Lilly has a couple more opportunities to hit home runs than Novo Nordisk does, but the contest is far from being a blowout. Both companies are very likely to make multiple high-earning medicines across the short term, medium term, and long term. Either business could make for a good investment, and it might even make sense to buy both to take advantage of their efforts to penetrate the type 2 diabetes and obesity markets.
On that note, the pair aren't exactly fighting tooth and nail to secure market share in those markets. In fact, Novo Nordisk's management anticipates that there will continue to be so much demand for Ozempic and Wegovy that it won't need to get into a direct competitive fight for some time. If that's not favorable news for both players, not much is.
