Novo Nordisk (NVO 0.84%) and Eli Lilly (LLY 1.19%) are the top two healthcare stocks in the world based on market cap. Their diabetes and weight loss medications are a big reason these have been among the best healthcare investments to own over the past few years. Today, Eli Lilly is the larger of the two companies, with a market cap of more than $700 billion. Novo Nordisk, however, isn't too far behind, sporting a valuation about $600 billion. And there are some recent catalysts that suggest that gap could shrink in the future.

Why Novo Nordisk could soar higher this year

Novo Nordisk stock is up 28% so far in 2024, and there are a couple of reasons it may become an even hotter in the weeks and months ahead.

On March 8, the Food and Drug Administration approved Novo Nordisk's weight loss treatment, Wegovy, for a new indication: reducing cardiovascular risk in obese or overweight adults. Up until then, the drug was only approved as a treatment for weight loss. The label expansion gives patients another reason to use the drug, which could result in more prescriptions and insurance coverage -- and thus, more revenue.

Novo Nordisk has also been working on a weight loss pill (Wegovy is an injectable) that has been demonstrating encouraging results in clinical trials, showing that it can achieve faster weight loss than Wegovy: 13% after 12 weeks versus just 6% with the injectable treatment. It was an early-stage trial but the data is promising nonetheless.

In 2023, Novo Nordisk's sales increased by 36% (when excluding the impact of foreign exchange) to 232.3 billion Danish kroner ($34.8 billion). Wegovy's sales of 31.3 billion Danish kroner soared by a staggering 420%. And with much more potential on the horizon with a new indication for Wegovy and it entering new markets, Novo Nordisk is nowhere near done growing. Having a weight loss pill in development that could be even better than Wegovy gives investors even more reason to stay bullish on the stock for the long haul.

Could Eli Lilly's stock struggle?

Novo Nordisk is more of a pure-play weight loss and diabetes investment, whereas Eli Lilly's business is much more diversified. And that diversification is one of the reasons the healthcare stock may stumble a bit this year. Recently, regulators delayed making a decision on Eli Lilly's Alzheimer's treatment, donanemab. While it's likely to still obtain approval, the stock fell on the news.

In addition to diabetes treatments, Eli Lilly's top five treatments for the last three months of 2023 featured a breast cancer drug (Verzenio) and psoriasis medication (Taltz). While weight loss is a big growth opportunity for Eli Lilly, with recently approved Zepbound just starting to generate revenue for the business, its operations are certainly broader than Novo Nordisk's.

Another reason the healthcare stock could face pressure this year is that it trades at a lofty 60 times forward earnings, which is based on analyst expectations of where its profits will be in the next year. By comparison, Novo Nordisk trades at a multiple of 39. With a much higher premium, there's more pressure for Eli Lilly to deliver on not just its weight loss and diabetes treatments but on its other drugs as well.

Will Novo Nordisk become the more valuable healthcare stock?

Over the past month, shares of Eli Lilly have fallen by about 3% while Novo Nordisk stock has risen by close to 7%. The gap is shrinking between these two companies and there's a possibility it narrows even more narrow later this year, depending on how these businesses perform.

I don't, however, expect Novo Nordisk to become the more valuable company. Eli Lilly is simply too strong, and with Zepbound in its very early innings of generating revenue and the approval of donanemab still a strong possibility, the recent pullback in price may only prove to be temporary.

Overall, these are two solid healthcare stocks and whichever you decide to invest in may ultimately depend on whether you prefer to focus on the broader and pricier business (Eli Lilly) or a slightly cheaper company whose priorities center around diabetes and weight loss (Novo Nordisk). But with stellar results and exciting futures ahead, both of these stocks can be great buys.