Eli Lilly (LLY 1.51%) and Berkshire Hathaway (BRK.A +1.14%) (BRK.B +1.30%) don't have a lot in common. The former is a pharmaceutical giant, while the latter is a diversified holding company with subsidiaries across many different sectors, from energy to transportation.
However, both are among the largest corporations in the world. Be rkshire Hathaway currently has the edge with a market cap of just over $1 trillion, making it a member of the elite trillion-dollar club. Lilly, with a market cap of $800 billion, could overtake it in the next five years, though, while also joining this exclusive clique. Here's why Eli Lilly has a better medium-term outlook.
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Eli Lilly's significant growth prospects
The market for weight management drugs is soaring; Eli Lilly has established itself as a leader in this niche and is already reaping the benefits. The company's tirzepatide, sold under the brand name Zepbound for treating obesity, is helping drive fast-growing sales. Over the next five years, Lilly's revenue and earnings should continue growing much faster than those of the average pharmaceutical giant.
On top of that, the drugmaker could have other clinical and regulatory catalysts. Eli Lilly is racing toward regulatory approval for orforglipron, which could become one of the first oral GLP-1 medications approved for weight management. The medicine should carve out a decent niche as an option for patients who don't like needles.
NYSE: LLY
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On the clinical front, Lilly is developing retatrutide, a medicine whose approach could revolutionize the GLP-1 space, because it mimics the action of three gut hormones. Retatrutide's performance in phase 2 studies was so strong that, in a published paper, researchers said that only bariatric surgeries seemed to match its level of efficacy. If it shines again in phase 3 clinical trials, that could jolt Eli Lilly's share price.
Berkshire Hathaway's challenges
Meanwhile, Berkshire Hathaway's performance through the end of the decade could be unimpressive. Here are two reasons.
First, with Warren Buffett stepping down as CEO by the end of this year, the company's long-term future seems uncertain to many. Investors will want the new generation of leaders, including the new CEO, Greg Abel, to prove themselves. That won't be easy, and it might take a few years.
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Second, Berkshire's largest holding, Apple, is also facing headwinds. The iPhone maker has to deal with significant tariffs that may cut into its profits, while its trillion-dollar tech peers have an edge in the artificial intelligence (AI) market. Apple may still be an attractive long-term bet (and I believe it is). But its performance over the next few years might not be the kind that will help Berkshire Hathaway -- which has a little over a fifth of its $257.2 billion portfolio invested in Apple -- impress investors.
Is Berkshire Hathaway still a buy?
Berkshire Hathaway's diversification, culture, and investment philosophy should still make it a great long-term buy, but investors might have to be patient as the company begins delivering outstanding market-beating returns again. Through 2030, Eli Lilly could outperform it enough to be worth more.
