Pharmaceutical giants Eli Lilly and Novo Nordisk have seen their value more than triple in less than three years. Their combined corporate value, which consists of market capitalization plus net debt, was around $360 billion at the height of the COVID-19 pandemic in February 2021. It has since grown to a trillion dollars.
The rapid rise of these two companies is largely attributed to their leading position in the business of novel therapies for the treatment of obesity. Eli Lilly’s shares alone increased by three-quarters in the past year, making it the first drug manufacturer to reach a market capitalization of over $500 billion. The Danish competitor, Novo Nordisk, saw a 50% increase in 2023.
Other pharmaceutical companies have not been nearly as successful recently. Roche, a Swiss pharmaceutical manufacturer, has been particularly disappointing, falling to sixth place in terms of corporate value. In early 2021, when the company was largely favored by the pandemic due to its SARS-CoV-2 detection tests, it was in second place. Novartis slipped from fifth to ninth place during the same period.
According to analysts at the securities firm Stifel, there is a paradigm shift in the pharmaceutical industry. Gone are the days when investors preferred companies that would develop as specific treatments as possible against cancer diseases in advance. Such therapies can indeed be marketed at high prices because they target a manageable circle of patients. However, this approach also limits their sales potential. Nowadays, investors favor companies that present solutions for common chronic ailments such as obesity, diabetes, chronic obstructive pulmonary disease (smoker’s lung), or asthma.
As for the new weight loss injections, it remains to be seen how far governments and health insurers will reimburse patients for their costs. In the US, it is currently more likely that wealthy women from Beverly Hills, whose body weight is almost normal, would resort to the medication rather than severely overweight poor people from states like Mississippi or Alabama. Patients from California and other wealthy coastal regions could pay for the treatment out of their own pocket.
According to calculations by analysts at the investment bank Goldman Sachs, the windfall that investors expect from the marketing of the new obesity therapy is largely taken into account in Eli Lilly’s stock market valuation. They also point to the risk that insurers in price negotiations could rather orient themselves towards the approaches in Europe than the current American list price. Novo Nordisk charges about $1,000 per month for the Wegovy weight loss injection in the US. In Europe, according to Goldman Sachs, it costs between $190 and $330.
For market observers at Baader Europe, the time has come to build positions in the shares of previously shunned European drug manufacturers. Given that the industry-wide price-earnings ratio for 2024 is currently only at 16, these are “ridiculously cheap” to have. Roche, Sanofi, and Bayer are on the securities firm’s recommendation list. The securities of the French and German pharmaceutical companies came under strong selling pressure last year. Whether the resulting price losses can already be made up for in 2024 is not certain.
This News Article was automatically generated by Bob the Bot (AI)
| Information | Details |
|---|---|
| Geography | Europe |
| Countries | 🇺🇸 🇩🇰 🇨🇭 |
| Sentiment | neutral |
| Relevance Score | 1 |
| People | Dominik Feldges |
| Companies | Goldman Sachs, Baader Europe, Sanofi, Novartis, Roche, Eli Lilly, Novo Nordisk, Bayer, Stifel |
| Currencies | US Dollar |
| Securities | Novartis, Roche, Eli Lilly, Novo Nordisk, Bayer |
