Biotech Behemoths: 3 Giants Set To Dominate The Health Scene

| May 16, 2024

The biotech behemoths look to be worth their weight in gold as they invest heavily in their treatment pipelines.

  • Don’t sleep on the biotech behemoth as they continue to invest in next-generation treatments that could help jab growth rates.
  • Eli Lilly (LLY): The stock’s getting expensive, and expectations are high. But if there’s a firm that can keep impressing to the upside, it’s Lilly.
  • Novo Nordisk (NVO): The company’s already thinking about producing something better than Ozempic and Wegovy. Perhaps Novo is playing chess while others play checkers.
  • Pfizer (PFE): The stock has already been halved, but are the full extent of its headwinds fully baked in?
Source: Pixaby

Biotechnology is an interesting place to look if you’re looking for growth and are not put off by severe levels of volatility. Undoubtedly, there’s a bit of speculative zest regarding some of the smaller biotech stocks out there, many of whom depend on just a handful of pipeline candidates.

As pipeline hopefuls progress through clinical trials, there’s bound to be needle-moving news. When it comes to the most-watched drugs and treatments, a biotech stock can easily pop or plunge based on progress, setbacks, or anything in between.

While the level of growth is more sizeable with small- and mid-cap biotech stocks, I’d much rather be a buyer of the behemoths. They tend to be on stabler footing, with large pipelines and the means to make money (something not all junior biotech companies can do in the early days).

Though I’m not against diversifying into biotech exchange-traded funds (ETFs), I do think it’s more exciting to explore the potential behind industry heavyweights that have the talent and money to spend researching next-generation treatments for diseases plaguing the world. Here are three biotech giants on my radar right now:

Eli Lilly (LLY)

Eli Lilly (NYSE:LLY) stock has gone parabolic in recent quarters. With shares now up more than 550% in the past five years, questions linger as to what can help Lilly keep the recent share price momentum going strong.

I’m not one for chasing stocks after they’ve doubled in just over a year’s time. That said, I do find Lilly has many drivers that could help it grow well after GLP-1 drugs lose their initial luster. There’s still plenty of demand for such obesity drugs, but as more rivals go on the market, Lilly needs to keep pulling remarkable innovations of its pipeline to retain and add to recent gains.

Perhaps the biggest reason to stick with Lilly for the long run lies in AI-fuelled innovation. It has the talent; now it’s poised to augment such talent with powerful AI models.

Last year, the company struck a $250 million deal with XtalPi to work on AI—and robotics-assisted drug discovery. This exciting collaboration may offer a glimmer of what the future holds for Lilly and the top innovators in the biotech industry.

In many ways, I find the elevated multiple on LLY stock is warranted, given what the next 10 years could hold. Call it the Nvidia (NASDAQ:NVDA) of biotech, if you will.

Novo Nordisk (NVO)

Novo Nordisk (NYSE:NVO) is the European biotech firm behind Ozempic, perhaps the weight-loss drug that started it all. Like shares of LLY, NVO stock has been red-hot in recent quarters. That is until it reported its first-quarter earnings, which, while solid, caused shares to dip before recovering ground in the following sessions. Now off 5.5% from its all-time high, the stock chart suggests now may be a good time to take some of that fat profit off the table.

At 44.75 times trailing price-to-earnings (P/E), though, I still don’t consider Novo to be an absurdly expensive stock given its laser focus on “one-upping” itself. Even if whatever comes next cannibalizes Ozempic and Wegovy sales, I’d argue that, like GPUs (graphics processing units), Novo needs to keep investing in innovation to stay ahead of the pack, especially not that more than a handful of firms are targeting the massive obesity market.

Last week, Novo shed light on a research project and collaboration with Metaphore Pharmaceuticals that seeks to put two more obesity products in its pipeline. That’s big news, and if all goes well, perhaps there will be no catching the biotech behemoth.

Pfizer (PFE)

From red-hot momentum plays to a major biopharma laggard and potential deep-value play, we have Pfizer (NYSE:PFE), a firm that’s battling through quite a few headwinds of late. From Seagen acquisition uncertainties to a patent cliff to the fall of the COVID-19 business, it’s clear PFE stock will not be for everyone to catch on the way down.

The stock has shed more than 53% of its value from its peak levels. And though there are headwinds, there’s still hope for the firm as it seeks to outgrow pressures that could weigh down future quarters.

During its latest round of earnings, Pfizer posted a good earnings result alongside a slight hike to its 2024 earnings guidance. It wasn’t a massive guidance hike, but nonetheless, given how battered PFE stock has been of late, it seemed like any bit of positives were to be given a thumbs up by investors.

Dismiss Pfizer as a value trap, if you will, but it has a great cancer franchise and a stacked, diversified pipeline that could help power a rebound at some point down the line.

This post originally appeared at InvestorPlace.

On the date of publication, Joey Frenette did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

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