As two of the most-watched and fastest-growing big pharma companies, Novo Nordisk (NVO +2.11%) and Eli Lilly (LLY 0.18%) already have upwardly mobile stock prices.
And now, there's yet another piece of news that could presage even more growth over the long term. Let's explore this new development.
NYSE: NVO
Key Data Points
This clinical trial could pave the way for even larger markets
Novo Nordisk's blockbuster drug Ozempic is widely known for being effective at controlling type 2 diabetes. Novo also makes Wegovy for treating obesity, which is the same molecule (called semaglutide) as Ozempic. Likewise, Eli Lilly's drugs Mounjaro and Zepbound are the same molecule (tirzepatide), and they are indicated for the same two conditions.
It goes without saying that diabetes and obesity are gargantuan markets. In Q4 alone, Mounjaro brought in more than $2.2 billion in sales for Eli Lilly, and for all of 2023, Ozempic drove growth of about 42% in Novo's diabetes and obesity segment, bringing it to more than $31.2 billion in total. The two businesses are able to compete in both of those markets using only one molecule each because their medicines target the glucagon-like peptide-1 (GLP-1) receptor, which is implicated in a number of different physiological processes. Eli Lilly's candidates also target another receptor at the same time, but don't worry about that aspect for now.
According to an estimate made by the analysts at J.P. Morgan late last year, the market for GLP-1 therapies could be as large as $71 billion by 2032. But they'll probably need to revise that figure upward, as there's some new data worth knowing about.
According to a paper published in The New England Journal of Medicine on April 3, a phase 2 clinical trial of 156 people with Parkinson's disease found that patients who were treated with a GLP-1-targeted molecule called lixisenatide for 12 months experienced less progression of their motor disability symptoms compared to subjects receiving a placebo. The difference in progression between the patients who were treated and those who got the placebo was statistically significant, and based on the data, it's arguable that the motor symptoms of the treated patients did not deteriorate at all during the study period.
NYSE: LLY
Key Data Points
These data are very promising for the possibility of addressing Parkinson's with future or currently existing GLP-1 drugs. According to Future Market Insights, the market for Parkinson's medicines could be as large as $6.1 billion in 2033. Parkinson's is a degenerative neurological disease, and while there are treatments to control some symptoms, so far there are no cures or commercialized medicines that stop it from progressing. So it is probably the case that a company that manages to produce a progression-halting therapy will have a blockbuster drug on its hands.
While it's true that lixisenatide is not the same molecule as Novo Nordisk's semaglutide or Eli Lilly's tirzepatide, that might not matter very much, as both drug developers now have a substantial incentive to start testing their candidates to see how they compare. And because they won't need to go through much of the extensive research and development spending to discover and test a completely new molecule, the cost of exploring the possibility of entering a new market won't be major.
There's still a lot of work to do before realizing any gains
This new development does indeed have the potential to push share prices up slightly, as it implies certain existing pharmaceutical assets could ultimately be more valuable than they were before. But the bigger benefits will only start to accrue if Novo Nordisk or Eli Lilly announce the start of a new clinical program devoted to investigating their GLP-1 therapies for Parkinson's.
Right now, Novo only has one program for the condition, which is a cell therapy in phase 1 trials. Eli Lilly's lone candidate for it is a gene therapy in phase 2. Therefore it's clear that both management teams already have at least some degree of interest in competing in the Parkinson's market.
But if you're on the fence about buying either stock, this latest piece of information shouldn't be the decisive factor. There will be at least a couple of years of clinical trials to go through before any candidate has a shot at being approved for sale. As of today, there isn't any evidence to suggest that the preliminary work to advance that process has started or even been conceived yet.
For now, both Novo Nordisk and Eli Lilly are still worth buying on account of the money they're making via their GLP-1 medicines. If they choose to test those medicines for Parkinson's next, it will be a positive sign that they can squeeze even more sales out of their prized cash cows, so keep an eye out for any announcements to that end.
