Biopharmaceutical firms engaged in developing weight-loss drugs were rewarded rather significantly in 2024.
It’s what helped Novo Nordisk A/S (CPH: NOVO-B) become the Europe’s largest company by market cap and made many forecast Eli Lilly & Co (NYSE: LLY) to emerge as the world’s first healthcare firm to hit $1.0 trillion valuation.
Still, analysts at UBS expect a more uncertain macroeconomic backdrop to make it difficult for the biopharma space to outperform in 2025.
RFK spells uncertainty for weight-loss drugs
UBS is somewhat dovish on the biopharmaceutical sector for the short to medium term primarily because Donald Trump has named Robert F. Kennedy Jr. to lead the Department of Health and Human Services.
RFK is a known vaccine skeptic who “has publicly criticised proposals to allow government health plans to pay for GLP-1 (weight-loss) drugs due to financial concerns.”
So, it’s uncertain how his appointment as the head of HHS will affect the weight-loss drugs industry, the investment firm told clients in its report on Tuesday.
Note that the anti-obesity drugs market has grown more than three-fold over the past four years to well over $6.0 billion in 2024.
UBS still forecasts growth in GLP-1
Despite macroeconomic uncertainty, however, UBS continues to see growth in GLP-1 and expects that theme to continue to dominate in 2025.
Its analysts recommend sticking to space leaders, Eli Lilly and Novo Nordisk, to play the potential upside in the weight-loss drugs market that’s broadly expected be worth $100 billion by 2030.
“Given the addressable market size, the range of potential outcomes is wide with potential for the Eli Lilly and Novo Nordisk franchises to grow beyond 2031 with successful pipeline read-outs.”
Zepbound sales totalled more than $1.2 billion in Lilly’s latest reported quarter. The blockbuster weight-loss treatment along with Mounjaro contributed some 42% to the company’s overall revenue in Q3.
Wegovy, on the other hand, brought in $2.5 billion for Novo Nordisk in the third quarter that translates to an incredible 79% growth on a year-over-year basis.
How high could Lilly and Novo stock go?
UBS favours sticking to Eli Lilly and Novo Nordisk to play anti-obesity drugs because a potentially more uncertain macroeconomic backdrop could weigh on competition as well.
“While we acknowledge there’s potential competition entering, we see limited penetration given the entrenchment of Lilly and Novo,” its analysts argued in a research note today.
They also expect Zepbound and Wegovy sales to increase as supply improves further in 2025. Plus, both Eli Lilly and Novo Nordisk are committed to an oral version of their weight-loss treatment as well.
UBS currently has a $1,100 price target on Eli Lilly stock that translates to a more than 40% upside from current levels and DKK 1,100 price target on Novo Nordisk that suggests an even bigger 75% upside.
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