In the third quarter of 2023, significant shifts in major investors like JPMorgan (JPM:US), BlackRock (BLK:US), and Vanguard increased their focus on weight-loss drug manufacturers, particularly with Eli Lilly (LLY:US) and Novo Nordisk (NVO:US). This surge in interest is attributed to the increasing demand for their respective products, namely Novo Nordisk's Wegovy and Ozempic and Eli Lilly's Mounjaro and Zepbound. These drugs have demonstrated efficacy in controlling blood sugar and achieving substantial weight loss.
Eli Lilly's shares rose by an impressive 14.5% in the third quarter and have marked a remarkable 67% increase throughout the year. Noteworthy institutional investors, including JPMorgan Chase, BlackRock, Vanguard, and hedge funds Two Sigma, Tiger Global Management, and Coatue Management, increased their allocations during this period. JPMorgan alone added over 1.6 million shares, now valued at approximately $1 billion.
The recent approval by the U.S. Food and Drug Administration for Eli Lilly's Zepbound, positioned to compete with Novo Nordisk's Wegovy, has further fueled investor enthusiasm.
Novo Nordisk also witnessed increased interest from investors such as Fidelity Investments, Lazard Asset Management, T Rowe Price, and Soros Fund. The company's ADRs rose by 12.4% in the third quarter and are up 45.8% year-to-date.
Despite the positive market sentiment, caution is advised. Eli Lilly currently trades at 54 times forward earnings, and Novo Nordisk at 34 times forward earnings, according to LSEG Datastream, compared to the S&P 500's multiple of 18.3. As the market for these drugs evolves, companies must balance becoming dominant with the challenge of potential fast followers entering the development landscape, as seen with Amgen and Pfizer working on competing drugs.
While the interest in weight-loss drug makers is evident, investors must carefully navigate the evolving market dynamics and consider factors such as reimbursement perspectives and emerging competition in their investment strategies.
In addition, on September 8, Congressman Ro Khanna acquired NVO stock with a transaction amounting to $1,000 to $15,000. In contrast, Congressman Josh Gottheimer purchased LLY stock on October 11, with the investment ranging from $1,000 to $15,000.