What’s better than a stock that has delivered huge profits? That’s simple: a stock that has delivered huge profits And still has a lot of room to run.
We asked three Motley Fool contributors to sift through recently high-flying stocks to find ones they think could rise significantly further. This is why they chose Eli Lilly (NYSE: LLY), Novo Nordisk (NYSE: NVO)And Vertex Pharmaceutica (NASDAQ: VRTX).
Just started
Keith Speights (Eli Lilly): In 2023, Eli Lilly stock shot up 59%. So far this year, big pharma stocks are up nearly 40%. I think Lilly is just getting started.
Why am I so optimistic about Lilly? For starters, it’s just the first innings for the company’s weight-loss drug, Zepbound. Lilly received US approval for the drug in November 2023. In the first quarter of 2024, Zepbound brought in more than $517 million in revenue.
Zepbound and Mounjaro, which is approved in the US for the treatment of type 2 diabetes and in Europe for the treatment of obesity, are different brand names for the same underlying drug (tirzepatide). Mounjaro’s first quarter revenue more than tripled year over year to $1.8 billion.
There is more good news. Lilly recently reported positive results from a late-stage study evaluating tirzepatide as a treatment for obstructive sleep apnea. The company plans to apply for regulatory approval for that indication soon. The company is also evaluating tirzepatide in a late-stage study for the treatment of heart failure with preserved ejection fraction and in a Phase 2 study targeting metabolic disorders-associated steatohepatitis (MASH), also known as non-alcoholic steatohepatitis (NASH). Some Wall Street analysts predict that the market for MASH/NASH treatments could be worth more than $100 billion annually.
A Food and Drug Administration (FDA) advisory committee will review Lilly’s candidate donanemab as a treatment for Alzheimer’s disease in June. If the drug is approved by the FDA, Lilly will almost certainly have another blockbuster on its hands.
If that’s not enough, Lilly’s pipeline is packed with other promising programs. These include other candidates for obesity and Alzheimer’s disease, plus experimental drugs targeting autoimmune diseases, multiple sclerosis, Parkinson’s disease and more. Like I said, Lilly is just getting started.
It’s not too late to invest in this red-hot stock
David Jagielski (Novo Nordisk): This year is off to a good start for Novo Nordisk, with shares of the Danish healthcare company already up 28% so far. And since 2022, the stock’s total return (including reinvested dividends) has exceeded 140%.
However, the company behind the popular diabetes drug Ozempic and the weight-loss treatment Wegovy (both formulations of semaglutide) still has plenty of room to grow. Novo Nordisk’s first-quarter revenue rose 22% to 65.3 billion Danish crowns ($9.8 billion), while profit rose 28% to 25.4 billion Danish crowns ($3.8 billion). For the full year, the company expects operating profit to increase by 22% to 30% (excluding the impact of shifts in foreign currency exchange rates). In the long term, the company could grow even more as the company rolls out Wegovy to more markets, invests in more manufacturing capacity, and health insurers begin offering coverage to eligible Medicare recipients for the treatment.
Another potential catalyst that could add fuel to the fire under Novo Nordisk’s already hot stock is weight-loss candidate amycretin. Participants in an early-stage study who took the pill daily lost an average of 13% of their body weight after just 12 weeks. A phase 2 trial is planned for later this year, and if results remain encouraging, the stock could rise even further.
Multiple catalysts on the horizon
Prosper Junior Bakiny (Vertex Pharmaceuticals): It’s hard to argue with results like those from Vertex Pharmaceuticals, a biotech company that specializes in developing drugs for cystic fibrosis. The company has relied entirely on this one therapeutic area for more than a decade. So you could say the drugmaker has been a one-trick pony, but that’s not a problem when the trick is this good.
In fact, Vertex Pharmaceuticals has a monopoly on the cystic fibrosis market, with the only approved drugs for the condition, and has achieved excellent financial and stock market performance over the past decade. But it has broadened his horizons. The latest regulator-approved treatment is for Casgevy, a gene-editing therapy that could provide a functional cure for sickle cell disease and beta-thalassemia, two rare blood disorders. The sales potential of this drug is enormous, although it will take some time before it reaches its peak.
Vertex Pharmaceuticals is also developing several medicines that should soon further expand its range. The company is in the process of submitting an application to US regulatory authorities for suzetrigine as a treatment for acute pain. It has just begun the phase 3 portion of a phase 2/3 trial of Inaxaplin, a candidate treatment for APOL1-mediated kidney disease. And several other drug candidates are in earlier stages of development.
The biotech sector should make meaningful clinical and regulatory progress on some of these fronts in the coming year, and in the meantime, Casgevy sales should gain momentum. Given all this, it seems like Vertex Pharmaceuticals isn’t done delivering above-average returns just yet. The biotech sector still has many advantages left.
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David Jagielski has no position in the stocks mentioned. Keith Speights holds positions at Vertex Pharmaceuticals. Prosper Junior Bakiny holds positions at Vertex Pharmaceuticals. The Motley Fool holds and recommends Vertex Pharmaceuticals. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
3 High-Flying Stocks That Could Rise Even More was originally published by The Motley Fool
