Major Pharma Reporting Amidst Diabetes Drug Boom

Major healthcare companies are set to report their quarterly results amid increased competition in the diabetes drug market for weight loss indications.

Reliance on Key Therapies in Times of Stress

Healthcare stocks have traditionally been seen as defensive investments during periods of market excess. This is because medical expenses are among the least responsive to economic conditions. However, since the introduction of effective new weight loss drugs that have significantly increased revenue for some large pharma firms, many pharma stocks have behaved like tech stocks rather than reliable drug makers. Investors seek to invest before anticipated gains from specific medications with large sales contributions. As a result, large pharmaceutical companies have become reliant on the projected performance of a few key therapies. This could leave them unusually vulnerable in the current volatile market environment.​

Eli Lilly Faces Stiff Competition

The drug maker, one of the two major producers of GLP-1 inhibitor-based weight loss drugs, will report before the market opens on Wednesday. The main focus will be on the performance of its Mounjaro and Zepbound drugs, as they are expected to face increased competition following positive results in trials from rivals such as Roche and Viking Therapeutics earlier in the quarter. Last quarter, the company already boosted its guidance on the back of Mounjaro sales, which are expected to reach $34 billion this year. Eli Lilly's EPS is forecasted to expand to $2.70 per share from $2.11 per share last year, thanks to a 19.7% increase in sales to $9.95 billion.

Novo Nordisk Expects Sales Growth

Europe's largest company, thanks to the medications that have become synonymous with weight loss drugs, will also report on Wednesday. The company saw its sales of Ozempic and Wegovy rise 25% in the first quarter compared to the prior year, with further growth constrained by supply. As logistics improve, the company faces increased competition like Eli Lilly but still hiked its sales growth to a 19%-27% forecast this year. Novo Nordisk is projected to increase its net income to NOK 21.3 billion from NOK 19.4 billion in the same period of last year, thanks to revenue moving up to NOK 68.5 billion from NOK 54.3 billion the year before.

Gilead Stable, Focus on Oncology

The HIV and Hepatitis drug maker has avoided some of the froth of the weight loss craze but still expects to see solid growth in earnings on Thursday thanks to consistent demand. The focus will likely be on its oncology pipeline, with results of its seladelpar trial expected this month in the wake of acquiring CymaBay. The expansion of the bottom line at a faster rate than the top line can be attributed to synergies from the latest acquisitions and the company staying away from M&A over the last quarter. Earnings are expected to improve to $1.60 per share from $1.34 per share last year, with revenues posting a modest 1.8% annual increase to $6.72 billion.​

Eli Lilly Bounces at Long-Term Support

Eli Lilly's stock price has declined over 20% from its high of $965 but found support at its long-term upward trendline starting at $310, maintaining the overall positive trend. While a short-term decrease towards $890 is feasible, failing to surpass the previous high at $970 may result in additional losses, with $720 and $630 as the next key support levels. Alternatively, recapturing the record high could pave the way for $1000.

Source: SpreadEx / Eli Lilly

Key Takeaways

Major healthcare companies are set to report quarterly results amid increased competition in the diabetes drug market for weight loss. The drug makers Eli Lilly and Novo Nordisk, both major producers of GLP-1 inhibitor-based weight loss drugs, will report this on Wednesday, with a focus on the performance of their respective drugs, Mounjaro/Zepbound and Ozempic/Wegovy. Gilead, focused on HIV and Hepatitis drugs, also expects solid earnings growth this quarter driven by pipeline progress in oncology. Investors will monitor revenue and earnings figures closely at a time when large pharmaceutical firms have become reliant on a few key therapies.​