If you're looking for top stocks, there's no need to reinvent the wheel. The Securities and Exchange Commission makes it a breeze to follow the world's greatest investors. Every three months, the regulator has everyone with more than $100 million under management share their trading details with the public on a Form 13F filing.
One billionaire investor whom investors of all sizes follow closely is Philippe Laffont of Coatue Management. Known for investing in a combination of tech and healthcare stocks, Laffont grew his fund to $26.9 billion at the end of September.
Laffont and Coatue made a lot of money with Nvidia in the first half of 2024. At the end of June, Wall Street's favorite artificial intelligence (AI) stock was the fund's fourth-largest holding at a value of roughly $1.2 billion.
His love for Nvidia found a limit. During the third quarter, Coatue sold 3.6 million shares of the high-flying AI stock, which was enough to reduce its stake by 26%.
Nvidia has fallen out of favor at Coatue and been replaced by a pair of two drugmakers leading the anti-obesity niche. During the third quarter, Laffont increased his firm's stake in Novo Nordisk(NYSE: NVO) more than ninefold to $39 million. Coatue already had a large Eli Lilly(NYSE: LLY) stake that it raised by 20% to $220 million.
1. Novo Nordisk
The drugs that Novo Nordisk and Eli Lilly market for the treatment of obesity and diabetes are flying off pharmacy shelves and have further to climb. A report from Morgan Stanley suggests the market for anti-obesity drugs could rise from $6 billion in 2023 to $105 billion in 2030.
Novo's lead drug is semaglutide, a glucagon-line peptide-1 (GLP-1) agonist that the Food and Drug Administration (FDA) approved as Ozempic and Rybelsus to treat diabetes and later as Wegovy to treat obesity. In the first nine months of 2024, total semaglutide sales grew about 41% year over year to $19.8 billion.
In a clinical trial leading to its approval as a weight management drug, Wegovy reduced patients' weight by 12.4% compared to a placebo. Novo Nordisk isn't stopping at Wegovy. It's developing a next-generation weight management treatment made from semaglutide and an amylin analog called CagriSema (cagrilintide).
Treatment with CagriSema lowered patients' weight by a placebo-adjusted 20.4% on average after 68 weeks of treatment.
2. Eli Lilly
Eli Lilly is another large pharmaceutical company with a blockbuster GLP-1 drug. Tirzepatide first earned FDA approval to treat diabetes in 2022 under the brand name Mounjaro. The FDA approved the same drug to treat obesity in 2023 under the brand name Zepbound.
While semaglutide acts on GLP-1 alone, tirzepatide is a dual GLP-1 and GIP agonist. The dual action has improved its efficacy and sales trajectory. In trials leading to Zepbound's approval, it reduced patients' weight by a placebo-adjusted 17.8% on average after 72 weeks.
Novo Nordisk still has a leading share of the market for GLP-1 drugs, but tirzepatide is gaining fast. Despite just two short years on the market, total tirzepatide sales during the first nine months of 2024 rose above $11 billion.
CagriSema could disrupt tirzepatide's upward trajectory, but there's a good chance Eli Lilly will overtake Novo Nordisk as the leading seller of GLP-1 drugs. Although CagriSema's pivotal trial results were impressive, they pale in comparison to retatrutide, a triplet therapy Eli Lilly is testing.
Retatrutide is a GLP-1/GIP agonist that also acts on glucagon receptors. In 2023, a phase 2 trial showed it lowered patients' weight by a placebo-adjusted 22.1% after 48 weeks.
Time to buy?
The GLP-1 drug market will be stuck in a game of tug-of-war between Eli Lilly and Novo Nordisk for the next several years. Tirzepatide will likely overtake semaglutide in another year or two, but it could fall to CagriSema. Novo Nordisk's next-generation anti-obesity candidate already finished a phase 3 trial and could earn FDA approval in 2025.
Retatrutide began a phase 3 study in May of 2023 that should wrap up in January of 2026. If all goes as expected, CagriSema could be the top obesity treatment for about a year before the FDA looks at an application from Lilly for retatrutide.
While we can reasonably look forward to rapid sales growth from their still-experimental GLP-1 candidates, the stock market is already pricing in a lot of success. Expectations are so high for Eli Lilly that it's probably best to avoid the stock for now.
It's been trading for about 60 times forward-looking earnings estimates. At this steep valuation, any sign of trouble for tirzepatide or retatrutide could lead to heavy losses.
Shares of Novo Nordisk recently tanked because CagriSema results don't appear competitive against retatrutide. At its recently beaten-down price, the pharmaceutical giant is trading for 27.9 times forward-looking earnings expectations. That's a steep price to pay for a drugmaker, but soaring demand for its GLP-1 drugs could allow it to grow into its valuation and provide market-beating gains to patient investors.
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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
