Novo Nordisk (NVO) and Eli Lilly (LLY) both made headlines recently with positive drug trial results for their respective GLP-1 weight-loss drugs, as well as their approval in China. While these names have been often cited as top picks in the pharmaceutical industry, are there hidden gems to look out for or do Eli Lilly and Novo Nordisk remain at the top of the class?

Mizuho Healthcare Equity Strategist Jared Holz joins Morning Brief to give insight into the healthcare sector and what investors should keep in mind moving forward.

"I think for me, Novo and Lilly are still going to be the top two. You know, as long as they are dominating in this kind of section of the market, it's really tough to not ride these a little bit longer, as far as other players in the GLP one market that might emerge that are of interest or intrigue to investors," Holz says.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Nicholas Jacobino

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Video Transcript

Wave of developments in the pharma industry this week capturing Wall Street's attention.

We've got Eli Lilly's diabetes and obesity drug show positive results when used to treat sleep apnea in obese patients, sending shares of companies that make machines for sleep related complications like ResMed and also inspire medical.

Those shares were under pressure to add this week and Nova Nordisk also getting some positive news for its weight loss drug after getting approval in China.

So here what the top ways to play the sector we wanna bring in, Jared Holt.

He is a Mizuho's health care equity strategist joining us.

Now, Jared, I it's great to see you.

So we just take a look at obviously the excitement surrounding uh these drugs within the pharma space and exactly what that is going to do to stock prices.

Clearly, we've seen a run up in Eli Lilly.

We've also seen a lot of the excitement play out in Nova Nordis.

I'm curious from your perspective, how much of this, how much of this hype and excitement has already been priced in to shares at this point or whether or not maybe these two stocks still have room to grow.

Great to be here.

Thanks for having me.

I mean, that's the real question here.

I mean, these have been monster stocks for the past few years, another banner year for Eli Lilly up over 50% Novo Nordisk up over 40%.

Still think there's room here though.

I mean, the one thing that I keep on coming back to when looking at both of the stocks is kind of what the supply demand metrics look like for the G LP one market.

And we're still in, I think the infancy stages considering that it's only been about a year since both drugs have been on the market for obesity specifically.

And then we talk about all the demand in the market that seems at this point unlimited.

Plus you've got all these different catalysts for, you know, not curing, but at least addressing all these un other underlying medical conditions which make the drugs even better.

So I think it's very hard to kind of predict either name from a, a valuation standpoint alone.

But I do think the news flow over the next 6 to 12 months and even into next year um are gonna be potentially prolific because we're gonna be talking about more and more indications that the drugs satisfy with that in mind.

I mean, investors are always looking at the health care space for the the next major breakthrough or scientific advancement.

What is that beyond G LP ones at this juncture and is it, is it clear which company is pioneering that it's not really clear at all?

I mean, I think in some respect, the next, you know, innovation wave could still come as a result of the G LP one class because both companies are looking at their technology for use in neurological diseases, including Alzheimer's disease.

And we're gonna have data on that um roughly a year from now, maybe a little bit later than a year from now.

So as I kind of like look across the complex in BioPharma, the G LP one still might be, you know, the center of innovation in terms of like what you're talking about the next leg or you know, the next exciting area because outside of this, I just don't see market opportunities when we talk about dollar or revenue opportunities being anywhere near as significant as what these are gonna do.

So Jared when it comes to, I guess the potential here as to be the catalyst then for other names within the industry, we spend so much time and rightfully so over the last 6, 12 months, I'm sure for you a lot longer talking about, we're placing a lot of the emphasis on Eli Lilly and Anna Novo Nordis.

Are those the two top plays within the sector?

Or are there other names that maybe investors should be taking a look at here that could kind of ride the the coat tail, so to speak and also uh get a boost from some of this D LP one excitement.

Well, yeah, I mean, I think for me, Novo and Lily are still gonna be the top two, you know, as long as they're dominating in, in this kind of section of the market, um it's really tough to, you know, not ride these a little bit longer.

Um As far as other players in the G LP one market that might emerge that are of interest or intrigue to investors.

I think we're still trying to understand from Amgen, what their monthly G LP One data is going to look like that's gonna be available sometime this year.

Not precisely sure when, but they're looking at, you know, the use of the weight loss drug on a monthly basis that's versus Lilian Novo um weekly.

So that's one to kind of watch out for.

I mean, I've been pretty bullish on Merck all year given valuation, given the fact that they seem to be doing a lot of smart things from a business development standpoint to kind of dilute the effect of Kruta losing patent exclusivity closer to 2030.

That's been the big concern that, you know, the lion's share of their revenue is going away, but they've done a lot of smart things in terms of um acquisitions and otherwise to kind of make sure that that erosion is not as extreme.

Um And I think astrazeneca is probably fourth.

So I think astra and Merck as kind of like still very solid quality names in Pharma that you can play.

Um They don't have huge GOP one exposure, but I think Amgen is gonna be interesting.

I, I don't have a strong view on it.

We really haven't seen a lot of data companies seem super bullish on it.

Um You know, that could be one clearly worth watching into the second half.