Norwegian wealth fund says Novo, Eli Lilly could join trillion dollar club

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A pharmacist displays boxes of Ozempic, an injectable semaglutide drug used to treat type 2 diabetes made by Novo Nordisk, at Rock Canyon Pharmacy in Provo, Utah, on US 29 March 2023.

George Frey | Reuters

Norway’s super wealth fund, the world’s largest, has drawn attention to the possibility that Danish drugmaker Novo Nordisk and rival US Eli Lilly they could become the first health care members of the trillion-dollar club.

The comments come as both companies are seen as the main beneficiaries of skyrocketing demand for diabetes and weight loss drugs.

Novo Nordisk, Europe’s largest company by market capitalization, reported on Wednesday stronger-than-expected earnings in 2023, as sales of its popular drug Wegovy continued to rise. The company’s market valuation exceeded $500 billion on the news.

The largest pharmaceutical company in the world by market value, Eli Lilly is currently valued at approximately $612 billion.

Gemma Game, head of healthcare sector strategy at Norges Bank Investment Management, said on Tuesday that the launch of safe and effective weight loss drugs last year had helped make Novo Nordisk and Eli Lilly household names.

The brand names of individual medicines, such as Novo Nordisk’s Ozempic and Wegovy, and Eli Lilly’s Zepbound, have become familiar to many.

“The story is far from over,” Game said. “For billions [of] people living with obesity around the world today, this is very encouraging. Less than a fraction of 1% have been treated so far. So, we are early in the launch path.”

NBIM, the world’s largest single stock market investor, holds a 2.5% stake in Novo Nordisk and a 0.98% stake in Eli Lilly, according to LSEG data.

Eli Lilly and Company, a pharmaceutical company headquartered in Alcobendas, Madrid, Spain.

Cristina Arias Cover | Getty Images

Obesity, which has a major impact on health, is linked to approximately 200 different medical conditions.

NBIM Game said it would be closely monitoring data on whether the anti-obesity drugs known as GLP-1 agonists could also effectively treat chronic kidney disease, obstructive sleep apnea and chronic obstructive pulmonary disease. Alzheimer’s.

“We just heard about the ‘Magnificent Seven,'” Game said at a press conference, referring to a group of US mega-cap tech stocks. “Maybe in the future we’ll be talking about Eli Lilly and Novo Nordisk as the world’s first trillion-dollar healthcare companies.”

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US tech giants including Microsoft, Apple and Amazon all valued at over $1 trillion in market capitalization, and Meta’s market value recently surpassed the milestone for the first time since 2021.

Barclays said last year that it expects the global weight loss drug market to grow to around $100 billion by the end of the decade.

“If anything, we feel more confident about those forecasts,” Emily Field, head of European pharma equity research at Barclays, told CNBC’s “Worldwide Exchange” on January 8.

The most important thing for pharma stocks right now is their supply ramp, says Barclays' Emily Field

“What Novo was able to firmly establish last summer, and we saw more data in the fall, is that not only do you lose weight, but it could have a significant benefit to your cardiovascular health,” she said.

“And this year, we’re looking to see updates on these other areas where weight loss can produce other benefits, such as in kidney disease and also potentially liver disease.”

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