Generally, you can count on drugmakers for a steady revenue performance — since patients need their medicines, revenue holds up well at these companies regardless of general economic conditions. But certain pharmaceutical and biotech stocks stand out from time to time, behaving more like growth players with soaring revenue and stock performance. This happens when they develop or sell a drug in a particularly high-growth area or are innovating at a rapid pace.
Right now, two players fit the bill — one is a biotech that’s a leader in its specialty area and now is broadening into an area of great need, and the other is a pharma giant selling one of the world’s most sought-after treatments. In fact, the treatment was on the U.S. Food and Drug Administration’s (FDA) shortage list until just recently due to unrelenting demand.
And these players have more catalysts ahead, making them great buys right now before they surge even higher. Let’s check them out.
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1. Eli Lilly
Eli Lilly (LLY 1.67%) sells many products across treatment areas, from immunology to neuroscience. But one particular portfolio has supercharged growth in recent quarters, bringing in billions of dollars and leading to double-digit revenue gains. I’m talking about Lilly’s weight-loss drugs. The company sells tirzepatide, commercialized under the name Zepbound for weight loss and under the name Mounjaro for type 2 diabetes. (Doctors have prescribed both for the weight loss indication.)
Zepbound and Mounjaro both have reached blockbuster status and in the most recent quarter generated $1.2 billion and $3.1 billion in revenue, respectively. And Lilly is working on other weight loss candidates in late-stage clinical trials, including an oral formulation — that could make administration easier than today’s injectable formats.
Demand for these drugs has surpassed supply, putting them on the FDA’s shortage list, but the regulator recently removed them from the list as Lilly ramped up production. Lilly recently said it expects to produce 60% more doses of these drugs in the first half of this year compared to the first half of last year.
And with analysts forecasting an obesity drug market of $100 billion to $130 billion by 2030, Lilly, as a leader in the market today, could be well positioned to benefit. And that may lead to significant stock price gains from here over the long term — even after Lilly’s 200% increase over the past three years.
2. Vertex Pharmaceuticals
Vertex Pharmaceuticals (VRTX 2.74%) is the global leader in cystic fibrosis (CF) treatment and recently reinforced this position when it won approval of a new drug. Alyftrek has proven itself to be even more efficacious and more convenient — in a once-daily format — than Vertex’s current top seller, Trikafta.
CF drugs have helped Vertex grow revenue into the billions of dollars, with product revenue advancing in the double digits to more than $2.7 billion in the recent quarter. Now, though, the company may be heading toward a new era of growth, with the approval of Alyftrek and the potential addition of a treatment in an area of much need: pain.
Vertex has applied to the FDA for the approval of suzetrigine, a candidate for the treatment of moderate-to-severe acute pain. The regulatory agency is expected to issue a decision by the end of January, so this could represent a very near-term catalyst for the stock.
And if Vertex wins approval, potential revenue could represent a major long-term catalyst for stock performance. Today, options for pain management are limited, with over-the-counter treatments often lacking in efficacy — and the prescription of opioids discouraged due to their link to addiction. Vertex’s non-opioid candidate could gain significant market share, and the company is studying the drug in additional pain indications. Vertex has said it expects suzetrigine to become a “multibillion-dollar drug.”
All of this means that Vertex, which has climbed 87% over the past three years, may have much farther to go. And that’s why right now is a great time to get in on this innovative biotech player.
Adria Cimino has positions in Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.
