2 Weight Loss Drug Stocks That Are Screaming Buys in June

Morgan Stanley projects the weight loss drug market will surge from $15 billion to $150 billion by 2035, with Novo Nordisk and Eli Lilly currently dominating with a combined 97% market share. While competition is emerging, both companies are actively developing next-generation oral and injectable treatments like Novo Nordisk's CagriSema and Eli Lilly's orforglipron and retatrutide to maintain their lead; analysts suggest that owning both stocks is the best strategy to capitalize on the sector's growth, despite Eli Lilly's current valuation premium (P/E of 62 vs. Novo Nordisk's 22).

Analysis

The weight loss drug market is projected for significant expansion, with Morgan Stanley forecasting a tenfold increase from an estimated $15 billion in 2024 to $150 billion by 2035. Novo Nordisk and Eli Lilly currently dominate this sector, commanding an estimated 97% combined market share, with Novo Nordisk holding 62% and Eli Lilly 35%. Despite emerging competition, substantial barriers to entry, including challenging drug development and rigorous regulatory hurdles—highlighted by Pfizer's recent discontinuation of its oral weight loss candidate, danuglipron—bolster the incumbents' positions. Both market leaders are actively innovating to maintain their lead: Novo Nordisk is awaiting potential U.S. Food and Drug Administration approval for an oral version of Wegovy by the end of 2025 and is advancing CagriSema, a potential successor to Wegovy, through Phase 3 trials for a possible 2026 launch, although CagriSema has reportedly faced challenges in demonstrating superior performance over existing treatments in clinical trials. Eli Lilly's experimental oral drug, orforglipron, has shown promising Phase 3 results, and its next-generation injectable, retatrutide, which targets three distinct hunger-related hormones, is also in Phase 3 with an anticipated market arrival in 2027. Near-term competitive threats appear limited, with Boehringer Ingelheim's survodutide (expected 2027) being the most prominent, while Amgen's MariTide is projected for a later arrival around 2028. Financially, Eli Lilly trades at a considerable P/E ratio of 62 versus Novo Nordisk's 22, reflecting higher market expectations and a forecasted 32% annualized earnings growth compared to Novo Nordisk's 14%. However, both companies display reasonable valuations relative to their growth prospects, with PEG ratios of 1.5 for Novo Nordisk and 1.9 for Eli Lilly, suggesting that both are well-positioned to capture significant upside in this burgeoning market.

Key Decisions for Investors

• Investors should consider gaining exposure to both Novo Nordisk and Eli Lilly to capitalize on the substantial projected growth in the weight loss drug market, given their current market dominance and strong pipelines.
• Evaluate the distinct risk-reward profiles: Eli Lilly offers higher growth expectations, reflected in its premium valuation (P/E 62, 32% expected EPS growth), while Novo Nordisk presents a more conservative valuation (P/E 22, 14% expected EPS growth) with a PEG ratio of 1.5.
• Closely monitor key catalysts including clinical trial outcomes for next-generation therapies such as Novo Nordisk's CagriSema and Eli Lilly's orforglipron and retatrutide, regulatory approval milestones like that of oral Wegovy, and the competitive advancements from other pharmaceutical firms.