wealthy individual Philippe Laffont is offloading tech giant Nvidia, renowned for its advancements in artificial intelligence, and investing more in these two market frontrunners.
If you're searching for prominent investments, there's no need to re-invent the wheel. The Securities and Exchange Commission makes it simple to track the world's elite investors. Every three months, the commission demands that any individual managing over $100 million discloses their investments in a Form 13F filing for the public to view.
A billionaire investor frequently observed by investors with varying portfolio sizes is Philippe Laffont of Coatue Management. Known for investing in a combo of tech and healthcare stocks, Laffont elevated his fund's value to $26.9 billion by September's end.
Laffont and Coatue saw significant profits with Nvidia during the initial half of 2024. By June's close, this favorite AI stock of Wall Street ranked as the fund's fourth-largest holding, valued around $1.2 billion.
However, his fascination with Nvidia had a limit. During Q3, Coatue divested from 3.6 million shares of this skyrocketing AI stock, reducing its share by 26%.
Nvidia lost preference at Coatue, as it was replaced by a duo of drugmakers leading the anti-obesity sector. In Q3, Laffont expanded Coatue's stake in Novo Nordisk (NVO), more than ninefold to $39 million. Coatue already held a substantial stake in Eli Lilly (LLY), which it increased by 20% to $220 million.
1. Novo Nordisk
The treatments for obesity and diabetes marketed by Novo Nordisk and Eli Lilly are flying off pharmacy shelves and still have room to grow. According to a report from Morgan Stanley, the market for anti-obesity drugs could escalate from $6 billion in 2023 to $105 billion in 2030.
Novo Nordisk's key drug is semaglutide, a glucagon-like peptide-1 (GLP-1) agonist, which received FDA approval in 2017 for diabetes treatment and later in 2021 for obesity treatment under the brand name Wegovy. Between January and September 2024, total semaglutide sales grew approximately 41% year-over-year to $19.8 billion.
In a clinical trial culminating in its approval as a weight management drug, Wegovy decreased patients' weight by 12.4% compared to a placebo. Novo Nordisk hasn't stopped at Wegovy and is developing a future-generation weight management treatment derived from semaglutide and an amylin analog called CagriSema (cagrilintide).
Treatment with CagriSema reduced patients' weight by an average of 20.4% compared to a placebo following 68 weeks of treatment.
2. Eli Lilly
Eli Lilly is another prominent pharmaceutical company with a potent GLP-1 drug. Tirzepatide gained FDA approval to treat diabetes in 2022 as Mounjaro, and to treat obesity in 2023 as Zepbound.
Whilst semaglutide targets GLP-1 exclusively, tirzepatide is a dual GLP-1 and GIP agonist. Its dual action has boosted its effectiveness and sales trajectory. In trials leading to Zepbound's approval, it reduced patients' weight by an average of 17.8% compared to a placebo after 72 weeks.
Novo Nordisk currently retains the largest market share for GLP-1 drugs, but tirzepatide is swiftly gaining ground. Despite only being on the market for two short years, total tirzepatide sales in the first nine months of 2024 surpassed $11 billion.
CagriSema may disrupt tirzepatide's upward progression, but there's a strong probability Eli Lilly will take over Novo Nordisk as the leaders in GLP-1 drugs. Although CagriSema's pivotal trial results were impressive, they pale in comparison to retatrutide, the triplet therapy being tested by Eli Lilly.
Retatrutide is a GLP-1/GIP agonist that also acts on glucagon receptors. In a 2023 phase 2 trial, it reduced patients' weight by an average of 22.1% compared to a placebo after 48 weeks.
Time to invest?
The GLP-1 drug market is set to remain in a game of tug-of-war between Eli Lilly and Novo Nordisk for the coming years. Tirzepatide is likely to overtake semaglutide in another year or two, but it may backslide to CagriSema. Novo Nordisk's next-generation anti-obesity remedy has wrapped up a phase 3 trial and may earn FDA approval in 2025.
Retatrutide began a phase 3 trial in May 2023, which should finish up in January 2026. If everything proceeds as planned, CagriSema may be the top obesity treatment for approximately a year before the FDA assesses an application from Lilly for retatrutide.
Though we can reasonably anticipate rapid sales growth from their still-experimental GLP-1 contenders, the stock market is already pricing in a significant amount of success. Opinions are so high for Eli Lilly that it might be best to avoid the stock for now.
It's been trading for about 60 times forward-looking earnings estimates. At this high valuation, any hint of trouble for tirzepatide or retatrutide could result in substantial losses.
Novo Nordisk's shares took a hit lately due to less appealing outcomes from CagriSema compared to retatrutide. Currently, the pharmaceutical conglomerate is selling at a multiple of 27.9 times projected future earnings, which is quite high for a pharmaceutical company. However, the skyrocketing demand for its GLP-1 drugs might enable it to expand into its valuation, offering better returns than the market to its health-focused investors.
- Given the promising outlook for the anti-obesity and diabetes drug market, investing in companies like Novo Nordisk and Eli Lilly could be a lucrative move. According to a Morgan Stanley report, the market for anti-obesity drugs could potentially grow from $6 billion in 2023 to $105 billion in 2030.
- With significant profits to be made in the GLP-1 drug market, finance experts and individual investors alike should consider allocating a portion of their financial portfolios to companies like Novo Nordisk and Eli Lilly, which are currently leading the way in this sector.
