Weight-loss drugs are currently the hottest trend in the biotech space. According to DataHorizzon Research, the weight loss drug market is expected to grow at a compound annual rate of 45.7% to $82.8 billion by 2032. In this article, we'll size up the prospects for two stocks that are diving into this exciting market.

Biotech firm Eli Lilly's (LLY) weight-loss drugs, Mounjaro and Zepbound, have piqued Wall Street's and investors' interest. These drugs compete with Novo Nordisk's (NVO) weight-loss medications, Wegovy and Ozempic.

Aside from weight-loss medications, Eli Lilly is well-known for its extensive line of products that treat serious conditions such as diabetes, Alzheimer's, cancer, autoimmune diseases, and more.

Biopharma company Amgen (AMGN) is a relatively new entrant into the weight-loss market, with its candidate still in Phase 2 clinical trial. While the weight-loss drug market is large enough to accommodate another player, Amgen's journey to be as successful as its competitors could be a long road.  

Eli Lilly stock rose 59% in 2023, outperforming the S&P 500 Index's ($SPX) 25% gain, Amgen shares advanced 10% in 2023. 

While weight-loss drugs make these two stocks particularly appealing right now, it is critical to determine whether the companies have other strong products in their portfolios that will drive future growth. Let's look at their most recent quarterly results and growth prospects to see which investment idea is more compelling.

The Case for Amgen Stock

Founded in 1980, Amgen's diverse product portfolio ranges from oncology, hematology, cardiovascular diseases, inflammation, and bone health to general medicine. So far in 2024, Amgen’s stock has dipped 0.3%.  

In general medicine, the company has now ventured into the obesity market with its anti-obesity candidate called MariTide. In the Q4 earnings call, management stated that in late 2024, Amgen will report Phase 2 clinical trial data, including top-line 52-week data from 592 patients.

Amgen presented the preclinical study, which was published in Nature Metabolism on Feb. 5. The results showed that a single MariTide injection caused weight loss and kept it off for about five months after the first dose was administered.

In addition to obesity, the company is planning a Phase 3 program to investigate the candidate's efficacy in a variety of other indications. In the obesity treatment category, several other candidates, including AMG 786, are in Phase 1 trials, and many other preclinical assets are moving forward. Amgen's ability to have a weight loss drug on the market, let alone its success, remains a long shot. Nonetheless, the company has other strong products in its pipeline that are driving its financial performance.

In the fourth quarter, total revenue increased 20% to $8.2 billion, with a 7% increase in full-year 2023 revenue to $28.2 billion. The top-performing products of the year were Enbrel, an autoimmune drug, Otezla (apremilast), which is used to treat psoriasis and psoriatic arthritis, and Prolia (denosumab), which is used to treat osteoporosis in postmenopausal women. Adjusted earnings also grew 15% in Q4 and 5% for the full year.

Amgen spent $1.5 billion on research and development (R&D) during the quarter. The company expects its R&D expenses to rise in 2024, driven by the advancement of oncology programs and MariTide. Amgen generated $7.4 billion in free cash flow in 2023.

Looking ahead, management expects revenue to be between $32.4 billion and $33.8 billion in 2024, with adjusted EPS ranging from $18.90 to $20.30 - in line with analysts' estimates for the fiscal year.

Out of the 23 analysts covering the stock, 11 rate it a “strong buy,” one rates it a “moderate buy,” nine suggest a "hold,” and two recommend a “strong sell.” Based on the mean target price of $309.90, the stock has an upside potential of 7.9% in the next 12 months. The high target price of $380 is 31% above current levels.

The Case for Eli Lilly Stock

Eli Lilly's weight loss drugs, Mounjaro and Zepbound, continue to capture the market's attention. So far in 2024, the stock has returned 30%, while the S&P 500 has gained 5%.

Mounjaro, which is also used to treat type 2 diabetes, has been driving the company’s revenue. In the most recent fourth quarter, it generated $2.21 billion in sales. In November 2023, the Food and Drug Administration (FDA) approved Zepbound for adults with obesity. Zepbound generated $175.8 million in sales in the fourth quarter. 

In Q4, Lilly's total revenue of $9.3 billion increased by 28% year-over-year. Besides Mounjaro, the top products that drove revenue were Verzenio (used to treat advanced or metastatic breast cancers) with $1.1 billion in sales, and Trulicity (used to treat type 2 diabetes) with $1.67 billion in sales in the quarter.

Adjusted earnings increased 19% to $2.49 per share during the quarter. Lilly continues to invest heavily in early-stage research and late-stage candidates to advance its pipeline. R&D expenses totaled $2.56 billion in the quarter.

Furthermore, under an Accelerated Approval Program, the company also received FDA approval for Jaypirca, used for treating chronic lymphocytic leukemia or small lymphocytic lymphoma.

Looking ahead, management anticipates revenue in the $40.4 billion to $41.6 billion range for 2024. This year-over-year growth of 18% to 22% is expected to be mostly driven by new products. The company’s adjusted EPS is expected to be in the $12.20 to $12.70 range. 

Analysts also expect EPS to land in the same range on revenue of $41.3 billion. Furthermore, earnings could increase by 43.5% year-on-year in 2025, with revenue jumping by 21.9% to $50.3 billion.

Out of the 21 analysts covering the stock, 18 rate it a “strong buy,” one rates it a “moderate buy,” and two rate it a “hold.” Eli Lilly stock has surpassed its average target price of $728.25; however, its high target price of $865 implies a potential upside of 14% to current levels.

Which Biotech Stock Is a Better Buy Right Now?

Based on analysts' ratings, Amgen stock is a “moderate buy,” and Wall Street rates Eli Lily stock a “strong buy” overall. Wall Street also expects higher growth from Eli Lily in the next few years.

According to market research firm Evaluate, Novo and Eli Lilly will be the top two players in global new sales in 2024. While Eli Lilly's global sales may exceed $5 billion, Amgen's sales could be over $4 billion.

It could take a while before Amgen’s weight-loss drug is approved and hits the market. Even if it does, it must overcome stiff competition from Lilly, Novo Nordisk, and other companies attempting to enter this market to succeed. Lilly, on the other hand, already has successful products on hand.

Eli Lilly's valuation is steep, trading at 60 times forward 2024 earnings. In comparison, Amgen trades at just 14 times forward earnings. Nonetheless, I believe Eli Lilly's strong portfolio of already-successful products and new candidates in the pipeline make it a worthwhile long-term investment, despite its inflated valuation.