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November 30, 2022 will go down as a defining moment in modern history. That’s the day OpenAI released ChatGPT to the masses. Just like that, the euphoria about artificial intelligence (AI) took over the world.
One of the biggest beneficiaries of the AI boom is the semiconductor specialist Nvidia. If you had bought shares of Nvidia on the same day ChatGPT was launched, you would now be up 583%. Some investors might think that returns of this magnitude are rare. I don’t agree with that. Stocks rise for all kinds of reasons, even the most unconventional.
What’s rare, however, is finding a quality company with legitimate catalysts that can drive long-term growth. Outside of AI, another growing story in the stock market surrounds the emergence of glucagon-like peptide-1 (GLP-1) agonists for the treatment of diabetes and obesity, such as Ozempic and Mounjaro.
Recently I watched an interview with Dave Mazza, CEO of Roundhill Investments, in which he referred to the pharmaceutical leader Eli Lilly (NYSE: LLY) as the “Nvidia of the GLP-1 and weight loss space.” I like this analogy, and I agree with his position. Below, I outline several reasons why investing in Eli Lilly right now could be similar to investing in Nvidia at the dawn of the AI revolution.
The rise of weight loss drugs
GLP-1 agonists have become popular among diabetic and obese patients. Today, Lilly has two leading GLP-1 drugs: Mounjaro and Zepbound. These treatments are sending shockwaves through the pharmaceutical sector and have initiated a new phase of growth for Lilly.
Furthermore, the company’s CEO, David Ricks, said the company hasn’t even scratched the surface yet. marketing and promotional efforts for its GLP-1 setup. With that in mind, it’s reasonable to think that Mounjaro and Zepbound have even better days ahead.
Additionally, Lilly continues to work hard to diversify beyond injection-based weight loss treatments. The company’s oral solution, orforglipron, is currently in Phase 3 clinical trials.
Finally, GLP-1 drugs are likely to see greater proliferation in the long term. Novo Nordisk‘s Wegovy recently received an expanded indication from the Food and Drug Administration (FDA) to treat cardiovascular disease in obese patients. And Lilly has explored applications for treating obstructive sleep apnea.
So much more to offer
Nvidia is best known for its chips called graphics processing units (GPUs). The company also has a large software company called CUDA, which is rarely talked about. In a similar way, Eli Lilly is much more than that blockbuster GLP-1 drugs.
One of the other successful drugs is a cyclin-dependent kinase (CDK) inhibitor called Verzenio. It received FDA approval in 2017 and last year was given an expanded indication for use in certain cancer patients. This has broadened Verzenio’s addressable market and initiated a new phase of accelerated growth for the drug.
In addition to its core portfolio, Lilly will enter another area in healthcare. In July, the company received FDA approval for its Alzheimer’s disease candidate, donanemab. Like the GLP-1 market, the treatment of Alzheimer’s disease has enormous potential. Yet today there is limited competition out there Biogen‘s and Eisai‘s Leqembi.
In addition to its existing capabilities and robust pipeline of new medicines, Lilly is also at the forefront of technological innovation in healthcare.
Earlier this year it entered into a partnership with OpenAI. The goal is to bring the capabilities of generative AI to healthcare in an effort to discover breakthrough treatments for advanced (and perhaps neglected) diseases.
An unstoppable force for the long term
I see a lot of overlap between Nvidia and Lilly. Both companies are the biggest names in their respective industries, and each has a proven track record of developing best-in-class products and services.
As with the AI story, I think the GLP-1 story is just beginning. To me, it is likely that new chapters will include more and more applications for these drugs, further strengthening Lilly’s market potential. When you add up the company’s entry into the Alzheimer’s space and the long-term prospects AI brings to healthcare, it’s hard to overstate all the growth catalysts Lilly has in store for it.
I see it as a generational opportunity that will continue to deliver significant gains for patient investors. I think now is a good time to buy Eli Lilly stock and hold it for the long term.
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Adam Spatacco has positions at Eli Lilly, Novo Nordisk and Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Biogen and Novo Nordisk. The Motley Fool has one disclosure policy.
Investing in this healthcare stock could be like catching Nvidia at the dawn of the AI boom was originally published by The Motley Fool