We recently compiled a list of the 12 Best Biotech Stocks To Invest In According To Hedge Funds. In this article, we are going to take a look at where Eli Lilly and Company (NYSE:LLY) stands against the other biotech stocks.
As we have mentioned in our article, “10 Best Penny Stocks to Buy Under $1,” the size of the global biotechnology industry was assessed to be worth $1.38 trillion in 2023 and is expected to grow at a CAGR of 11.8% from 2024 to 2033, predicted to be worth around $4.25 trillion.
Specifically, the U.S. biotechnology market was forecast to be $246.18 billion last year, and at a CAGR of 11.6% from 2024 to 2034, it is expected to be worth approximately $830.31 billion as per Precedence Research. North America’s revenue share was 37.79%, while Asia Pacific produced a revenue share of 23.99%. In terms of revenue share by application, the biopharmacy segment had 41.73% in 2023, and the application segment for bioindustries accounted for 24.33% of total revenue. In terms of technology, the tissue engineering and regeneration market has projected a 19.26% revenue share for 2023.
According to stock analysis, there are 665 stocks in the biotechnology industry, with a combined market value of $1,559.75 billion and total sales of $127.6 billion.
However, the U.S. Food and Drug Administration and other drug authorities’ clearance decisions and research data have a significant impact on the future of these occasionally volatile equities.
It has always been necessary to have a high risk tolerance and the ability to wait years or even decades for results when investing in biotechnology stocks. The resilience of biotech investors has been put to the test by inconsistent results in recent years and thus far this year. According to Morningstar strategist Karen Andersen, biotech had a strong start to 2024, driven by an uptick in M&A and every indication that interest rates would begin to decline. However, the second quarter of 2024 has been more mixed for the industry, with rates appearing to be stabilizing rather than falling, despite ongoing (but improving) inflation. Higher rates typically deter investors from waiting for hazy returns on their biotech investments.
Andersen sees a lot of promising things in biotech as well as room for expansion, despite the recent mixed outcomes, stating:
“We still see tailwinds for the industry going forward. Smaller-cap names are still targets for acquisitions by bigger biopharma firms, and a wave of acquisitions has continued since late last year, particularly focused on oncology and immunology,” “We think obesity acquisitions are likely going forward, as big biopharma can bring development and commercialization expertise to multiple programs in midstage trials at small biotechs. Second, on a more fundamental level, new technologies and launches in new therapeutic areas are poised to boost productivity and drive biotech performance.”
Moreover, the report “Future of Biotech AI-driven Drug Discovery” states that artificial intelligence may drastically speed up drug research, cutting down on development timeframes from many years to a matter of years. Through the integration of artificial intelligence AI with drug development and biology, scientists can build customized therapies for patients. Instead of replacing scientists, AI will improve their skills by enabling them to automate repetitive operations and produce fresh insights. Companies need to go from isolated pilots to a complete, data-driven approach, integrating analytics into decision-making, and emphasizing quick, observable results that help patients and the scientific method in order to properly utilize AI.
Currently, more than 450 life sciences companies, classified as “startups” or “scaleups,” are actively utilizing machine learning and deep learning-based predictive and generative capabilities to enhance their research strategies, as per the findings of BioPharmaTrend’s report, “The State of Artificial Intelligence (AI) in the Biopharma Industry.”
Fitch Ratings also continues to maintain a neutral outlook on the global biotech industry for 2024. Despite rising interest rates, it expects growth driven by demographic trends and innovation. Although they are confronting difficulties with investment and regulation, Fitch highlights that companies are concentrating more on research and development as well as strategic changes that improve drug pricing.
Methodology:
We sifted through holdings of biotech ETFs and online rankings to form an initial list of 20 biotech stocks. Then we selected the 12 stocks that were the most popular among institutional investors. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
An array of pharmaceutical pills with the company’s logo on the bottle.
Eli Lilly and Company (NYSE:LLY)
Number of Hedge Fund Investors: 100
Eli Lilly and Company (NYSE:LLY) is a pharmaceutical company that specializes in cancer, immunology, neuroscience, and cardiometabolism. Verzenio for cancer, Mounjaro, Zepbound, Jardiance, Trulicity, Humalog, and Humulin for cardiometabolic conditions, and Taltz and Olumiant for immunology are some of Lilly’s most important products.
LLY, the “Best GLP-1 and Weight Loss Stocks to Buy Now” and one of the top insulin producers, is involved in the drug manufacturing industry. Due to the success of its FDA-approved weight reduction and diabetic medications, Tirzepatide (Zepbound and Mounjaro), Eli Lilly’s stock has shot up by over 71% in the last year.
Baron Health Care Fund stated the following regarding Eli Lilly and Company (NYSE:LLY) in its first quarter 2024 investor letter:
“Eli Lilly and Company (NYSE:LLY) is a global pharmaceutical company that discovers, develops, manufactures, and sells medicines in the categories of diabetes, oncology, neuroscience, and immunology, among other areas. Stock performance was strong due to robust fourth quarter sales of Mounjaro/ Zepbound, better-than-anticipated initial guidance for fiscal year 2024, and ongoing enthusiasm surrounding the company’s obesity and diabetes franchises. We continue to think Lilly is well positioned to grow revenue and earnings at attractive rates through the end of the decade and beyond.”
Overall, the firm’s financial performance has been strong. Over time, the annual revenue has grown dramatically, primarily due to the high sales of FDA-approved drugs for obesity.
However, the company is currently facing a serious supply shortage as a result of its inability to construct enough facilities to produce enough dosages to meet the rapidly increasing demand. Kisunla, an Alzheimer’s drug, faces significant obstacles to success due to patient diagnosis backlogs, necessary scans and monitoring, and competitive pricing. Nonetheless, Lilly’s strong leadership in weight-loss drugs is expected to deliver industry-leading growth, with authorized drugs and well-positioned next-generation weight-loss drugs under development.
Driven by solid results from Mounjaro and Zepbound in Q2 2024, Morningstar analysts increased their estimate of Eli Lilly’s fair value to $580 from $540. However, they cautioned that the stock looks overpriced due to potential obstacles and market optimism.
Setting Eli Lilly and Company (NYSE:LLY) apart from its competitors and fostering long-term growth is the company’s inventive culture and steadfast financial commitment to creating the next generation of pharmaceuticals. Lilly can grow at the fastest rate in the market because it is releasing multiple blockbusters and its patent losses are decreasing.
Ken Fisher’s Fisher Asset Management is the largest stakeholder in the company, with 4,888,710 shares worth $4.43 billion.
Overall LLY ranks 1st on our list of the best biotech stocks to buy according to hedge funds. While we acknowledge the potential of LLY as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than LLY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
