Want To Find Out the Level of Hype Surrounding the GLP-1 Weight Loss Drugs? Just Look at This Comparison Between Eli Lilly and Company (LLY) and Pfizer

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The burgeoning hype around GLP-1 weight loss drugs as a panacea for the obesity pandemic has propelled Eli Lilly and Company (LLY) shares to previously unimaginable zeniths while leaving Pfizer (PFE), a former darling of the pharma world, in the proverbial dust bowl.

As is shown in the above X post, the Price-to-Sales (P/S) ratio of Eli Lilly and Company and Pfizer moved virtually in lockstep between 1991 and early 2021, only to experience a signification divergence thereafter as Pfizer’s Covid-driven sales boom plateaued at a time when Eli Lilly jumped on the GLP-1 bandwagon.

Source: Finbox

The above snippet shows the price-to-LTM (Last Twelve Months) sales ratio of Eli Lilly and Company and its various competitors, including Pfizer. Notice that this metric is currently at 17.5x for Eli Lilly vs. just around 2.3x for Pfizer.

A key reason behind this divergence is the accelerated sales growth expectations baked into Eli Lilly and Company’s bullish thesis vis-a-vis its GLP-1 weight loss drugs.

Source: Finbox

The above snippet includes the expected 5-year forward Compounded Annual Growth Rate (CAGR) for sales of Eli Lilly and Company and its competitors. Notice that Eli Lilly is expected to grow its sales by around 33 percent each year for the next 5 years. On the other hand, Pfizer is expected to experience an annual sales decline of around 10 percent over this period.

Morgan Stanley has estimated that around 11 percent of US households – corresponding to roughly 5 percent of the total population – currently have at least one member on a weekly regimen of GLP-1 drugs, with another 17 percent of the households open to the possibility of a family member adopting this pharmaceutical intervention to combat obesity and diabetes. Additionally, as per Morgan Stanley’s estimates, GLP-1 drugs can reduce the caloric consumption of the eligible population by a whopping 20 percent, posing grave ramifications for the fast food industry.

Capital Group recently estimated that the Total Addressable Market (TAM) of these GLP-1 drugs is well over 2 billion people. This supports the projection that the annual sales of these drugs will hit the $100 billion level by 2030, with Eli Lilly and Company and Novo Nordisk expected to capture a major chunk of this sizable TAM.

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