Medicare and Medicaid coverage of GLP-1 weight loss drugs could be just what the doctor ordered for these two struggling stocks.
Two of the hottest healthcare stocks in recent years have been Novo Nordisk (NVO 6.25%) and Eli Lilly (LLY 0.78%). The former has risen by 400% in the past five years, while the latter is up 67%. If not for the steep sell-off in Novo Nordisk’s value this year, however, its gains would be far more significant.
But these stocks still look underrated. While many investors may be reevaluating how much growth may be ahead for these two GLP-1 drugmakers, both seem to be underestimated. If you haven’t invested in either of these companies yet, here’s why you may want to consider doing so.
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Coverage could be coming for GLP-1 weight loss drugs
GLP-1 weight loss drugs help to curb appetite, which, in turn, helps people to lose weight by feeling fuller sooner. Many pharma companies are racing to develop GLP-1 weight loss treatments, in what could be one of the hottest growth opportunities in the sector for many years to come.
Eli Lilly and Novo Nordisk have an advantage, however, as they already have approved treatments on the market: Lilly has Zepbound and Novo Nordisk has Wegovy. But arguably the biggest reason consumers think twice about taking them is their prices. Zepbound, for example, has a list price of over $1,000 for a 28-day supply, while Wegovy is more than $1,300.
Reportedly, however, the Trump administration is looking at possibly covering GLP-1 weight loss treatments under Medicare and Medicaid. If that happens, it could become a huge growth catalyst for these companies. While the medications can be costly, given the overall health improvements that can come with weight loss, they could alleviate some of the burden on the healthcare sector as a whole. And GLP-1 drugs are turning out to have wide-ranging benefits.
Zepbound, for instance, was approved last year as a treatment for obstructive sleep apnea. And regulators approved Wegovy to help reduce the risk of serious heart problems in obese or overweight adults. Semaglutide, the active ingredient in Wegovy, also may be effective in treating substance abuse disorders.
Much more growth out there for these two stocks
Both companies have been doing well in recent years. The exciting thing is that as researchers discover more indications for these GLP-1 drugs, it could lead to more applications and use cases, which would result in even stronger growth rates.
LLY Revenue (Quarterly YoY Growth) data by YCharts.
Novo Nordisk’s growth rate has declined this year, but there’s much more growth on the horizon. Last year, the global GLP-1 weight loss drug market was worth $14 billion, and is expected to triple to $49 billion by the end of the decade, according to Grand View Research. Both Novo Nordisk and Eli Lilly look to be in excellent positions to benefit from these opportunities.
Both stocks look like great buys for the long haul
Many investors have given up on Novo Nordisk this year — it’s down around 35% thus far in 2025 — but that could be a costly mistake, given that it still has tremendous growth opportunities ahead. Compounded versions of its drugs have affected sales, but the U.S. government is cracking down on that. And if it offers coverage for GLP-1 weight loss drugs, the promising healthcare stock could be off to the races again. At a price-to-earnings multiple of just 14, Novo Nordisk shares bought today may prove to be a steal of a deal in the long run.
Eli Lilly is down 3% this year, and while it hasn’t been in free fall like Novo Nordisk, it also looks like it may be a bit of an underrated buy. The stock trades at close to 50 times earnings, but future growth and larger profit margins could bring that multiple down significantly in the years ahead.