GLP-1 surge, oncology stars to power industry's earnings growth over the next 18 months: Moody's

The commercial frenzy of GLP-1 medicines from Eli Lilly and Novo Nordisk has not only resulted in skyrocketing revenue for both companies, it's also expected to be a major driving force behind the industry's overall earnings growth over the next 12 to 18 months, according to a new report from Moody’s Ratings.

Moody’s outlook on the industry’s overall earnings performance has been "stable" since June 2022. Now, thanks to the rise of the new diabetes and weight loss drugs, the agency has moved its outlook to "positive," with an expectation of 4% to 6% overall earnings growth over the period.

The GLP-1 medicines are among the most successfully launched products “in decades,” Moody’s said in its report this week. The key GLP-1 drugs to watch are Novo’s Ozempic and Wegovy plus Lilly’s Mounjaro and Zepbound.

The rating update tracks with last quarter’s industrywide sales surge, which was led by Lilly and Novo. The fourth-quarter turnaround came after the majority of large drugmakers posted year-over-year revenue declines earlier in the year.

In 2023, Novo’s GLP-1 drugs picked up a combined $18.4 billion in sales, nearly double the prior-year haul of $9.3 billion. Lilly, too, saw booming demand, netting $2.2 billion in fourth-quarter Mounjaro sales and $176 million from Zepbound after its November approval. Diabetes med Mounjaro specifically “crushed” analysts’ consensus, Third Bridge analyst Lee Brown wrote at the time.

Besides GLP-1 drugs, Moody’s flagged other products that are expected to chip in to the industry's earnings performance in the near term. That list includes cancer blockbusters from Merck, Bristol Myers Squibb, Roche, AstraZeneca and Daiichi Sankyo.

Beyond 12 to 18 months, the Inflation Reduction Act's (IRA's) Medicare negotiation measure has the potential to affect industry earnings, according to Moody's. New prices for the 10 drugs that made the list for the first round of IRA-mandated Medicare price negotiations will come out in September and are set to begin in 2026.

Another potential earnings pressure is more patent expirations as the decade rolls on. As it stands, the biggest anticipated patent impacts stem from Johnson & Johnson's upcoming loss of exclusivity on Stelara, plus continued biosimilar and generic erosion on AbbVie’s Humira and Bristol Myers Squibb’s Remlivid.

Stelara biosimilars are expected to hit the U.S. market in early 2025.