The healthcare sector has plenty of innovative companies that have created massive wealth for investors, but so far, none of the healthcare companies in the US have reached a market cap of $1 trillion. That's understandable since the "trillion-dollar club" in the US is pretty exclusive and is dominated by a few tech giants.
However, it's only a matter of time before a healthcare company joins the club, and who will be the lucky one?
Meet the Top 5 candidates in my heart for the trillion-dollar healthcare stock:
$Eli Lilly(LLY)$ leads the pack with a market cap of $610 billion, followed by health care giant $UnitedHealth(UNH)$ with a market capitalization of about $482 billion, And the $470 billion Danish drugmaker $Novo-Nordisk A/S(NVO)$ . $Johnson & Johnson(JNJ)$ and $Merck(MRK)$ rank fourth and fifth with market caps of 390 billion and $300 billion, respectively.
1. $Merck(MRK)$
The company has long relied on the cancer drug Keytruda for growth, but the drug faces patent expiration in 2028. Merck's post-Keytruda plan is unlikely to take off before the stock's stock price rises.
2. $Johnson & Johnson(JNJ)$
It's a great dividend stock, but the drugmaker's current legal and litigation issues will continue to weigh on the stock. So, there's limited upside potential here.
After ruling out these two stocks, we're left with three candidates: $Eli Lilly(LLY)$ , $UnitedHealth(UNH)$ , and $Novo-Nordisk A/S(NVO)$ .
3. $Eli Lilly(LLY)$ wins!
Lilly and Novo Nordisk have a lot in common.
They both operate in the diabetes and obesity drug market, but Lilly's latest diabetes and obesity drug Mounjaro (previously known as ZepBound) is more effective, and could become one of the best-selling drugs in history.
In addition, Lilly has a more diversified product pipeline and revenue stream with drugs like donanemab, an Alzheimer's disease candidate currently awaiting approval. Novo Nordisk, on the other hand, relies heavily on its diabetes and obesity drugs.
Simply put, Novo Nordisk will struggle to beat Lilly in terms of both financial performance and stock price performance. Unitedhealth is now the only stock left.
These two companies operate in different industries, so it's tough to compare them directly.
But based on analysts' forecasts for future earnings growth, $UnitedHealth(UNH)$ is expected to see its earnings per share grow at an average annual rate of 11.6% over the next five years, while Lilly's expected growth rate is more than double at 28.7%.
And don't forget, $Eli Lilly(LLY)$ 's current market cap is over $100 billion higher than UnitedHealth Group's. To reach a trillion-dollar market cap in five years, Lilly would need to grow at an annual rate of 10.4%, which seems well within its capabilities.
So, it looks like Lilly is the most likely candidate to become the first US healthcare stock with a trillion-dollar market cap.
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