The drug and biotech sector has underperformed the broader equity market in 2023 despite the launch of promising new medicines and high-profile merger and acquisition (M&A) activity. In fact, most large drugmakers have also underperformed the drug/biotech industry.

Regular pipeline setbacks, slow ramp-up of newer drugs, supply chain disruptions, uncertainty about the impact of Medicare drug price negotiations, Federal Trade Commission’s (FTC) scrutiny of M&A deals, rising inflation and economic uncertainty are some of the factors that pulled down the drug/biotech industry.

Nonetheless, a few big drugmakers, Novo Nordisk (NVO Quick QuoteNVO - Free Report) , Eli Lilly (LLY Quick QuoteLLY - Free Report) , Vertex Pharmaceuticals Incorporated (VRTX Quick QuoteVRTX - Free Report) , Regeneron (REGN Quick QuoteREGN - Free Report) and GSK plc (GSK Quick QuoteGSK - Free Report) , have outperformed the industry this year. Moreover, these stocks are also well poised to keep their momentum alive in 2024.

In this article, we discuss how these five companies performed this year and the factors that are likely to drive their growth in 2024.

Novo Nordisk

Novo Nordisk has one of the broadest diabetes portfolios in the industry, with an extensive range of insulin drugs and diabetes-related products. Semaglutide remains the company's growth engine. It is approved as Ozempic pre-filled pen and Rybelsus oral tablet for type II diabetes and as Wegovy injection for weight management. Ozempic, Rybelsus and Saxenda have been helping the company maintain momentum.

Novo Nordisk is a global market leader in the popular GLP-1 segment of the diabetes market. Its popular GLP-1 receptor agonist, Wegovy, is seeing strong prescription trends and is generating impressive revenues and profits for Novo Nordisk. Label expansions of diabetes and obesity care drugs in cardiovascular and other indications are likely to boost sales.

Data from the phase III SELECT study, which evaluated Wegovy (semaglutide 2.4 mg) as an adjunctive treatment for preventing cardiovascular (“CV”) diseases in adults with overweight or obesity, showed that Wegovy reduced the risk of major adverse CV events by 20%. Obesity is one of the major risk factors responsible for CV diseases. A weight-loss drug like Wegovy, which also has CV benefits, is expected to see an increase in sales and demand. Novo Nordisk is also evaluating a once-daily oral formulation of semaglutide for obesity indication in late-stage studies, with a potential FDA filing expected later this year.

Novo Nordisk has also significantly stepped up its M&A activity in the past two years.

Novo Nordisk sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The stock has risen 43.5% so far this year compared with an increase of 3.9% for the industry.

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Estimates for its 2024 earnings per share have increased from $2.91 to $3.10 over the past 60 days.

Eli Lilly

In 2023, Lilly made rapid pipeline progress in areas like obesity, diabetes and Alzheimer’s, thus attracting investors to the stock.

Mounjaro/tirzepatide, Lilly’s new dual GIP and GLP-1 receptor agonist (GIP/GLP-1 RA), was approved for treating type II diabetes in May 2022 and generated impressive sales of $2.96 billion in the first nine months of 2023, benefiting from strong demand trends. Tirzepatide is expected to be a key long-term top-line driver for Lilly as it has the potential to be approved for obesity and other diabetes-related diseases.

Tirzepatide showed superior weight-loss reduction in clinical studies for obesity indication. It was approved for the said indication in the United States in November by the name of Zepbound. Mounjaro and Zepbound are expected to be key top-line drivers for Lilly, with demand for weight loss drugs rising rapidly.

Lilly also gained approvals for some other new drugs in 2023. Omvoh/mirikizumab was approved for its first inflammatory bowel disease (IBD) indication, ulcerative colitis, in the United States, Europe and Japan in 2023. Lilly expects to file a regulatory application seeking approval for Omvoh/mirikizumab for its second IBD indication, Crohn's disease, in 2024. Lilly’s BTK inhibitor Jaypirca was approved for mantle cell lymphoma in the United States in January 2023 and for the second indication, chronic lymphocytic leukemia, in December.

Lilly will file the U.S. regulatory application for donanemab for early Alzheimer’s disease in the first quarter of 2024 while an application is under review in the EU. All these potential new product launches are expected to drive the growth of the company.

Continued strong sales of key drugs Mounjaro, Verzenio, Jardiance and Taltz, coupled with contributions from new products like Zepbound, are expected to drive top-line growth in 2024.

Lilly is a #3 Ranked stock.

The stock has risen 56.4% so far this year compared with an increase of 3.9% for the industry.

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Though estimates for 2024 have declined from $13.16 per share to $12.70 in the past 60 days, it was only due to higher costs related to some research and collaboration deals. The stock has surged 49.5% year to date.

Vertex

The company enjoys a dominant position in the cystic fibrosis (CF) market. Vertex’s CF sales continue to grow, driven by its triple therapy, Trikafta (marketed as Kaftrio in Europe). While CF remains the main area of focus, Vertex is also developing treatments for sickle cell disease (SCD), beta thalassemia (TDT), acute and neuropathic pain, APOL1-mediated kidney disease, type I diabetes and alpha-1 antitrypsin deficiency. It also has earlier-stage programs in diseases such as muscular dystrophy.

Many of its non-CF candidates represent multibillion-dollar opportunities. Several of the programs are past the proof-of-concept stage. It has been in the news this year due to the progress made in its non-CF pipeline.

Earlier this month, the FDA approved Vertex and partner CRISPR Therapeutics Casgevy (exagamglogene autotemcel) for SCD for patients aged 12 years and older with recurrent vaso-occlusive crises. Casgevy became the first CRISPR-based gene-editing therapy to be approved in the United States.

CRISPR and Vertex have also developed Cagevy for the treatment of TDT in the United States. A regulatory filing for the use of Casgevy for this indication is currently under review. A decision from the FDA is expected on Mar 30, 2024. Last month, Casgevy was approved in the United Kingdom for treating both SCD and TDT indications.

Last week, Vertex announced encouraging data from a phase II study that demonstrated the promising safety and efficacy profile of its investigational non-opioid pain medicine, VX-548, for treating painful diabetic peripheral neuropathy across all doses.

The data from the phase II dose-ranging study showed that VX-548, a novel first-in-class NaV1.8 inhibitor, led to a statistically significant and clinically meaningful reduction in the primary endpoint of change from baseline in the Numeric Pain Rating Scale, a measure of pain intensity in adults.

Investors are paying a lot of attention to VX-548, which, they believe, has blockbuster potential as it can change the standard of care for neuropathic pain, an area with limited treatment options, mostly highly addictive opioid-based medications. 

Vertex has a Zacks Rank of 3.

So far this year, the stock has risen 42.2% against the industry’s 17.7% decline.

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Estimates for 2024 earnings per share have increased from $16.05 to $16.55 over the past 60 days.

Regeneron

Regeneron’s key top-line drivers are inflammatory medicine, Dupixent, which it markets in partnership with Sanofi, and eye drug Eylea. Dupixent sales are rapidly growing, driven by continued strong demand in the approved indications — atopic dermatitis, asthma, chronic rhinosinusitis with nasal polyposis, eosinophilic esophagitis and prurigo nodularis.

In August 2023, the FDA approved Eylea HD (higher dose of Eylea) for the treatment of patients with wet age-related macular degeneration, diabetic macular edema and diabetic retinopathy. The approval of Eylea HD is a great boost to the company and may help revise Eylea sales, which have been under pressure in the last couple of quarters due to competition from Roche’s Vabysmo. Label expansion into additional indications should further increase the commercial potential of Eylea and Dupixent. We are impressed by Regeneron’s efforts to bring additional products to the market, like Kevzara, Inmazeb and Libtayo. The company’s progress with its oncology pipeline candidate, odronextamab, a bispecific antibody targeting CD20 and CD3, is also impressive.

Regeneron has a Zacks Rank #3

So far this year, the stock has risen 19.1% against the industry’s 17.7% decline.

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Estimates for its 2024 earnings per share have increased from $42.26 to $42.62 over the past 60 days.

GSK

GSK enjoys a strong position in HIV and Vaccines therapeutic areas. Its products like Dovato, Nucala, Shingrix and Juluca have become key drivers of top-line growth.

The company has some promising new products in Specialty Medicines and Vaccines areas like RSV vaccine, Arexvy and Ojjaara (momelotinib) for myelofibrosis with anemia. Arexvy has been successfully launched in the third quarter of 2023 and it, along with Shingrix, is expected to be a key driver of growth in the Vaccines unit in 2024.

Other new drugs approved/launched recently are Jesduvroq/ Duvroq (daprodustat) for anemia due to chronic kidney disease (CKD) in adults on dialysis in the United States, and Apretude, a long-acting injectable form of cabotegravir drug for the prevention of HIV infection, also called pre-exposure prophylaxis or PrEP. All these new products are expected to drive growth in the future quarters.

GSK boasts a broad vaccine portfolio that targets infectious diseases like meningitis, shingles, flu, polio and many more. GSK is also focusing on accelerating the vaccine pipeline, particularly the expanded use of the RSV vaccine, pentavalent vaccine and the 5-in-1 meningococcal vaccine, MenABCWY, to drive long-term growth. It has a leading suite of vaccine platform technologies, including next-generation mRNA, multiple antigens presenting system, or MAPS, as well as adjuvant systems.

Some label expansion studies are ongoing on Jemperli, with other oncology compounds in earlier-stage endometrial cancer and advanced NSCLC. GSK is also focused on developing innovative ultra-long-acting HIV regimens for treatment and prevention, which can extend the dosing intervals of the injections.

This Zacks #3 Ranked stock has risen 2.1% so far this year against a decline of 17.7% for the industry.

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Estimates for its 2024 earnings per share have increased from $3.79 to $3.84 over the past 60 days.