Eli Lilly and Novo Nordisk Are Fine -- but These 2 Stocks Could Be an Even Better Way to Invest in the GLP-1 Boom
Key Points
Becton, Dickinson supplies equipment whose demand is soaring due to the rise of GLP-1 medicines.
Abbott Laboratories' most important growth driver could benefit from greater adoption of GLP-1 drugs.
Both healthcare giants are also excellent dividend payers.
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Demand for GLP-1 medicines is booming, as these drugs have proven highly effective at treating diabetes, obesity, and other conditions. Investors looking to capitalize on this may turn to the current leaders in the GLP-1 market: Eli Lilly (NYSE: LLY) and Novo Nordisk (NYSE: NVO). Both companies could be great picks to ride the GLP-1 tailwind over the medium term, but as competition grows in this niche, they may see declining market share and pricing power. There are other ways to profit from the GLP-1 boom that don't depend on picking whichever drugmaker will dominate it over the next five to 10 years. Let's consider two stocks that will cash in on this market no matter what: Becton, Dickinson and Company (NYSE: BDX) and Abbott Laboratories (NYSE: ABT).
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1. Becton, Dickinson
Becton, Dickinson is a medical device manufacturer. The company has a large product portfolio, many of which are used daily by healthcare facilities. Becton, Dickinson is benefiting from the GLP-1 boom thanks to its status as a leading supplier of devices -- such as prefillable syringes -- that pharmaceutical companies use to deliver these medicines to patients. Becton, Dickinson has seen soaring demand for this segment of its business. The company is doubling down. At the beginning of the year, Becton, Dickinson announced it would invest $110 million to expand its production capacity for prefillable syringes to support the rising demand for GLP-1 drugs. The company is well-positioned to ride this wave through the end of the decade and beyond.
In the meantime, there are other good reasons to buy the stock. Becton, Dickinson has a reliable business that generates consistent revenue and earnings, thanks in large part to the fact that more than 90% of its revenue is generated from recurring consumables. The healthcare giant has also gotten rid of some of its low-growth segments -- like its biosciences and diagnostic solutions unit -- which should eventually lead to stronger top-line growth. Lastly, Becton, Dickinson is a great dividend stock. The company has raised its payouts for 54 straight years, putting it above the threshold to be a Dividend King, which requires 50 or more consecutive annual payout increases. Becton, Dickinson is a great pick for long-term income seekers.
2. Abbott Laboratories
Abbott Laboratories is a leader in the market for continuous glucose monitoring (CGM) devices that help diabetes patients track their blood sugar levels. Although some thought that the rise of GLP-1 medicines would lead to lower demand for CGM systems like Abbott's FreeStyle Libre, this hasn't happened. As Abbott Laboratories has argued, CGM adoption has continued to grow even as GLP-1s have become more popular.
That's likely partly because patients often use CGMs alongside GLP-1s. In fact, Abbott found in a study that FreeStyle Libre sensor adherence was higher for patients on GLP-1 medicines. Similarly, GLP-1 adherence was also higher among FreeStyle Libre users. So, if anything, these diabetes and weight loss drugs may actually drive higher usage of CGM devices, as physicians increasingly prescribe them together.
That's good news for Abbott Laboratories, whose diabetes care segment has been its biggest growth driver for some time, thanks to the FreeStyle Libre. And as the company has pointed out, there is still significant white space in the CGM market. While the healthcare leader hasn't performed well lately, largely due to slowing growth in its nutrition and diagnostics segments, the opportunities in CGM may help it turn things around.
Further, Abbott Laboratories has expanded its diagnostics business through an acquisition that granted it access to the potentially lucrative cancer screening market. Lastly, Abbott is a Dividend King with 54 consecutive years of dividend increases. All these are good reasons why it is a strong buy-and-hold option.
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Prosper Junior Bakiny has positions in Eli Lilly and Novo Nordisk. The Motley Fool has positions in and recommends Abbott Laboratories, Eli Lilly, and Novo Nordisk. The Motley Fool has a disclosure policy.
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