2 Stocks That Could Capitalize on the GLP-1 Boom

Demand for GLP-1 drugs has soared in recent years due to breakthroughs in the field. The list of conditions these medicines can treat has evolved and will continue to do so over the next decade or so, sending the market to new heights. Investors don't want to miss out on this. Thankfully, there are many ways to capitalize on the ongoing GLP-1 boom, even beyond buying shares in the current leaders in the field: Eli Lilly (NYSE:LLY) and Novo Nordisk (NYSE:NVO). Let's consider two stocks to buy that could also cash in on this area's rapid growth: CVS Health (NYSE:CVS) and Roche (OTC:RHHBY).

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1. CVS Health

CVS Health, a leading pharmacy chain, has performed well over the past 18 months. The company is addressing several issues that have plagued its business, including rising medical costs that have squeezed profits and margins in recent years. But CVS Health is posting much-improved financial results. In the second quarter, the company's revenue increased 7.3% year over year to $106.1 billion, while its adjusted earnings per share (EPS) were $2.58, up 42.5% from the year-ago period.

CVS Health's GLP-1-related efforts could provide another boost to its business. Health insurance coverage for these medicines, particularly in the weight loss market, has been spotty. But CVS has launched initiatives that could help address that problem. The company offers all approved GLP-1 medicines in the U.S., including Eli Lilly's market-leading Zepbound and its oral anti-obesity medicine, Foundayo, as well as Novo Nordisk's Wegovy in subcutaneous and oral formulations.

CVS Health also offers online visits to assess whether patients are eligible for GLP-1s at a low cost of $29, along with professional support as people move toward their weight-loss goals. All these initiatives could attract many people who have had trouble accessing GLP-1 drugs and boost sales within CVS's pharmacy division. But does any of this make the stock a buy?

Even though CVS's GLP-1 efforts are important, there is much more to the company than that. The good news is that, as we have seen, the rest of the business is performing well. Just as important, CVS Health is well-equipped to benefit from the increase in healthcare spending we should see in the U.S. over the next decade. The company is a leader in several categories within this large market and can help patients through much of their care journey.

CVS Health has a deep footprint in the healthcare sector and has built relationships with patients and communities, with many people relying on the company for prescription drugs for years. That grants CVS Health a competitive advantage, putting it in a strong position to perform well over the long run.

2. Roche

Roche, a pharmaceutical leader, has a vast portfolio of products across several therapeutic areas. The company also operates a diagnostics segment, which helps diversify its business beyond its core pharmaceutical unit. Roche generates consistent revenue and earnings. In the first half of the year, the company posted revenue of 30.4 billion Swiss francs ($37.8 billion). The top line decreased 2% when reported in Swiss francs (due to the currency’s strong appreciation compared to the year-ago period), but revenue was up 6% year over year in constant currency. Roche’s EPS was 10.85 CHF ($13.5), up 9% year over year in constant currency.

Roche boasts several growth drivers in its arsenal, including Vabysmo, a medicine that treats several eye-related disorders, Ocrevus, a therapy for multiple sclerosis, and Xolair, a drug for allergic asthma. But the company is also developing highly promising weight-loss medications that could boost its sales.

One of Roche’s leading anti-obesity medicines is CT-388, an investigational dual GLP-1 and GIP agonist (it mimics the action of both hormones). The dual-pathway approach has proved effective, as evidenced by Eli Lilly’s Zepbound. In a phase 2 study, CT-388 delivered a mean weight loss of up to 22.5% after 48 weeks (placebo-adjusted). These are highly impressive results, considering Eli Lilly’s Zepbound posted a mean weight loss of 20.2% in a phase 3 study over 72 weeks.

CT-388 is now in phase 3 studies, and if successful, it could make Roche a leader in the GLP-1 category. There is always the risk of a clinical setback, but even if that happens, Roche has a deep pipeline and an approved portfolio beyond this single candidate, including other weight-loss medicines it is developing. The company is well-positioned to capitalize on the GLP-1 boom, but even if it doesn’t, Roche has the innovative capabilities and a diversified enough business to overcome setbacks in this field and still perform well over the long run.

Prosper Junior Bakiny has positions in Eli Lilly and Novo Nordisk. The Motley Fool has positions in and recommends Eli Lilly and Novo Nordisk. The Motley Fool recommends CVS Health and Roche Holding AG. The Motley Fool has a disclosure policy.