The 21st century has ushered in an era characterized by a multitude of conflicts that often overshadow a remarkable reality. We find ourselves amidst a period of robust technological innovation that holds the potential to amalgamate all previous scientific breakthroughs, paving the way for tackling humanity’s most daunting challenges. However, amidst the chaos of local and global catastrophes, it becomes arduous to fully grasp the convergence of technology and science, as they collectively reshape the very fabric of our existence.
Prominent companies such as Apple, Amazon.com, Alphabet, Microsoft, Meta Platforms, and Nvidia have directed their energies towards refining products that possess the ability to unearth hidden solutions and forge connections within the vast wealth of written knowledge. Yet, the scope of this opportunity far surpasses the confines of artificial intelligence alone.
Simultaneously, pharmaceutical giants such as Moderna, Eli Lilly, and Novo Nordisk are tirelessly working towards developing potentially miraculous medications capable of curing or alleviating diseases that have long been perceived as immutable consequences of genetics, misfortune, or poor life choices.
Innovation, by its very nature, tends to be unpredictable and volatile. Its valuation through traditional financial analysis, which heavily relies on historical data, poses challenges. However, investors who possess the ability to navigate through this uncertainty should seriously consider investing in themes that hold immense potential, provided these innovations successfully navigate the rigorous scrutiny imposed by regulators, medical professionals, scientists, as well as equity and options markets.
Obesity serves as an example worth contemplating. Excessive body fat not only leads to major afflictions such as cardiovascular diseases and diabetes but also exacerbates them. Encouragingly, emerging weight-loss drugs from Lilly and Novo Nordisk have demonstrated remarkable abilities to ameliorate the severity of not only major illnesses but also seemingly unrelated conditions like Alzheimer’s disease and sleep apnea.
Reflecting these groundbreaking discoveries, Lilly’s stock has witnessed a staggering surge of 77% over the past year. Although traditional metrics may deem the stock overvalued, it can be argued that its performance fails to fully capture the immense potential benefits that these medicines bring forth.
Obesity Drugs: The Next Potential Gold Mines
A recent study conducted by Goldman Sachs has drawn a fascinating comparison between the potential growth of obesity drugs and the early days of Amazon and Apple. Just as these tech giants started with books and computers before evolving into major product platforms, Goldman believes companies like Lilly and Novo Nordisk may expand into uncharted territories in the near future.
In the next five years, both Lilly and Novo Nordisk are set to unveil the results of over 20 studies. According to Goldman’s estimations, if even half of these studies turn out to be successful, Lilly stock (currently priced at $625) could potentially soar to around $840 by 2028. And if even more tests yield positive outcomes, the increase in value could be even greater.
The market for anti-obesity treatments is staggering, with potential customers in the United States alone surpassing 100 million people. John Marshall, Goldman’s derivatives strategist, who headed the research team behind this study, predicts that insurance companies will opt to cover the cost of obesity drugs due to their significantly lower price compared to major surgical procedures.
Instead of engaging in endless debates about financial assumptions, investors would be wise to take a page from the playbook of sophisticated investors. When they believe in an idea but want to hedge against potential risks, these seasoned experts often turn to options as a means of controlling stock, rather than purchasing shares outright.
If this approach piques your interest, it might be worth considering buying Lilly call options with strike prices slightly above the current stock price. These options would expire in January 2025, allowing ample time for the market to mature and attract more investors.
Of course, there is always the risk that Lilly’s stock falls below the call strike at expiration, resulting in an unsuccessful trade. Therefore, anyone considering this strategy must diligently monitor their position, much like individuals who prioritize their overall well-being and track their weight and diet.
Remember, the potential in obesity drugs is immense, and early investors might just tap into a market that could be as groundbreaking as Amazon or Apple in their early days.
Breaking Boundaries, Shaping the Future.
