Diabetes is a major chronic disease from which many Americans suffer, and it is on the rise. According to the National Diabetes Statistics Report, 2020, published by the Centers for Disease Control and Prevention (CDC), cases of type 1 and type 2 diabetes have increased considerably among the youth in the United States. A projection by the American Diabetes Association indicates that the number of people with diagnosed diabetes in the country will increase by 165% between 2000 and 2050.

The numbers imply that there is immense scope for the companies involved in offering healthcare services to the diabetic. According to Fortune Business Insights, the global diabetes drugs market is likely to expand at a CAGR of 6.1% to $78.3 billion by 2026. Experts also project the diabetes devices market will reach $9 billion in the United States by the end of 2020.

Abbott Laboratories (ABT), Novo Nordisk A/S (NVO) and Eli Lilly and Company (LLY) are three pharmaceutical companies that command a significant share in the diabetes care market. As the incidence of this disease increases, so will be the need for its treatment and control. And these three stocks would benefit directly.

Abbott Laboratories (ABT)

ABT is a global pharmaceutical giant involved in research & development, manufacturing, and selling of drugs and other health products. The company has collaborated with Tandem Diabetes Care to develop and commercialize integrated diabetes solutions. While its Established Pharmaceutical Products segment offers drugs for the treatment of various disorders, the Diagnostic Products segment offers laboratory systems.

In its third quarter, ABT launched FreeStyle Libre^® 2 and obtained CE Mark for FreeStyle Libre 3, which automatically delivers up-to-the-minute glucose readings Yesterday, the company announced that it had received approval for FreeStyle Libre® 2 from Health Canada for adults and children (4 and older) with diabetes. In November, ABT also committed $5 million over three years to the American Diabetes Association (ADA).

During the third quarter ended September 2020, the company’s sales climbed 9.6% year-over-year to $8.9 billion, driven by the growth in its diabetes segment. ABT’s medical device sale in the Diabetes Care category climbed 26.9% year-over-year. The company’s EPS rose 30.2% over the prior year period to $0.69.

Analysts expect revenue for the fourth quarter ended December 2020 to be $10 billion, representing a 19.8 % increase year-over-year. Meanwhile, EPS is likely to climb 42.1% to $1.35.

On a year-to-date basis, ABT rose 24.9% to end yesterday’s trading session at $108.15. Over the past six months, the stock climbed 16.6%.

How does ABT stack up for the POWR Ratings?

A for Trade Grade

A for Buy & Hold Grade

A for Industry Rank

A for Overall POWR Rating

The stock is also ranked #4 out of 240 stocks in the Medical – Pharmaceuticals industry.

Novo Nordisk A/S (NVO)

NVO is a leading pharmaceutical company involved in the discovery, development, manufacturing, and marketing of medical products globally. Diabetes and Obesity care, and Biopharmaceuticals are the two sectors in which it operates primarily. The company has an agreement with Evotec AG to develop small molecule therapies for treating patients with diabetes, obesity, and co-morbidities.

In November, NVO announced the acquisition of Emisphere Technologies for $1.8 billion. Emisphere specializes in proprietary drug delivery technologies that convert injectable therapeutics into oral therapeutics. NVO already uses its Eligen SNAC technology for the oral version of Rybelsus, its type-II diabetes drug.

NVO’s revenue during the nine months ended September 2020 climbed 6% year-over-year to 94.8 DKK, led by growth in North America Operations. Sales in the Diabetes and Obesity care climbed 6% driven by the robust growth in its GLP-1 class drugs, Ozempic® and Rybelsus®. NVO’s EPS for the quarter climbed to 14 DKK from 12.68 DKK posted in the same period last year.

The consensus revenue estimate for the fourth quarter ended December 2020 is $5.4 billion, signaling a 3% rise over the prior-year period. EPS is expected to grow at the rate of 1.8% per annum over the next five years.

NVO surged 16.6% on a year-to-date basis to close at $68.14 in yesterday’s trading session. During the past six months, the stock gained 2.8%.

NVO’s POWR Ratings reflect this promising outlook. It has an overall rating of “Buy” with an “A” in Industry Rank, and a “B” in Trade Grade, Buy & Hold Grade and Peer Grade. Among the 240 stocks in the Medical – Pharmaceuticals industry, it is ranked #20.

Eli Lilly and Company (LLY)

LLY is a world-class pharmaceutical company that offers endocrinology products for treating diabetes as well as for osteoporosis in postmenopausal women and men. It has also developed a cure for human growth hormone deficiency and pediatric growth conditions. LLY also has a collaboration with Junshi Biosciences for co-developing therapeutic antibodies for the potential treatment and prevention of COVID-19.

On November 18th, the company announced a global agreement with Swiss diabetes specialist, Ypsomed, wherein LLY will commercialize an insulin pump called mylife™ YpsoPump®, which was developed and manufactured by the latter. This pump would also use pre-filled insulin cartridges for LLY’s rapid-acting insulins.

During the third quarter ended September 2020, LLY’s revenue increased 4.8% year-over-year to $5.7 billion. Meanwhile, the company’s EPS slipped 2.9% from the prior-year period to $1.33, because of $125 million in expenses incurred for the development of potential COVID-19 therapies. During the quarter, LLY also added its Insulin Value Program to its comprehensive suite of insulin affordability solutions for diabetes patients in the United States.

The street expects revenue for the fourth quarter ended December 2020 to climb 7.8% year-over-year to $6.6 billion. Meanwhile, analysts expect the EPS to increase 18.5% to $2.05.

LLY ended yesterday’s trading session at $145.16, gaining 10.8% year-to-date.

It is no surprise that LLY is rated “Strong Buy” in our POWR Ratings system. It also has a “B” for Trade Grade, Buy & Hold Grade and Peer Grade, and an “A” for Industry Rank. In the Medical – Pharmaceuticals industry, it is ranked #21.

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ABT shares were trading at $107.66 per share on Thursday afternoon, down $0.49 (-0.45%). Year-to-date, ABT has gained 25.90%, versus a 15.82% rise in the benchmark S&P 500 index during the same period.

About the Author: Namrata Sen Chanda

Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education. More...

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