The U.S. pharmaceutical market is expected to grow at a CAGR of 5.5% from 2024 to 2030. With the rising prevalence and awareness of chronic conditions and infectious diseases among the population, demand for customized medicines, personalized drugs, vaccines, and therapies is also increasing.

Furthermore, growing per capita healthcare expenditure in developed and emerging countries and the increase in the patient pool has driven the demand for medicines to treat these diseases and has significantly impacted market growth.

Against this backdrop, let’s compare two pharma stocks, Eli Lilly and Company (LLY) and Catalent, Inc. (CTLT), to analyze which pharma stock offers better returns.

The Case for Eli Lilly and Company

Valued at $708.83 billion by market cap, Eli Lilly and Company (LLY) discovers, develops, and markets human pharmaceuticals worldwide.

On September 25, LLY received FDA approval for its new eczema treatment, Ebglyss. Unlike traditional topical treatments like creams or ointments, Ebglyss is an injectable designed for patients (aged 12 and older) with moderate-to-severe eczema who don’t find relief with topical medications. This medication is a monthly injection that can be used on its own or alongside topical corticosteroids.

LLY’s stock has gained 21.4% over the past nine months to close the last trading session at $788.19. Over the past month, the stock has surged 3.8%.

LLY’s trailing-12-month gross profit margin of 80.91% is 39.4% higher than the industry average of 58.03%. Further, its trailing-12-month EBIT margin of 36.46% is significantly higher than the industry averages of 2.50%.

For the fiscal third quarter that ended September 30, 2024, LLY’s revenue increased 20% year-over-year to $11.44 billion. Its non-GAAP net income stood at $1.06 billion and $1.18 per share, up significantly from the prior-year quarter, respectively.

Street expects LLY’s revenue for the fourth quarter (ending December 2024) to increase 49.7% year-over-year to $14 billion. Its EPS for the current quarter is expected to grow 118.6% year-over-year to $5.44. Moreover, the company surpassed the consensus EPS estimates in three of the trailing four quarters, which is impressive.

LLY’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

LLY has a B grade for Sentiment and Growth. It is ranked #31 out of 154 stocks in the Medical – Pharmaceuticals industry.

Click here for the additional POWR Ratings for LLY (Value, Quality, Stability, and Momentum).

The Case for Catalent, Inc. 

Valued at $11.07 billion by market cap, Catalent, Inc. (CTLT) provides end to-end intelligent workflow automation platform solutions for digital businesses in the North America, Europe, the Middle East and Africa, Asia Pacific, and internationally.

CTLT’s stock has gained 4.8% over the past nine months to close the last trading session at $61.

On October 14, 2024, CTLT, the leader in enabling the development and supply of better treatments for patients worldwide, announced that it had entered into a definitive agreement to sell its oral solids development and small-scale manufacturing facility in Somerset, NJ to Ardena, a Contract Development and Manufacturing Organization (CDMO) with locations in Belgium, Spain, the Netherlands and Sweden.

CTLT’s trailing-12-month levered FCF margin and EBITDA margin of 8.24% and 10.45% are 256.8% and 87.3% higher than the industry averages of 5% and 9.87%, respectively. However, the stock’s trailing-12-month gross profit margin of 21.82 is 62.4% lower than the industry average of 58.03%.

CTLT’s net revenue for the first quarter that ended September 30, 2024, gained 4% year-over-year to $1.02 million. The company’s net loss and net loss per share came in at $129 million and $0.71.

Analysts expect CTLT’s revenue for the second quarter (ending December 2024) to increase 7.9% year-over-year to $1.11 billion. Moreover, the company’s EPS for the same quarter is expected to be $0.09. CTLT failed to surpass the consensus EPS estimates in three of the trailing four quarters.

CTLT’s bleak fundamentals are reflected in its POWR Ratings. The stock has an overall D rating, translating to a Sell in our proprietary rating system.

The stock has a F grade for Sentiment. CTLT is ranked #103 out of 154 stocks in the same industry.

In addition to the POWR Ratings I’ve just highlighted, you can see CTLT’s ratings for Value, Growth, Momentum, Stability, and Quality here.

Eli Lilly (LLY) vs. Catalent (CTLT): Which Pharma Stock Offers Better Returns?

Pharmaceutical companies are at a significant crossroads in terms of how they engage with customers, innovate, and adopt digital capabilities. The market has been dominated by large pharmaceutical companies, which have been investing heavily in research and development to bring new drugs to market.

However, LLY’s higher profitability, and strong financials favor it as the better pharma stock pick.

Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Medical – Pharmaceuticals industry here.

What To Do Next?

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LLY shares were trading at $795.35 per share on Friday afternoon, up $7.16 (+0.91%). Year-to-date, LLY has gained 37.33%, versus a 27.97% rise in the benchmark S&P 500 index during the same period.

About the Author: Nidhi Agarwal

Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More...

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