In the pharmaceutical industry, it is possible to have a larger share of the healthcare market compared to competitors. However, there is still a limitation based on the overall size of the market. Regardless of the effectiveness of a cancer or diabetes medication, healthcare systems will still need to allocate resources for treatments related to heart disease and rheumatoid arthritis.
This is why the recent divergence of companies specializing in obesity and diabetes from the rest of the industry cannot be sustained indefinitely. As of 2023, Eli Lilly and Novo Nordisk have experienced significant increases in their market capitalization, with each company rising over 50%. Their combined value now hovers around $1 trillion, making them the two largest pharmaceutical companies. In contrast, the rest of the industry has underperformed the market, with the NYSE Arca Pharmaceutical Index only rising by 4% compared to the S&P 500's 24% increase.