In a potential shift, did Eli Lilly declare a strategic victory over Novo Nordisk?
Eli Lilly (LLY) and Novo Nordisk (NVO) have been rivalrous for decades, leading in the insulin and broader diabetes drug sectors where they've made significant advancements and battled for market share. More recently, they've been at odds in the GLP-1 weight loss space, with Lilly's Zepbound and Novo Nordisk's Wegovy being prominent names. The market for these drugs is expected to surge in the near future, but which company will prevail?
Lilly reported some promising news that could tip the scale in its favor. Let's delve into the details and examine the implications for investors.
Side-by-side test
Evaluating one drug's efficacy over another can be complicated. Results from related but disparate trials can be indecisive. Even if one outperforms another, different elements across multiple trials may affect outcomes. The most reliable approach to gauge efficacy differences between two drugs is to compare them directly in the same clinical trial.
This is what Lilly did by conducting a phase 3b study involving obese patients. Some participants received tirzepatide, Zepbound's active ingredient, while others got semaglutide, Wegovy's active ingredient. The 72-week study concluded with a clear victory for Zepbound, recording an average weight loss of 20.2% versus 13.7% for Wegovy, representing a 47% greater weight loss than its competitor.
Is Novo Nordisk on the brink?
In the first three quarters of the year, Zepbound raked in approximately $3 billion in revenue, despite being authorized in November 2023. On the other hand, Wegovy, which was approved in June 2021, generated revenue of 38.3 billion Danish kroner ($5.4 billion), a 76% year-over-year growth. Despite Wegovy's early start, the revenue gap between the two is relatively modest at the moment.
However, Zepbound could surpass Wegovy sooner than expected. But both companies have potential weight loss pipeline candidates due to hit the market within the next two years that could shake up the status quo. Novo Nordisk is developing CagriSema, a fusion of semaglutide and cagrilintide, while Lilly's pipeline features orforglipron and retatrutide.
The future of these investigational medicines is unclear, but even if Wegovy cedes market share to Zepbound, Novo Nordisk could recover ground via new approvals.
Which stock should investors chase?
Lilly currently has an edge because its product roster and pipelines are more diverse than Novo Nordisk's. Though Zepbound and Mounjaro (Lilly's tirzepatide variant for diabetes) are capturing attention, Lilly boasts several other successful drugs with robust growth.
Verzenio, Lilly's breast cancer drug, saw revenue surge 32% year-over-year to $1.4 billion in the third quarter. Taltz, an immunosuppressant, garnered $879.6 million in sales, up 18% from the previous year. Furthermore, Kisunla, Lilly's recent Alzheimer's disease treatment, could become a blockbuster; moreover, other new products, such as blood cancer drug Jaypirca and ulcerative colitis drug Omvoh, have potential to join the billion-dollar club.
Lilly relies heavily on its diabetes/obesity medications for revenue, but unlike Novo Nordisk, it has at least two billion-dollar drugs that aren't in those categories. Accounting for Zepbound's superior efficacy compared to Wegovy, Lilly appears to hold more promising prospects.
However, Novo Nordisk isn't without merit. Its diabetes/weight loss late-stage pipeline is arguably stronger, and it's ahead of Lilly in bringing a once-weekly insulin product to market.
Ultimately, investors stand to gain from either stock. Both companies have seen significant revenue and earnings growth in recent years, and they boast impressive innovation capabilities and expansive pipelines with robust underlying businesses, providing ample justification for long-term investment in both Eli Lilly and Novo Nordisk.
The promising results from Lilly's phase 3b study, showing a 47% greater weight loss with Zepbound compared to Wegovy, could potentially attract more investments in its finance sector.
In the financial battle for market dominance, Lilly's diverse portfolio and successful drugs, such as Verzenio and Taltz, may provide it with a financial edge over Novo Nordisk, despite the revenue gap between Zepbound and Wegovy being relatively modest at the moment.
