Eli Lilly (2.11%) and Novo Nordisk (1.19%) are prominent pharmaceutical competitors, particularly clashing in the lucrative weight-loss drug market, where both have achieved notable success.
Currently, there are several factors suggesting Eli Lilly holds a competitive advantage. These factors support considering an investment in Lilly’s stock, especially if you’re contemplating choosing between the two companies. Here are three reasons why Lilly might be leading the race:
1. Easing Supply Constraints Boost Lilly’s Revenue Potential
The surge in sales of new weight-loss medications is significantly driving earnings growth and enhancing share prices for both companies. The demand for these medications, including Lilly’s Zepbound and Novo Nordisk’s Wegovy, has been so overwhelming in the U.S. that neither company has managed to produce enough to satisfy patient needs. In Q2 alone, Zepbound generated over $1.2 billion in revenue, establishing itself as a blockbuster drug.
This imbalance between supply and demand was always expected to be short-lived. Both companies are making substantial investments in new manufacturing facilities and collaborating with contract manufacturing organizations (CMOs), signaling their eagerness to meet the pent-up demand swiftly.
Lilly appears to be leading in this regard, despite its product being approved slightly later.
According to Lilly’s CEO during the Q2 earnings report, the company anticipates that all doses of Zepbound in the U.S. will soon be removed from the FDA’s official drug shortages list. This development will enable doctors to prescribe the treatment to new patients, thereby increasing the company’s market share and revenue.
In contrast, Novo Nordisk seems to lag behind. There are no definitive timelines for when Wegovy will overcome its shortage issues, which could hinder its growth rate.
2. Lilly Advances with a Crucial Program Upgrade
Both Wegovy and Zepbound are approved for obesity treatment and some common co-morbidities.
Both companies are conducting significant R&D, including clinical trials, to explore whether their medications can address these co-morbidities—such as sleep apnea, cardiovascular risk, and heart failure. If they can demonstrate to regulators that their products are effective for these conditions, each new indication represents an expanded market and potential revenue growth.
However, not all expanded indications are equally lucrative. Some may offer minimal market expansion, while others, like heart failure treatment, can provide substantial growth opportunities.
In Q2, Novo Nordisk seemed poised to add heart failure to Wegovy’s approved indications list. However, discussions with regulators raised concerns, leading Novo Nordisk to withdraw its application in early August, planning to resubmit next year. This unexpected setback doesn’t affect Lilly.
Lilly recently concluded its phase 3 trial for the heart failure indication and is promptly submitting its materials to regulators. Even if the FDA’s review process is lengthy, Novo Nordisk is unlikely to secure approval before Lilly, assuming Lilly succeeds. Consequently, Lilly is expected to access this new market segment first, facilitating its growth.
3. Lilly’s Early Entry into a New Market
While Novo Nordisk isn’t primarily focused on Alzheimer’s treatments, it aims to compete in this emerging market.
Novo Nordisk is conducting late-stage trials to investigate whether semaglutide, Wegovy’s active ingredient, could be beneficial for Alzheimer’s. An additional Alzheimer’s indication could significantly expand the addressable market and strengthen Novo Nordisk’s market position due to limited competition.
However, Eli Lilly has already made its mark. With the FDA’s approval of Kisunla, a new Alzheimer’s drug developed specifically for this purpose, in early July, Lilly is poised to generate sales. Kisunla may even offer advantages over Biogen’s Leqembi, the first approved Alzheimer’s treatment. If proven more effective, Kisunla could quickly capture market share.
In conclusion, Eli Lilly has recently outperformed Novo Nordisk on multiple fronts, which is likely to benefit its shareholders. While Novo Nordisk remains a solid stock, if you’re choosing just one, Eli Lilly seems to have more momentum at the moment.
