Eli Lilly (LLY 0.86%) and Novo Nordisk (NVO -1.53%) have competed for decades. They’re both leaders in the areas of insulin and broader diabetes drugs, where they’ve made significant breakthroughs and fought for market share.
In recent years, these two healthcare leaders have also been butting heads in the GLP-1 weight loss space. Eli Lilly’s Zepbound and Novo Nordisk’s Wegovy are the two most prominent brands in this area, which is projected to grow by leaps and bounds in the coming years. Which of these companies will dominate?
Eli Lilly recently reported some news that might give it an advantage. Let’s find out what it is, and what it means for investors.
A head-to-head challenge
Figuring out whether one medicine is more effective than another can be challenging. Results from similar but separate studies are often inconclusive. Even if one performs better than another, there could be other factors across these different trials that affect the results. The best way to measure differences in efficacy between two drugs is to pit them against one another in the same clinical study.
That’s what Eli Lilly did. It ran a phase 3b trial where some patients living with obesity were given tirzepatide (the active ingredient in Zepbound) while others received semaglutide (the active ingredient in Wegovy); the study lasted 72 weeks. The result was a triumph for Zepbound, which produced an average weight reduction of 20.2% compared to 13.7% for Wegovy. In other words, Zepbound led to a 47% greater weight loss than its competitor.
Is Novo Nordisk doomed?
In the first nine months of the year, Eli Lilly’s Zepbound generated revenue of about $3 billion despite being approved in November 2023. By comparison, Wegovy’s revenue came in at 38.3 billion Danish kroner ($5.4 billion), an increase of 76% compared to the year-ago period. Wegovy was first approved in June 2021, about two-and-a-half years before Zepbound. Considering Wegovy’s head start, the difference in sales between the two right now isn’t that large.
It looks as though Zepbound could overtake Wegovy soon enough. However, there’s more to the story. Both Eli Lilly and Novo Nordisk have important weight loss pipeline candidates that should hit the market within the next two years and disrupt the dynamic of this area. Novo Nordisk’s phase 3 pipeline features CagriSema, a combination of semaglutide and cagrilintide (another of the company’s medicines). Lilly’s late-stage pipeline features orforglipron and retatrutide.
The jury is still out on these investigational medicines, so even if Wegovy loses market share to Zepbound, Novo Nordisk could make up for it through newer approvals.
Which one should investors buy?
Eli Lilly has an advantage. Its lineup and pipeline are more diversified than Novo Nordisk’s. Though Zepbound and Mounjaro (its version of tirzepatide aimed at diabetes) are the stars of the show, the pharmaceutical giant has several other medicines whose sales are growing fast.
In the third quarter, Lilly’s revenue from the breast cancer drug Verzenio increased by 32% year over year to $1.4 billion. Sales from the immunosuppressant Taltz came in at $879.6 million, 18% higher than the year-ago period. Furthermore, the newly approved Alzheimer’s disease medicine, Kisunla, could also become a blockbuster. Other new products, blood cancer drug Jaypirca and ulcerative colitis medicine Omvoh, can also get there.
Eli Lilly still generates most of its revenue from its diabetes/obesity medicines, but unlike Novo Nordisk, it has at least two billion-dollar drugs that aren’t in those fields. Considering Zepbound’s greater efficacy compared to Wegovy, Lilly seems to have stronger prospects.
That said, Novo Nordisk has plenty of strengths as well. Its late-stage pipeline of diabetes/weight loss candidates is arguably stronger. It’s also ahead of Lilly in getting a once-weekly insulin product to the market.
At any rate, investors can’t go wrong with either stock. Both have grown revenue and earnings rapidly in recent years. And they’re proven innovative powerhouses with vast pipelines and solid underlying businesses. There are plenty of excellent reasons to invest in both Eli Lilly and Novo Nordisk for the long run.
