Novo Nordisk falls, Eli Lilly dominates weight loss drugs?

Novo Nordisk's latest weight loss drug CagriSema has underperformed in clinical trials, leading to a market value evaporation of up to $100 billion.

CagriSema helped patients lose an average of 22.7%, below the company's expected 25%. Additionally, only 57% of patients could tolerate the highest dose, indicating that the drug may have difficult-to-bear side effects.

This setback follows Novo Nordisk's announcement in September that its experimental weight loss pill monlunabant failed to meet market expectations. Novo Nordisk's stock plummeted over 20% on Friday, down more than 40% from its peak.

Eli Lilly Becomes the New "King of Weight Loss"

Novo Nordisk's setbacks have undoubtedly benefited its competitor Eli Lilly. Eli Lilly's weight loss drug Zepbound appears to be more effective than Novo Nordisk's Wegovy, and currently, there are no strong short-term competitors. Eli Lilly's stock rose 4.7% on Friday.

Currently, Novo Nordisk's forward P/E ratio for 2025 is 21 times, while Eli Lilly's is 35 times.

However, Eli Lilly also faces its own challenges. Kevin Gade, a portfolio manager at Bahl & Gaynor, pointed out that Eli Lilly will face two critical moments next year:

First is the first-quarter earnings report in February, where investors will focus on whether the company can reverse the disappointing sales of diabetes and weight loss drugs from October last year;

Second is the clinical data release for the oral weight loss drug orforglipron later this year, which could open up a significant market opportunity for Eli Lilly.

Outlook and Challenges in the Weight Loss Drug Market

In recent years, the duopoly of Novo Nordisk and Eli Lilly in the weight loss drug sector has created over $1 trillion in market value growth for investors. However, surpassing current treatment effects in the future will not be easy.

Commercialization also faces numerous obstacles. The explosive early demand has led to supply bottlenecks, and expanding the market to a broader population still faces insurance coverage issues: Will employers widely accept these drugs? Will health insurance provide comprehensive coverage? Without broader insurance coverage, the market size may struggle to meet Wall Street's ambitious forecasts.

Kevin Gade stated, "The easy money has already been made. Achieving $50 billion in annual sales is feasible, but reaching some analysts' predicted $150 billion will require some 'gymnastics' to make the numbers work."