Novo Nordisk raises expectations for Eli Lilly after CagriSema slipup
Novo Nordisk's stock fell ~18% after disappointing results from its weight loss drug CagriSema, which achieved only ~20% weight loss in a late-stage trial, below the expected 25%. In contrast, Eli Lilly's shares rose, reflecting strong performance and expectations for its next-gen drug retatrutide, which showed ~24% weight loss in trials. Analysts suggest Lilly's advancements may solidify its market position, while Novo faces challenges, including a ~17% stock decline over the past year due to industry issues.
Novo Nordisk (NVO) and Eli Lilly (LLY), the undisputed leaders in the global obesity drug market, saw their stocks heading in opposite directions later this week after the former disappointed investors with its next-gen weight loss candidate, CagriSema.
The contrasting performances underscored the lofty expectations set by Wall Street for the U.S. drugmaker, which is advancing a more potent next-gen rival to consolidate its dominance in the obesity drug market, expected to reach as much as $150B by 2030.
Valuation discrepancy heightened on Friday as NVO closed ~18% lower after CagriSema, comprising the company's amylin-analog cagrilintide and its GLP-1 receptor agonist semaglutide, caused only ~20% of weight loss over 68 weeks in a late-stage trial for obese/overweight adults.
While the study reached the primary endpoint for the once-weekly injectable against the placebo, the results failed to meet the 25% bar the Danish drugmaker set in the lead-up to the readout.
After the setback, Eli Lilly (LLY) shares climbed, adding to its ~33% gains over the past 12 months, a period NVO has lost ~17% amid industry challenges such as supply constraints for its weight loss therapy Wegovy.
LLY vs NVO (12-month performance) (Source: Seeking Alpha)
The valuation mismatch also reflects the elevated expectations set on LLY's next-gen rival, retatrutide. In a mid-stage trial, the triple agonist of the GIP, GLP-1, and glucagon receptors has already indicated a ~24% weight loss over 48 weeks.
"Lilly's next generation subcutaneous obesity treatment seems to be future proofing the company's weight management franchise," argued SA analyst BioCGT Investor. BioCGT expects the company to launch the once-weekly injectable with its GLP-1 pill, orforglipron, in 2026–2027.
"With CagriSema underperforming expectations this week, the risk of a product superior to tirzepatide coming to market in the next few years is greatly reduced," Seeking Alpha Investing Group Leader Growth Stock Forum wrote.
"The valuation differential to Novo Nordisk already reflects these favorable changes, and Eli Lilly needs to meet or exceed growth expectations going forward."