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Novo Nordisk vs Eli Lilly: Who is better positioned for obesity drug demand?

Novo Nordisk vs Eli Lilly: Who is better positioned for obesity drug demand?

Obesity has long been a significant global health challenge, particularly in the western world, due to the implications it can have for associated conditions such as heart disease, diabetes and certain cancers.

Until recently, treatments have focused on lifestyle changes and pharmacological interventions like appetite suppressants and fat absorption inhibitors. However, these early drugs often had limited efficacy and significant side effects, leading to a persistent demand for more effective solutions.

In the last few years, a new class of drugs known as GLP-1 receptor agonists have shown considerable success in the fight against obesity. These therapies have demonstrated remarkable efficacy and safety profiles, revolutionising the anti-obesity medication (AOM) landscape.

These innovative therapies target crucial receptors in the gastrointestinal tract, effectively making patients feel less hungry. Novo Nordisk [CPH:NOVO] and Eli Lilly NYSE:LLY have led the market with Semaglutide (marketed as Ozempic for diabetes and Wegovy for obesity) and Tirzepatide (marketed as Mounjaro for diabetes and Zepbound for obesity) respectively. These drugs not only improve glycaemic control but also promote substantial weight loss, offering a dual benefit for patients with obesity and type 2 diabetes.

Both drugs are administered via weekly injections, making them costly and onerous to deliver to patients. Furthermore, concerns are growing over the longer-term outcomes for patients after they have ceased treatment. Initially, patients tend to lose a mix of fat and muscle but, post-medication, many revert to prior habits and find that their regained weight is predominantly fat.


Ozempic looks set to polish its crown as the dominant force in the weight loss market, with new credentials added to its list of health benefits. It’s the only GLP-1 RA to be approved by the FDA in the United States for reducing the risk of worsening kidney disease and cardiovascular death in adults with type 2 diabetes and chronic kidney disease. This approval was based on the results of Novo Nordisk’s FLOW phase 3b kidney outcomes trial so it’s a big win for the company and positions them at the head of the pack.

For adults living with type 2 diabetes and cardiovascular problems or chronic kidney disease, Ozempic has the potential to offer huge relief and cut healthcare costs, potentially reducing the need for multiple drugs.

Novo chart

Source: Bridgewise

The above chart is a comparative analysis using AI to measure both Novo Nordisk and Eli Lilly against their closest peers in the market across a broad range of data sets, including PE ratio, return on equity, and dividend yield, among many other factors.

Market expectations for these treatments have been extremely high, with sustained demand growth anticipated. According to recent market analysis, the market was valued at approximately $3.2 billion in 2023 and is projected to reach $11.3 billion by 2028, growing at a compound annual growth rate (CAGR) of 28.9% during this period.

The future of obesity treatment looks highly promising, with the development of next generation therapies,” says Alisa Craig, one of the managers of the International Biotechnology Trust. “There are currently 79 clinical stage programmes being carried out across at least 41 unique biochemical mechanisms, and these numbers continue to rise.”

Among the most exciting new developments are combination therapies that activate multiple pathways, such as GLP-1 combined with gastric inhibitory polypeptide (GIP) receptors, amylin, glucagon or leptin. These combinations aim to boost efficacy, improve patient outcomes and offer more comprehensive weight management solutions. Additionally, new targets such as amylin, mitochondrial uncoupling and cannabinoid-1 (CB1) reverse antagonists are being explored, promising to deliver innovative new approaches to more effective long-term obesity management.

“Rather than backing individual treatments, we are adopting a lower risk approach by taking smaller positions across a range of the most promising assets,” says Marek Poszepczynski, who also manages the International Biotechnology Trust with Craig. “This is an approach we have successfully taken over the years, in other therapeutic areas at a similar stage of maturity.”

Investors should also be prepared for further merger and acquisition (M&A) activity in this part of the biotech universe. Several large pharmaceutical companies do not yet have an obesity franchise and may look to acquire exposure, given the anticipated growth and continued investor enthusiasm for this market.

Existing players may also look to bolster their positions, as reflected in Novo Nordisk’s acquisition of Inversago Pharma. This deal highlights the strategic importance of emerging obesity therapies that target novel mechanisms, as well as the inherent value in innovative solutions.

Shares in Novo Nordisk have been slumping since August and look set to drop below the SKR 550 level. But this is not reflective of the overall value of the stock. Here at The Armchair Trader we consider it to be undervalued, even before you factor in its recent FDA approvals.

Novo chart

The above chart shows the short term trend analysis of Novo Nordisk stock specifically, using data from Trend Intelligence. Recent share price gains for NOVO have not been sufficient to reverse negative indicators on the 12-month picture. The lowest graph shows a neutral set up. Overall this is a 75% negative trend according to this technical analysis.

For investors, the obesity drug market presents significant opportunities. The sector is poised for continued growth, driven by rising obesity rates and the increasing demand for effective treatments. The biotech industry continues to invest in innovation, with advances in drug development, novel mechanisms of action and improved delivery methods set to transform the AOM landscape in the years ahead.

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