Lilly and Novo Nordisk: The Best of Times, the Worst of Times

This week has given us a study in contrasts. The leading makers of obesity medicines, Lilly and Novo Nordisk, posted quarterly reports and received sharply different responses.

When Novo Nordisk released their report on Wednesday, the market value of the stock plunged by eight percent.

The next day, Lilly reported results and saw its market value spike, gaining nine percent.

Great Expectations

Novo had failed to meet great expectations for growth of both Wegovy and Ozempic – the company’s brands for semaglutide in obesity and diabetes respectively. This quarterly report was a sobering moment for investors after months of exhilarating growth for these brands and seemingly limitless potential. Second quarter Ozempic sales were up by 31%, while Wegovy sales grew 55% versus the same period in 2023. The disappointment was that the sales for both brands fell short of expectations. Almost six billion dollars in sales for those two brands in just three months might sound like a lot of money. But it was hundreds of millions of dollars less what investors had expected.

Novo Nordisk lowered their profit projections for the year while also telling reporters that this disappointment is merely “a blip.”

Novo had yet other headaches to report. The company pulled back on its filing for heart failure (HFpEF) for semaglutide and cancelled a GLP/GIP dual agonist in early development. On top of that, they told analysts that “demand is still expected to exceed supply” for their semaglutide products.

With CEO Lars Fruergaard Jørgensen scheduled for a grilling by Bernie Sanders in a Senate hearing next month, more challenges lie ahead.

A Different Story from Lilly

In sharp contrast to Novo Nordisk, Lilly presented results that exceeded expectations. Sales of their tirzepatide brands for diabetes and obesity – Mounjaro and Zepbound – grew briskly. The company offered a more positive outlook on supply, saying “our progress on supply gives us confidence in our outlook.” So it’s not terribly surprising that the response was positive.

Looking Ahead

In truth, the characterization of this week’s news as “a blip” is perfectly reasonable. The work these two companies are doing to better meet the needs of people living with obesity is a marathon, not a sprint. Both semaglutide and tirzepatide still have supply issues – even if Lilly is offering a more positive spin.

Stock analysts also have their eyes on new competitors in this space and they will indeed be important. But right now, those new competitors are years away from approval. So semaglutide and tirzepatide will be in the spotlight for years to come – as will the issues with supply and prices. We are counting on something that Novo Nordisk executives told analysts this week to be true:

“As volumes go up, prices will come down.”

Bring it on.

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Portrait of Charles Dickens, engraving from the Welsh Portrait Collection / Wikimedia Commons

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August 9, 2024