Much like Novo Nordisk's (NVO 0.84%) money-generating medicine Ozempic, Eli Lilly's (LLY 1.19%) drug Mounjaro is intended to treat type 2 diabetes, and it's also prescribed off-label to treat weight loss. Both companies are raking in billions from sales, and both anticipate making even more in the near future.
But their therapies aren't exactly the same, which means that one might end up stealing market share from the other, or at least driving proportionally more growth for the manufacturer.
To figure out how this face-off will play out for shareholders, we'll first examine two reasons why Mounjaro could outcompete Ozempic. Then, we'll check out the counterarguments.
Two factors could push Mounjaro ahead of Ozempic
Mounjaro sold $980 million in the second quarter, and there's good reason to suspect that its revenue will continue rising. The drug only launched in May 2022. The most important factor that could drive Mounjaro to win the market is that it appears to be more effective at controlling key symptoms than Ozempic.
Patients taking Ozempic for 40 weeks in a direct comparison clinical trial conducted in 2021 experienced a 1.9% decline in their A1C measure of blood glucose. But Mounjaro reduced patients' A1C by 2% to 2.3%. For weight loss, Mounjaro blew Ozempic out of the water, with patients losing between 17 and 25 pounds during the study period, whereas Ozempic led to only 13 pounds of weight loss on average. Given that the two medicines have comparable side effect profiles, it looks like Eli Lilly's drug is the clear winner.
Plus, according to Eli Lilly, the total number of Mounjaro prescriptions since its launch have grown dramatically faster than other injectable type 2 diabetes medicines of the same class, which include Ozempic. And that's the second reason why it could beat Novo Nordisk's entry and create more value for shareholders in both the long term as well as in the short term. Clinicians in the U.S. look to be prescribing it en masse, even when they have the option to prescribe Ozempic for the same purpose.
Two reasons to bet on Ozempic instead
Despite Mounjaro's apparent supremacy in terms of its efficacy and growth as a share of prescriptions for type 2 diabetes treatments, don't count Ozempic out just yet. In the second quarter, its sales topped $3.2 billion, so it's still the undisputed leader of the market, and there are a couple of reasons why that might continue to be the case.
Per Novo Nordisk, the drug has a 44% share of the market for medicines of its class in the U.S. Once patients are on a medicine and seeing good effects in controlling their symptoms, clinicians will be loath to switch them to something else.
That's especially true considering the context of heart disease risk in people with type 2 diabetes. Ozempic is approved for the purpose of reducing that risk -- but Mounjaro isn't, at least not yet. So the prescription share for those patients isn't going to get eroded at the moment.
Furthermore, while Ozempic is priced at around $1,000 without insurance for a month's worth of four doses, whereas Mounjaro on average costs $1,085. While the difference isn't huge, for price-sensitive buyers it's relevant. And with Novo Nordisk planning to bolster its manufacturing capacity for the drug, it's clear that management anticipates the demand will remain strong.
How to invest based on this information
The takeaway for investors is that the fight for the combined type 2 diabetes and weight loss market is just starting. Novo Nordisk's early lead is under threat, but competition is clearly no obstacle to its continued top-line growth in the segment so far despite any clear competitive advantage. While Eli Lilly's therapy may be more effective and gaining prominence rapidly, it'll still have a hard time taking from Novo Nordisk's share of the pie.
So what's the best move? If you're only able to invest in one of these two stocks at the moment, consider the information here to be one point in favor of buying Eli Lilly. But don't sell your shares of Novo Nordisk. Realistically, sales of these medicines will drive strong returns for shareholders of both companies, and there's likely to be a lot more growth on the way even as their candidates compete.
