"Oh, oh, oh, Ozempic." Those are the upbeat lyrics from the song in the TV commercials for Ozempic, which are based on the 1974 hit song "Magic," recorded by Pilot. However, the lyrics might now have a different connotation -- one that isn't so magical and upbeat for Ozempic's maker, Novo Nordisk (NVO 0.84%).
Ozempic has become a sensation (along with its sibling product, Wegovy), thanks largely to its remarkable effectiveness in helping people lose weight. Last week, though, Truveta Research released an analysis that could be very bad news for the popular drug and Novo Nordisk.
Real-world data, real-world differences
On Nov. 22, 2023, Truveta researchers published data from a real-world evidence study comparing semaglutide and tirzepatide on the medRxiv (pronounced "med-archive") pre-print website. Novo Nordisk markets semaglutide under the Ozempic brand for treating type 2 diabetes and under the Wegovy brand for weight loss.
Tirzepatide is marketed by Eli Lilly (LLY 1.19%) under the Mounjaro brand for treating type 2 diabetes. Lilly also recently won U.S. approval for its drug in weight loss and is marketing it under the brand Zepbound.
Truveta included 41,223 patients with type 2 diabetes in its analysis. Roughly 78% of them took Ozempic, while the rest took Mounjaro. The findings showed a startling difference in weight loss within one year of treatment:
| Weight reduction | Ozempic | Mounjaro |
|---|---|---|
| ≥5% | 64.6% | 81.8% |
| ≥10% | 38% | 62.1% |
| ≥15% | 19.3% | 42.3% |
Data source: Truveta Research analysis on medRxiv.org. Table created by author.
These results aren't surprising. There have been some clinical studies that showed Mounjaro was more effective than Ozempic at helping people with type 2 diabetes lose weight (and in controlling blood sugar levels). However, this is the first real-world data that underscores just how much better Lilly's drug might be.
How this could affect Novo Nordisk
You can bet that physicians are paying attention to any comparisons between Ozempic and Mounjaro (and between Wegovy and Zepbound). If a consensus emerges that Lilly has the superior products, it's likely that prescriptions will shift to Mounjaro and Zepbound at the expense of Ozempic and Wegovy.
We're talking about a massive amount of money at stake. In the third quarter of 2023, Novo Nordisk's sales of Ozempic and Wegovy totaled roughly $4.8 billion -- more than $19 billion on an annualized basis.
That's potentially just the tip of the iceberg, though. Wall Street analysts predict that Lilly's Mounjaro/Zepbound franchise could generate peak annual sales of over $50 billion.
Don't expect sales for Ozempic and Wegovy to crater anytime soon, though. Novo Nordisk has a solid head start in the market. Ozempic arguably enjoys broader brand recognition than Mounjaro does, and many physicians have become accustomed to prescribing Novo's two products.
Is it time to sell Novo Nordisk stock?
Investors don't appear to be too worried about Novo Nordisk. The big pharma stock actually rose slightly after Truveta's real-world data was published online. Should they be worried? Maybe a little.
Novo Nordisk's forward earnings multiple is nearly 33x. This lofty valuation is justifiable only if the company can continue to deliver exceptionally strong growth. There's a real possibility that the rise of Mounjaro and Zepbound could stymie Novo's growth, to some extent.
That said, there's plenty of time to see how the obesity market shakes out. Novo's pipeline features several late-stage candidates that could be big winners, notably including an oral version of semaglutide targeting both type 2 diabetes and obesity.
Is it time to sell Novo Nordisk stock because of the new real-world data that's bad news for Ozempic? I don't think so. On the other hand, my view is that there are stocks that offer better opportunities for long-term investors.
