Novo Nordisk (NVO -4.02%) is a leader in the billion-dollar weight loss market, with two drugs that have helped its earnings soar. The company sells semaglutide under the name Wegovy for weight loss and as Ozempic for type 2 diabetes.
Doctors also have prescribed rival Eli Lilly's (LLY -2.68%) diabetes drug, Mounjaro, for weight management, causing sales at this big pharma to take off, too. And recently, regulators approved the same molecule -- tirzepatide -- specifically for weight loss. Lilly sells that product under the name Zepbound.
Considering there have been shortages of weight loss drugs due to great demand, we may assume there's plenty of room for both companies to thrive. But could two elements in particular offer Lilly the edge? Let's find out.
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Weight loss drugs' efficacy and price
These two elements are efficacy and price. We'll talk about efficacy first, starting with how these drugs work. Though the Novo Nordisk and Lilly drugs both reduce appetite and have helped patients shed pounds, they take action in slightly different ways. Novo Nordisk's products interact with one hormone that controls blood sugar levels and hunger -- while Lilly's interact with two.
Truveta researchers recently published a study showing these drugs produced somewhat different results as well. They studied a group of 18,000 people to determine the effectiveness of Novo Nordisk's semaglutide versus Lilly's tirzepatide -- and found users of the Lilly drug were more likely to lose weight.
For example, those taking tirzepatide were 1.8 times more likely to reach 5% weight loss than those taking semaglutide. And those taking the Lilly drug were three times more likely to reach 15% weight loss than those on the Novo Nordisk drug. The study also found that mean percentage change in body weight was greater in the tirzepatide group than in the semaglutide group at three months, six months, and one year.
Now, a bit about price. Lilly set the Zepbound list price at $1,059.87, about 20% cheaper than Novo Nordisk's semaglutide. Today, most insurers don't cover weight loss drugs, and in those cases, patients may be eligible to pay about half the list price. Novo Nordisk also offers a savings program that could cut the price of its Wegovy by about $500. So, while Lilly's product still remains cheaper, patients generally don't pay the list price for either company's drugs.
Does Eli Lilly have an edge?
Let's get back to our question: Do the points of better efficacy and a lower price offer Lilly an edge? Yes, the efficacy data may make doctors think twice as they newly prescribe a weight loss drug to a patient. And the price could be a factor too, especially if patients do some research and discuss this issue with their doctors.
But I don't think this represents a threat to Novo Nordisk, for a few reasons. First, many people have used Novo Nordisk's semaglutide and have successfully lost weight -- if the drug has worked well for them, they're likely to stick with it. Also, doctors may not want to switch a patient to another treatment if the current one is well tolerated and doing the job.
As for price, it could weigh on some decisions, but I would expect Novo Nordisk to do what it can to keep its products competitively priced if it were to see any significant impact. And I don't expect the pricing difference as it stands to greatly shift the market away from Novo Nordisk's drugs. It has the first-to-market advantage, and as mentioned above, loyal fans probably will stick with the products that have worked for them.
High demand for weight loss treatments
All of this isn't bad news for Lilly, though. The assumption I made above that demand for these kinds of drugs could keep growth going at both companies is one I'll stick with. We've seen demand surpassing supply, and though both companies plan to increase production, I still think there's room in this market for more than one big player.
The anti-obesity drugs market may increase more than 16 times by 2030 to reach $100 billion, according to Goldman Sachs Research.
And this means that while strong efficacy data and an effort on pricing could help Lilly quickly gain market share as it rolls out Zepbound, Novo Nordisk's drugs should continue to grow, too. This is great news for long-term investors in both of these top pharmaceutical stocks.
