Novo Nordisk Faces Increasing Competition from Eli Lilly in Weight Loss Drug Market

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Good afternoon! The booming market for a class of weight loss and diabetes drugs has been dominated by them so far.

Eli Lilly may be gaining an edge over its Danish competitor in the race to capitalize on the demand for GLP-1 treatments.

That became clear last week after the pair reported their respective second-quarter earnings.

Evan Seigerman, a BMO Capital Markets analyst, stated in a research note on Thursday that Lilly is leading in the metabolic duopoly.

Novo Nordisk lowered its full-year profit forecast on Aug. 7 due to lower-than-expected sales of Wegovy, which was attributed to higher-than-expected price concessions to pharmacy benefit managers.

The company's stock plummeted due to lower-than-expected revenue from its blockbuster diabetes drug Ozempic.

Still, Novo Nordisk slightly increased its guidance for full-year sales growth.

The second quarter results for Eli Lilly's weight loss injection Zepbound and diabetes treatment Mounjaro exceeded expectations.

Eli Lilly increased its 2024 revenue forecast by $3 billion and updated its full-year earnings forecast due to the strong performance of Zepbound and Mounjaro, as well as "improved clarity" regarding the company's production plans for those drugs.

Eli Lilly experienced a decline in the use of savings card programs for Mounjaro, resulting in higher U.S. prices of the drug in the quarter. Executives anticipate "stable pricing" for Mounjaro and Zepbound in the last two quarters of 2024.

Eli Lilly shares closed more than 9% higher on Thursday.

Several analysts were pleased with Eli Lilly's positive manufacturing updates, as demand for weight loss and diabetes drugs is outpacing supply in the U.S., giving companies that can quickly produce more of a product an advantage in the market.

The Food and Drug Administration's drug shortage database now lists all doses of Mounjaro and Zepbound as available. However, some doses of Wegovy are in limited supply due to Novo Nordisk's manufacturing expansion efforts.

Bank of America analysts have revised their revenue forecast for Mounjaro and Zepbound to $19.7 billion in 2024, $31 billion in 2025, and $38.5 billion in 2026 due to increased confidence in supply dynamics.

Although there may still be occasional supply shortages of Mounjaro and Zepbound in the near future as access improves and physicians become more comfortable with the availability of supply, the analysts commended Eli Lilly's efforts to increase its manufacturing capabilities and improve supply.

David Ricks, CEO of Eli Lilly, stated on an earnings call that the company has constructed six manufacturing plants, some of which are currently operational, and has employed thousands of workers to increase production. Additionally, the company acquired a new site earlier this year.

Eli Lilly anticipates that the production of incretin drugs, which are used for weight loss and diabetes treatments, will increase by 50% in the second half of 2024 compared to the same period the previous year, according to the company's CEO.

Eli Lilly's ability to scale up manufacturing of Zepbound and Mounjaro gives the company confidence in its ability to compete with newcomers to the weight loss and diabetes drug market who may not have the same manufacturing capacity.

Scaling manufacturing is undoubtedly a challenge, according to Ricks.

"As you mentioned, creating things on a billion-scale level is challenging, time-consuming, and requires significant capital investment. Therefore, it's inevitable that competitors will emerge. However, the road ahead for the other drugmakers is vast, as the two leading companies have already made significant strides."

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Latest in health-care technology

Stryker to acquire artificial intelligence startup Care.ai

On Monday, Stryker, a medical technology company, announced its agreement to acquire Care.ai, another artificial intelligence-related deal in the health-care sector.

Clinicians can monitor patients and workflows across hospitals, skilled nursing facilities, and assisted living facilities with the help of care.ai's AI-powered sensors. In 2022, the company raised $27 million from Crescent Cove Advisors.

Stryker provides medical and surgical equipment, as well as products in orthopedics and neurotechnology. The company stated that technology like Care.ai's is becoming increasingly important as health-care organizations face challenges such as nursing shortages, burnout, administrative burden, and workplace safety concerns, according to a Monday release.

The terms of the deal were not made public, and Stryker stated that the acquisition is contingent on standard closing conditions.

Shares of Stryker were mostly flat on Tuesday.

Stryker will use Care.ai to speed up its healthcare IT and digital strategy, allowing customers to make informed decisions in real-time, according to Andy Pierce, group president of MedSurg and Neurotechnology at Stryker.

Stryker's platforms and devices will seamlessly integrate with Care.ai's technology, the company stated.

"Chakri Toleti, founder and CEO of Care.ai, stated on LinkedIn Monday that their commitment to simplifying and improving the lives of healthcare professionals and patients remains unwavering. They are transforming healthcare by prioritizing the well-being of those who need care and those who dedicate themselves to caring for others."

Stryker declined to provide a comment. Care.ai did not respond to CNBC's request for comment.

Read the full announcement here.

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