Did Novo Nordisk Just Get a Jump on Eli Lilly?
One of the biggest themes in the pharmaceutical industry right now is the weight loss market. Demand for the newest diabetes and obesity treatments is through the roof. What's intriguing, however, is that these markets are dominated by just two players at the moment: Eli Lilly and Novo Nordisk (NYSE: NVO).
Eli Lilly is the developer behind tirzepatide, which it markets as the diabetes medication Mounjaro and the weight loss drug Zepbound. Novo Nordisk's breakthrough drug semaglutide is the compound in three big hits: the diabetes treatments Ozempic and Rybelsus, and the weight loss drug Wegovy.
While the race continues between these two pharma giants, Novo Nordisk may have just opened up a gap between itself and Lilly.
Breaking down diabetes and obesity treatments
The common thread linking Mounjaro, Zepbound, Ozempic, Rybelsus, and Wegovy together is that all of these drugs are glucagon-like peptide 1 (GLP-1) agonists.
As noted, despite being approved for different conditions, Ozempic, Rybelsus, and Wegovy all use the same compound: semaglutide. Similarly, Lilly's Mounjaro and Zepbound both use tirzepatide.
Generally, after a breakthrough discovery in one area of healthcare that leads to a drug's approval, the Food and Drug Administration (FDA) will permit pharmaceutical companies to conduct additional studies to see if that drug could be used to treat other conditions. When a drug wins approval for use in other indications, it's known as a label expansion. These can be quite lucrative for pharmaceutical businesses.
Look out for expanded indications
Novo Nordisk and Eli Lilly have each been conducting additional clinical trials in search of further effective uses of semaglutide and tirzepatide. Specifically, both companies have been testing their drugs as treatments for cardiovascular disease.
This makes sense, as diabetes and obesity can play roles when it comes to heart disease, hypertension, and the risk of stroke. And earlier this month, Novo Nordisk received some positive news from the FDA that may put it handily in the lead over its rival.
Novo Nordisk's latest win
Wegovy is now FDA-approved to be prescribed specifically as a treatment to help prevent life-threatening cardiovascular events in people with cardiovascular disease.
This is a major win for Novo Nordisk. Not only did Wegovy earn its indication expansion before Zepbound, but the FDA approval opens several opportunities for the company.
According to the Centers for Disease Control and Prevention (CDC) and World Health Organization (WHO), heart disease is the leading cause of death worldwide. Some industry research suggests that the market for heart disease treatments will exceed $200 billion annually by next decade.
Considering that demand for Wegovy soared in 2023 just for its use as a weight loss treatment, the implications of its application in treating cardiovascular disease should not go overlooked. Yet even though this milestone should be celebrated, investors should also think about the bigger picture.
Novo Nordisk's management has spoken at length about the supply and demand challenges it faces with its various medications. The company is investing heavily in bolstering its production capabilities in an effort to reach the point where it can fulfill patient demand. In fact, earlier this year, Novo agreed to pay $16.5 billion to acquire drug manufacturing subcontractor Catalent.
These are the types of moves that will be required if Novo Nordisk wants to keep up its growth trajectory. So while the label expansion of Wegovy is terrific, I suspect it may take some time for the company to reach a critical mass in the cardiovascular space, as it's still in the early stages of ratcheting up its production.
Nevertheless, I see the FDA's approval of Wegovy to treat patients with heart disease as a major positive catalyst for Novo Nordisk -- and one that could serve as a bellwether for long-term growth as Eli Lilly continues its efforts to catch up.
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Adam Spatacco has positions in Eli Lilly and Novo Nordisk. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
Did Novo Nordisk Just Get a Jump on Eli Lilly? was originally published by The Motley Fool
