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Novo 30% Below Lilly Despite 350% Surge, Eyes Growth

Novo Nordisk's Wegovy faces supply challenges and pricing debates, trading at a 30% discount to Eli Lilly despite a 350% rally.

By Bill Bullington

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5/2, 09:35 EDT
Eli Lilly and Company
Novo Nordisk A/S
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Key Takeaway

  • Novo Nordisk's stock trades at a 30% discount to Eli Lilly despite a 350% rally, indicating potential growth opportunities.
  • Wegovy's Q1 sales missed expectations amid supply constraints and competition, with Novo doubling investment in manufacturing.
  • Despite high list prices for Wegovy and Ozempic, most US patients with coverage pay $25 or less due to pricing strategies.

Market Dynamics

Novo Nordisk A/S and Eli Lilly & Co. are at the forefront of the weight-loss drug market, a sector experiencing rapid growth and intense competition. Novo Nordisk's Wegovy and Eli Lilly's Zepbound are central to this battle, with both companies striving to meet the soaring demand that currently outstrips supply. This week, both firms presented their quarterly results, highlighting the significance of these medications to their financial health. Despite a more than 350% rally over the past four years, Novo Nordisk's stock still trades at a 30% discount to Eli Lilly, suggesting room for growth if it aims to narrow this valuation gap.

Supply and Demand Challenges

Novo Nordisk is ramping up its efforts to increase the supply of Wegovy in the United States, facing supply constraints and stiff competition from Eli Lilly. The company has doubled its investment in manufacturing capacity to approximately $6.4 billion, excluding a planned $11 billion acquisition of three factories. This move comes as more than 25,000 patients in the US start on Wegovy each week, a significant increase from about 5,000 in December. Despite these efforts, Wegovy's sales in the first quarter, totaling 9.38 billion kroner ($1.35 billion), fell short of analysts' expectations due to pricing pressure and supply issues.

Pricing and Accessibility

The cost of Wegovy and its sister medicine for diabetes, Ozempic, has sparked debate in the US. A study by Yale University estimated that Ozempic could be profitably produced for less than $5 a month, despite its list price of $936 and Wegovy's price of $1,349. Novo Nordisk's CFO, Karsten Munk Knudsen, noted that prices have decreased due to volume, coverage breadth, and competition. Approximately 80% of Wegovy patients in the US with commercial coverage are paying $25 or less per month. However, Novo Nordisk continues to restrict access to lower doses of Wegovy to ensure patients can maintain treatment as they progress to higher doses.