Take Your Ozempic: Why Late Entry Of Rival Weight-Loss Drugs Won't Floor Novo, Eli Shares

Eli Lilly LLY reports its fourth quarter earnings next week and, as Novo Nordisk NVO did on Wednesday, is expected to wow investors with earnings and revenue beats thanks, in large part, to the overwhelming success of its diabetes treatments that have become popular weight-loss solutions.

Reporting on Feb. 6, Eli Lilly is expected to post quarterly earnings of $2.76 per share, up 32.1% from the same period a year ago. Revenue for the quarter is expected to climb 21.4% to $8.86 billion, according to Zacks consensus estimates.

On Wednesday, Eli Lilly’s chief rival in the weight-loss treatment market Novo Nordisk beat earnings estimates of $0.65 a share with its fourth quarter result of $0.71 and also topped revenue expectations, according to Benzinga Pro data.

Also Read: Could IBM’s Return To Office ‘Or Else’ Be Code For Poor Performance?

Shares Have Soared In 2023

Both companies are trading at, or close to, record highs and have seen their market capitalizations double in the last two years.

But can such remarkable growth continue as the market for diabetes/weight-loss drugs becomes more crowded? Currently dominated by just two key players, what role will major pharmaceutical companies like Pfizer Inc PFE and AstraZeneca PLC AZN play in this evolving landscape?

While shares in Novo and Eli soared 52.7% and 59.4% respectively last year, Pfizer’s sank 43.7%, while Astra dipped 5.5%. That’s a long way short of their performances through 2021-22 as chief suppliers of Covid vaccines.

From where is the competition expected to emerge for Novo’s Ozempic and Wegovy, as well as Eli’s Mounjaro and Zepbound therapies?

Rival Treatments In The Pipeline

Pfizer has had some difficulties, abandoning plans for a weight-loss pill to be taken twice a day after side effects were detected in trials. But CEO Albert Bourla said the company would continue to develop a competitor.

“Pfizer’s position is that we believe that obesity is a place that we have the ability to play and win. So we will have to play,” he said at this month’s JPMorgan Healthcare Conference.

But how will it accomplish this? The company, as it noted in its fourth-quarter results presentation on Tuesday, is seeking to control costs, so an acquisition of a biotech firm in development of a new weight-loss treatment seems unlikely.

This, however, has been the route taken by Swiss pharma group Roche, which acquired Carmot Therapeutics in December for $3.1 billion.

Meanwhile, AstraZeneca has gone down the licensing route, agreeing a $2 billion deal with Chinese developer Eccogene in November.

Market Growth To Welcome Rivals

Does this mean that the market is about to get overcrowded, and that increased competition will see price reductions that weigh on corporate margins?

There might be a little margin loss as more treatments become available, but the market is potentially gigantic.

In an October report on the anti-obesity drugs market, Goldman Sachs estimated that about 15 million adults in the U.S. alone might be receiving weight-loss drug treatment by 2030. The total global market is expected to be $100 billion by the end of the decade.

“The obesity market is still in its early stages,” said Chris Shibutani, senior biopharmaceuticals analyst at Goldman Sachs.

“The chronic weight management market is undergoing an inflection, in our view, with potential for solid growth ahead and a peak opportunity that, by our estimates, could ultimately yield some of the highest grossing drugs of all time,” he added.

Now Read: Mortgage Rates Soar, Cash Buyers Score: The New Homebuying Playbook

Photo: Shutterstock