Novo Nordisk v Eli Lilly: return of the weight-loss wars

In recent months makers of weight-loss drugs have gone on a crash diet. In late July Novo Nordisk, the Danish firm that gave the world Ozempic, lost a quarter of its market value in a day after it cut sales and profit forecasts. The next week the share price of Eli Lilly, its main rival, fell by 14%, the American pharmaceutical giant’s biggest one-day loss in 25 years. In the 63 weeks since their combined heft peaked—a period in which people injecting themselves with the firms’ skinny pens can expect to lose 15-20% of their kilograms—the duo have between them shed some 35%, or around half a trillion of their dollars. Novo Nordisk, the lighter of the two, has also shed its boss. His successor, the head of its non-American business, took over last month.

For the Danish firm, the emaciation is the result of sluggish sales in America, the world’s biggest health-care market (and a place with a lot of people hoping to lose a few pounds). Ozempic, which belongs to a class of appetite-suppressing drugs known as GLP-1 agonists and has been prescribed for diabetes since 2017, and Wegovy, a version aimed specifically at weight loss and available since 2021, were the first such blockbusters to be approved for use by America’s Food and Drug Administration (FDA). But they fell out of favour with doctors and patients the moment Eli Lilly launched its more effective GLP-1 concoctions, Mounjaro and Zepbound, in 2022 and 2023. As for Eli Lilly, its recent, decent financial results have been overshadowed by those of a clinical trial showing that its new pill had less slimming power than hoped.

The two weight-loss heavyweights also no longer have the ring to themselves. Initial trouble building up production led to shortages, especially of Wegovy. In times of scarcity, the FDA permits “compounding” pharmacies to copy branded drugs. Novo Nordisk says that these compounders, which often procure active ingredients from China and charge much lower prices, account for 30% of all anti-obesity prescriptions in America.

Other contenders are muscling in. On September 22nd Pfizer, another American giant, said it would pay $7.3bn for Metsera, a recently listed biotech firm working on next-generation weight-loss treatments. The same day Roche, a big Swiss drugmaker, said that it would begin late-stage trials of its own candidate next year. Earlier this year it struck a $5.3bn deal with Zealand to co-develop and sell the smaller Danish firm’s promising medicine. In June Innovent, a Chinese company, won approval from China’s drug regulator for its own novel GLP-1 injection to treat obesity. On September 19th it said its anti-diabetes formulation had likewise got the thumbs-up.

Should the weight-loss pioneers be bracing for more lean years, then? Not necessarily. For although being first did not guarantee success for Novo Nordisk, being early may yet pay off both for it and for its American arch-nemesis.

The two champions’ first advantage over all comers is their ample production capacity. Novo Nordisk in particular has now built up manufacturing muscle. Over the past four years its cumulative capital expenditure has exceeded $28bn. Capex eats 18% of revenue, up from 15% three years ago. In December its parent, Novo Holdings, completed the $16.5bn purchase of Catalent, an American manufacturer, to boost capacity in America—handy as President Donald Trump prepares to slap his beloved tariffs on imported pharmaceuticals. In February the FDA at last took Wegovy off its shortage list.

The only rival that comes close to matching this capital splurge is Eli Lilly, which has spent $21bn in the past four years (though given its broader portfolio of drugs, not all of it on GLP-1 production). This is equivalent to around 11% of sales, twice Roche’s share and two and a half times Pfizer’s.

The one-two punch of tariffs and healthier supply is likely to knock out the competition from compounders. Novo Nordisk has also filed 130 lawsuits to stop the copycats in America and has already won 44, according to a tally by Bernstein, a broker. The FDA looks poised to crack down on the compounders over their links to Chinese factories lacking the American regulator’s stamp of approval. Since 80% of the weight-loss preparations sold by the compound pharmacies are semaglutide, Novo Nordisk’s patented molecule, it stands to wrest from them a big piece of that 30% market share.

The second reason for optimism about the incumbents is their widening product pipelines. On September 17th Novo Nordisk reported that a tablet version of Wegovy, which patients pop daily rather than injecting weekly, is comparable in effectiveness to injectable semaglutide. Eli Lilly’s pill may be less potent but there is no need to fast for half an hour after taking it and, because it relies on a simpler and smaller molecule, it is cheaper to make. Both firms expect the FDA’s blessing for their pills within months.

The day before its pill results Novo Nordisk said that injections of cagrilintide, a molecule which works similarly to GLP-1, led to somewhat smaller average weight loss but with many fewer side-effects—an appealing trade-off for people who need to lose fewer kilos. Meanwhile, the firm’s cocktail of cagrilintide and semaglutide, known as Cagri-Sema, shows higher kilo-shedding potential. So does Eli Lilly’s experimental drug, retatrutide.

Fat chances

Crucially, these products are further along than rival offerings from other manufacturers, which look unlikely to clear all the clinical and regulatory hurdles before 2028 at best. This implies that the bulk of the $100bn, give or take, the world is forecast to spend annually on obesity drugs by 2030 should end up in the pockets of Novo Nordisk and Eli Lilly. After that, things could get leaner for the pioneers. Until then, the pie is theirs to fight over.

Correction (September 26th): In an earlier version of the article we suggested that users of the Wegovy pill must fast the for half an hour before taking it. In fact they shouldn’t eat for half an hour after taking it.

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