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Denmark-based pharmaceutical giant Novo Nordisk (NYSE: NVO) has been struggling during the past year. Its financial results -- though strong by comparison to most of its peers -- haven't been as good as investors expected. The company has also faced clinical trial setbacks: An otherwise promising weight loss medicine it developed failed to impress the market with its late-stage results.
Now, Novo Nordisk is getting even more bad news, thanks to developments from its biggest competitor in the diabetes and obesity drug markets: Eli Lilly (NYSE: LLY). Should investors give up on Novo Nordisk?
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Losing ground in the GLP-1 market?
Novo Nordisk's sales have been growing fast thanks to GLP-1 medicines like Ozempic for diabetes and Wegovy for weight management. In 2024, revenue increased by 25% year over year to 290 billion Danish kroner ($44.7 billion). As of November, the drugmaker held a 55.1% share of the GLP-1 diabetes market, a slight increase from its 54.8% share as of November 2023. However, it could soon see its market share in this area, which it has long dominated, decline.
On April 17, Eli Lilly reported positive phase 3 results for a GLP-1 therapy called orforglipron. There are at least two notable things about this investigational treatment.
First, orforglipron is a daily oral pill -- the current leaders in the GLP-1 market are administered via subcutaneous injection. Many patients would prefer taking a pill, though, so orforglipron could attract a reasonable number of them. That's especially the case since -- and this is our second point -- orforglipron's results were on par with those of injectable GLP-1 options.
The medicine helped decrease A1C levels in type 2 diabetes patients by 1.3% to 1.6% at different doses, while leading to a mean weight loss of 7.3 kilograms (16 pounds) at the highest dose over 40 weeks. By comparison, Ozempic led to mean A1C level reductions of 1.4% to 1.6% after 30 weeks, while also decreasing body weight by an average of as much as 4.7 kilograms. Orforglipron's similar efficacy in reducing A1C levels, its more convenient dosing, and the fact that oral pills are much easier to manufacture at scale could make it a hit once it's finally approved. That's why Novo Nordisk's shares dropped significantly once Eli Lilly reported this news.
Still a good stock to buy
Novo Nordisk and Eli Lilly have been competing in the diabetes drug market for several decades. Even when one has gotten an edge thanks to a breakthrough, the other has often followed with a similar win not too long after. In my view, the same is likely to happen this time. Eli Lilly might have gained the edge thanks to orforglipron, but Novo Nordisk has several oral weight loss and diabetes candidates across all stages of clinical trials in its pipeline.