Investors need to know if Eli Lilly will face the identical pricing pressure on its blockbuster weight-loss drug Zepbound that Novo Nordisk did within the second quarter on its rival drug Wegovy. Novo Nordisk shocked investors on Wednesday when its latest results fell in need of Wall Street expectations. Shares are reeling, losing 8% after the corporate cut its forecast for operating profit growth in 2024. Eli Lilly is predicted to report its second-quarter results before the market opens on Thursday. Analysts surveyed by LSEG expect the drugmaker to earn $2.60 a share on revenue of $9.92 billion. Demand for Lilly’s GLP-1 drugs Mounjaro and Zepbound, also referred to as tirzepatide, helps drive expected sales growth of nearly 19% starting within the second quarter of 2023. But Novo’s results sparked some selling in Lilly shares on Wednesday, which fell 3%. While Eli Lilly’s share price is up about 32% year-to-date, worries about increasing competition within the category have caused Lilly shares to say no nearly 16% over the past month. The outlook for the obesity drug will largely determine where shares go from here, analysts say. LLY YTD Mountain Eli Lilly Stocks YTD Why Shares Are Under Pressure Novo Nordisk has worked hard to extend manufacturing capability for its popular GLP-1 drugs and expand access for Medicaid patients. Management said each of those efforts would fuel long-term growth but have hurt performance within the short term. Eli Lilly is making similar trials with Zepbound, but its launch is at an earlier stage than Wegovy’s. In the second quarter, sales of Ozempic, Novo’s diabetes drug, rose 4% from the primary quarter, while Wegovy sales rose 24% from the previous quarter. However, Wells Fargo analyst Mohit Bansal noted that the variety of prescriptions written for Ozempic rose 17% within the second quarter, while the variety of prescriptions for Wegovy rose 58% in the identical period, in keeping with IQVIA. Wegovy’s net price is falling partially due to efforts to expand access for Medicaid patients in 20 states. While patients enrolled within the state’s medical insurance program typically do not get weight-loss drugs, the Food and Drug Administration approved Wegovy to stop heart attacks and strokes in obese or obese individuals with heart problems. That ruling opened the door for expanded coverage. “Their [Novo Nordisk management’s] The focus is on ensuring supply to serve as many patients as possible, and we’ve found that as volume increases, price typically goes down,” Bansal wrote in a research note Wednesday. Barclays analyst Emily Field told clients in a research note that she would buy Novo Nordisk shares on weakness. “Was this the storybook quarter we were hoping for? Not necessarily,” she said. “But ultimately, obesity is going to be a volume-driven market, and the overwhelming message we got from the firm this morning is that volume is on track.” Prices approaching parity? It’s also vital to keep in mind that Wegovy is dearer than Zepbound. “It remains to be seen whether additional discounts on the more expensive Wegovy could lower overall prices or whether it will simply trend toward price parity with Zepbound,” Bansal said, adding that demand for these drugs, which mimic incretin hormones to suppress appetite and control blood sugar, stays strong. Bansal expects Lilly’s diabetes drug Mounjaro saw a 14% increase in volume from the primary to the second quarter, while Zepbound’s volume rose 59% over the identical period. However, how prices have fared is not going to be clear until results are released on Thursday. Bansal said he expects each drugs to beat estimates, even when the value did ease a bit in the course of the quarter. “Ultimately, overall demand for incretins remains very strong, with NVO raising its fiscal 2024 sales forecast by 2% after a 1% increase last quarter,” he said. Lilly may adjust its revenue forecast, especially given the manufacturing gains it made that helped get tirzepatide off the FDA’s shortage list. Pipeline Progress David Song, an investment partner at Tema ETFs, said investors may even deal with any updates Lilly provides on the drugs in development. Song said Lilly is “in pole position” with orforglipron, an oral GLP-1 drug it’s developing. But there are other pipeline updates which might be highly anticipated within the second half of the 12 months, including data from Amgen on MariTide and Novo on CagriSema. JPMorgan analyst Chris Schott expects health outcomes data for tirzepatide to be a key catalyst for Lilly stock in the approaching months. “While there have been a number of updates on early-stage competitor pipelines in obesity, we do not view these compounds as differentiated or likely to displace significant market share, and our view that LLY and Novo will continue to dominate in the incretin space remains unchanged,” Schott said. He expects Mounjaro and Zepbound to succeed in $16.5 billion in sales by the tip of this 12 months and grow to $27 billion by 2025. Sales should reach $36.5 billion by 2026.
