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LONDON, April 25 (Reuters Breakingviews) - The pecking order of the obesity drug market is shifting. Eli Lilly (LLY.N), the $815 billion maker of blockbuster weight-loss drugs Mounjaro and Zepbound, is trading at more than double the valuation multiple of Wegovy maker Novo Nordisk (NOVOb.CO), whereas once the two were equally richly valued. It will be hard for the Danish group to close the gap.
The companies run by David Ricks and Lars Fruergaard Jorgensen are long-standing rivals in diabetes. They have lately benefitted from the boom in GLP-1 drugs, which numb users’ food cravings and enable rapid weight loss. As recently as April 2023, both were roughly equally valued at over 30 times forward earnings, as per LSEG data.
Novo Nordisk’s fortunes turned last December when its hotly anticipated treatment CagriSema failed to meet expectations on weight loss and tolerability. The drugmaker’s share price has since collapsed, and it is worth just $269 billion, a third of Lilly’s market value.
Eli Lilly has also faced challenges. Its sales have been slower than expected due to shortages and its forward earnings multiple has fallen from the peak of 57 to 35 times, as per LSEG data. But the U.S. group is trading at a significant premium to Novo Nordisk: the latter now has just a humdrum 14 times multiple, in line with ordinary pharma group AstraZeneca (AZN.L).
This gap between the two is down to Eli Lilly’s superior treatments. In head-to-head trials, users lost more weight using the U.S. drugmaker’s obesity medication. This year, Eli Lilly’s diabetes division, which includes obesity sales, is expected to grow by 41%, as per Visible Alpha forecasts, versus 25% for Novo Nordisk’s comparable business.
Eli Lilly has also had some big wins. Earlier this month, the U.S. drug giant revealed details of a trial of its obesity pill orforglipron which added $100 billion to its market value. This year it will release trial data for new medication retatrutide, known as “triple G” because it targets three hormones instead of just one. Users lost 24% of their weight in an earlier trial, potentially making it the most promising weight-loss drug to date.
Novo Nordisk is fighting back. It’s looking to get regulatory approval to sell a weight-loss pill in the U.S. this year and is also hoping GLP-1 drugs can help treat Alzheimer’s. Yet the obesity market will also see new entrants like Roche (ROG.S), join the fray soon. And Novo Nordisk may be more vulnerable given its drugs’ lower efficacy, which may dent its valuation further. As competition bites, Jorgensen will come under pressure to find new revenue streams beyond obesity and diabetes, which accounted for over 90% of last year’s $44 billion of sales. The risk of expensive M&A may be one more thing for investors to worry about.
Eli Lilly said on April 17 that an under-development oral treatment caused weight loss of nearly 8% in patients on the highest dose, and lowered blood sugar in patients with type 2 diabetes in a late-stage clinical trial. Participants were still losing weight when the trial ended. Lilly is conducting six more late-stage trials of the drug.
Lilly said the drug, orforglipron, had a safety profile consistent with similar approved glucagon-like peptide-1 (GLP-1) receptor agonist therapies. Large-selling rival treatments, however, are injectables, while orforglipron is a pill.
https://www.reuters.com/breakingviews/obesity-drug-boom-has-new-pecking-order-2025-04-25/
