Today Novo wins, tomorrow it’s probably Lilly again, but Novo is still the better buy
After months of disappointments and market overreactions, Novo Nordisk just scored a very visible win. The FDA approved a pill version of Wegovy, and the market reacted exactly as you’d expect: Novo shares jumped 10%. But considering the ~40% YTD decline, some shareholders may have hoped for a little more enthusiasm. The GLP-1 tug-of-war game flipped direction again. Or did it really? We all know that in a few weeks or months, Lilly will have some magical announcement to make Novo’s stock drop again. But that’s not the problem. A duopoly creates massive pricing power, leading to fabulous margins — and that applies to both players.
If you’ve followed this space for more than five minutes, you know the pattern: one headline, one winner, one loser. And the winner is usually Lilly. But there’s no reason why it has to be that way. Both companies are in fantastic positions. Yes, one might have a slight edge over the other, but that’s it. Neither of them is going out of business anytime soon.
Let’s look at Novo right now: the company is not meaningfully behind Eli Lilly in products, pipelines, or research quality. Both are pushing phenomenal science, both dominate manufacturing, and together they effectively rule a duopoly sitting on one of the largest secular tailwinds in modern healthcare: obesity, diabetes, and cardiovascular risk. This market isn’t going anywhere, and competitors are years behind.
Yet the stock performance couldn’t look more different. Novo Nordisk is down roughly 40% this year, while Eli Lilly remains the market darling, printing new ATHs every week. Valuation tells the same story, with Novo trading at a forward P/E around 13, while Lilly is sitting closer to 50. And again, I admit that Lilly has higher near-term growth and better sentiment, but that gap is extreme. If Novo doubled tomorrow, it would still be trading at half the valuation of Lilly. And that doesn’t reflect the reality of the two businesses. This isn’t a case of one great company versus one mediocre one. It’s two elite operators being priced as if only one matters. Even the macro risks don’t apply anymore, since Novo secured its tariff exception through a deal with the White House.
Novo Nordisk remains one of my highest-conviction holdings. The FDA approval is a reminder, not a turning point in the story. Novo’s science is intact, execution remains world-class, and the competitive position is far stronger than the stock suggests. This market is a sure thing for management even with mediocre execution. And as soon as Novo gets its issues sorted out, investors will curse the day they could have bought below $50.
This is a chicken game between two giants. Headlines will keep swinging sentiment back and forth. But over the next few quarters, I’m betting on a rerating for Novo and valuation coming into play again.
Mark my words: if Denmark doesn’t sink in the next few years, Novo Nordisk will rebound.
