With a worrisome situation in the United States, where about 70% of adults are affected by excess weight, and in Europe that number being more than half, weight loss drugs are easily finding a market. Recent trends are showing that the new weight loss drugs and diet programs might come to a supermarket near you. However, investors are not fully convinced and expect perfection from the weight loss drugs manufacturers.
The retail giant Costco could not stay out the trend and partnered with Sesame to offer its members a discounted weight loss program. Under the program, a clinician would help the patients with diet, exercise and lifestyle modifications, and may prescribe medications, subject to availability, the blog post said. We are also seeing the same trend in gyms. Late last year, Jeff Zwiefel, chief operating officer of Take Life Time, for example said the gym chain would pilot a program to prescribe weight loss drugs for members.
All this should spell good news for Novo Nordisk and Eli Lilly, the main manufacturers of diabetes and weight loss drugs. Novo Nordisk continues to show strong financial results. Sales of GLP-1-based products for type 2 diabetes (Rybelsus, Ozempic and Victoza) grew 32% in the first half of the year, with Ozempic accounting for almost 79% of the total sales of the category. However, this hasn’t translated into stock price performance after its earnings report. Expectations were high for Novo Nordisk, and with the hefty valuation of a forward Price/Earnings at 37 times, ‘close to perfection’ results are expected by investors. This time Wegovy (the weight loss approved drug) sales fell short of the analysts’ expectations, despite the 74% year on year jump of its sales in the first half of this year. As a result the share price dropped 8% during the trading session yesterday.
But Novo Nordisk’s GLP-1 diabetes treatment Ozempic and the weight-loss treatment Wegovy continue to be front and center of the growth, with the two blockbuster products now alone accounting for almost 60% of its revenue.
Management announced the second upward sales revision for the year, now expecting full 2024 sales to increase with 22-28%. However they are now seeing operating profit growth for 2024 cut to 20-28%, vs previously announced 22-30%. The company is also having a solid R&D pipeline to advance its weight loss and diabetes products. There are even some new hopes that Ozempic may protect against Alzheimer’s disease following a study on a predecessor drug.
In the world ranking of large pharma, Novo Nordisk is in second place with a market capitalization of $534 billion. First is its close competitor in the weight loss market, Eli Lilly with $697 billion. Investors are worried that the competition between these two companies is ramping up, as Eli Lilly has also seen surging demand for its GLP-1 drugs Zepbound and Mounjaro. And the earnings report showed that Eli Lilly revenue in Q2 2024 increased 36%, driven exactly by the above drugs, with share price rising 10% in premarket.
On eToro platform Novo Nordisk is globally 156th most held stock but was the 18th company with the highest rise in owners during last quarter. Meanwhile Eli Lilly is the 173rd most held stock.
