You won’t find many hotter healthcare stocks these days than Novo Nordisk (NYSE: NVO). Shares of the big pharmaceutical company have skyrocketed by 50% so far in 2023. Those gains have been driven by one drug (semaglutide) that’s marketed under two brand names — Ozempic and Wegovy.
However, there was big news this week that just might alter Novo Nordisk’s trajectory somewhat. Look out, Ozempic and Wegovy: Eli Lilly (NYSE: LLY) is bringing a new weight-loss drug to town.
On Wednesday, the Food and Drug Administration (FDA) approved Lilly’s tirzepatide injection for chronic weight management. Lilly already markets tirzepatide under the brand name Mounjaro as a treatment for type 2 diabetes.
Like Novo Nordisk, Lilly chose to go with another brand name for tirzepatide’s obesity approval. The drug will be marketed in that indication as Zepbound. Maybe it’s not the greatest name in the world, but at least it’s easy to say and spell.
The FDA’s approval for Zepbound was pretty much a slam dunk. Lilly submitted data from two phase 3 clinical trials in its application. In one of those studies, individuals who received a 15-milligram dose of Zepbound lost an average of 48 pounds after 72 weeks. Trial participants who took a 5-milligram dose of the drug experienced an average weight loss of 34 pounds at 72 weeks. These results were better than Novo Nordisk achieved in clinical studies for Wegovy.
And that wasn’t the only encouraging news for Zepbound to come from those studies. Their results showed that people who took Zepbound for weight management and had other weight-related medical issues saw improvements in their cholesterol and blood pressure as well. Although the drug has not been approved to treat those conditions, some doctors could choose to prescribe Zepbound (or Mounjaro) as an off-label therapy for them.
I mentioned earlier that you won’t find many hotter healthcare stocks than Novo Nordisk. But Eli Lilly is one of the exceptions. The pharma stock is up more than 60% year to date.
Many are betting that huge sales for Zepbound are on the way. Those will likely turn out to be very good bets.
Multiple Wall Street analysts project that the combination of Mounjaro and Zepbound will generate peak annual sales of more than $50 billion. BMO Capital‘s Evan Seigerman thinks the sibling drugs will rake in nearly $69 billion per year in peak sales.
To put those numbers into perspective, consider that the best-selling pharmaceutical product of 2022 was Pfizer‘s (NYSE: PFE) COVID-19 vaccine, Comirnaty, with sales of just under $41 billion. The top-selling drug excluding vaccines was AbbVie‘s Humira, which brought in less than $22 billion.
Novo Nordisk is no doubt watching Mounjaro and Zepbound closely to see how they impact sales growth for Ozempic and Wegovy. However, the company (and investors) should look out for Pfizer, too.
Pfizer is currently evaluating danuglipron in phase 2 studies targeting obesity and type 2 diabetes. The company expects to announce results from those trials by the end of 2023. Danuglipron uses the same mechanism of action (GLP-1 agonist) as Ozempic and Wegovy. Mounjaro and Zepbound are dual GIP/GLP-1 receptor agonists.
Danuglipron likely won’t be as significant of a threat to Ozempic and Wegovy as Mounjaro and Zepbound will be. However, any market share that Pfizer’s drug might obtain could come largely at Novo Nordisk’s expense.
For investors seeking a potential rebound candidate, Pfizer could be a pretty good pick. But for those looking for a hot stock with room to run, there’s arguably no better big pharma around than Eli Lilly.
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Keith Speights has positions in AbbVie and Pfizer. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
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