A new class of weight loss drugs are powering massive stock market gains for Novo Nordisk and Eli Lilly.Both stocks surged more than 16% on Tuesday, boosting the combined valuation of both companies to nearly $1 trillion.A new study showed Novo Nordisk’s Wegovy lowered the risk of heart attack or stroke by 20%. Loading Something is loading.
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A new class of weight loss drugs has powered massive stock market gains for two pharmaceutical companies: Novo Nordisk and Eli Lilly.
Both companies produce GLP-1 receptor drugs that help diabetes and overweight patients lose upwards of 20% of their weight, and investors are sizing up a big opportunity for both companies as they begin to scale the production of the drugs.
Novo Nordisk produces Ozempic and Wegovy, two identical drugs that are used to treat diabetes patients and overweight patients, respectively. Shares of Novo Nordisk surged as much as 18% on Tuesday after the company released a study that showed its weight loss drug reduced the risk of heart attack or stroke by 20% in patients.
“Novo has framed the trial as potentially paradigm changing, similar to that of DCCT trial in the 1990’s for diabetes, in so much as it could change the perception on the importance of managing obesity,” Bank of America analyst Sachin Jain said in a Tuesday note.
Meanwhile, Eli Lilly, which produces the GLP-1 drug Mounjaro, surged as much as 18% on Tuesday after the company reported better than expected second-quarter results and raised its 2023 guidance, mostly driven by its fast growing Mounjaro drug.
Eli Lilly now sports a market valuation of about $500 billion, making it the ninth largest US company by market capitalization, and the largest health care company in the world. The surge in Novo Nordisk sent its valuation soaring to about $420 billion on Tuesday, bringing the combined market valuation of both companies to nearly $1 trillion.
Year-to-date, Eli Lilly shares are up about 44% while Novo Nordisk is up about 38%.
And the growth could continue as both companies expand access to their weight loss drugs and improve upon the drugs’ formulations.
For one, supply for these GLP-1 weight loss drugs has been constrained as both manufacturers race to increase supply amid surging demand.
And both drugs are administered via weekly injections, which could be a limiting factor for patients who may be afraid of needles. Both companies are working on a pill formulation of the drugs, which could increase the population set of patients that want to reduce their weight.
Additionally, Eli Lilly’s Mounjaro is currently approved for only diabetes patients, though the company has submitted studies to the FDA that could expand the drugs indication to cover overweight patients that don’t have diabetes, similar to Novo Nordisk’s Wegovy.
Finally, expanding insurance coverage for the drugs and changing doctors’ mindsets on treating obesity could significantly expand uptake of the weight loss drugs.
While there are plenty of levers both companies could pull to fuel future growth, the drugs are growing incredibly fast in the current environment. Eli Lilly reported sales of its Mounjaro drug soared to $980 million in the second quarter, compared to $16 million in the second-quarter of 2022, when the drug was first launched.
“We’d say today’s results will further bolster [investor] confidence on the commercial opportunity for Eli Lilly’s incretin franchise, namely Mounjar and Trulicity for Type 2 diabetes and tirzepatide, orforglipron and retatrutide for obesity,” Bank of America analyst Geoff Meacham said in a Tuesday note.
Novo Nordisk is scheduled to report its earnings results before the market open on Thursday.