Investors are wondering whether Eli Lilly and Co.’s blockbuster weight-loss drug Zepbound faced the same pricing pressure as Novo Nordisk’s competing drug Wegovy in the second quarter. Novo Nordisk’s latest results on Wednesday missed Wall Street expectations, shocking investors. Shares fell 8% after the company lowered its 2024 operating profit growth forecast. Eli Lilly will report second-quarter results before the market opens on Thursday. Analysts polled by LSEG expected the drugmaker to earn $2.60 per share on revenue of $9.92 billion. Demand for Eli Lilly’s GLP-1 drugs Mounjaro and Zepbound, also known as tezepatide, should help drive expected revenue growth of nearly 19% in the second quarter of 2023. But Novo’s results sparked some selling in Eli Lilly’s stock on Wednesday, with shares falling 3%. While Eli Lilly’s shares are still up about 32% year to date, concerns about increased competition in the category have led to a nearly 16% decline in the past month. Analysts say the outlook for the obesity drug will largely determine the direction of the stock price. Eli Lilly Stock Why It’s Under Pressure Year to Date Novo Nordisk has been working to increase production capacity of its popular GLP-1 drug and expand access to Medicaid patients. Management said both efforts would help its long-term growth but hurt short-term results. Eli Lilly is doing something similar with Zepbound, but it launched earlier than Wegovy. Second-quarter sales of Novo’s diabetes treatment drug Ozempic increased 4% from the first quarter, while Wegovy’s revenue increased 24% quarter-on-quarter. However, Wells Fargo analyst Mohit Bansal noted that Ozempic prescription volume increased 17% in the second quarter, while Wegovy prescription volume increased 58% during the same period, according to IQVIA data. Wegovy’s net price is declining, in part, amid efforts to expand coverage for Medicare patients in 20 states. Although weight-loss drugs are generally not covered by patients enrolled in federal health insurance plans, the U.S. Food and Drug Administration approved Wegovy to prevent heart attacks and strokes in people with cardiovascular disease who are overweight or obese. The ruling opens the door to expanded coverage. “Their (Novo Nordisk management) focus is on securing supply to handle as many patients as possible,” Bansal wrote in a research note on Wednesday, noting that prices typically fall as volumes increase. . Barclays analyst Emily Field told clients in a research note that she would buy Novo Nordisk shares on weakness. “Is this the perfect quarter we were hoping for? No. Definitely,” she said. “But at the end of the day, obesity is going to be a volume-driven market, and the overwhelming message we got from the company this morning is that volumes are on track.” Heading towards parity? It’s also important to remember that Wegovy’s pricing is higher than Zepbound’s. “It remains to be seen whether the additional discounts on the higher-priced Wegovy will drive down the overall price, or if it’s just a trend towards achieving price parity with Zepbound,” Bansal said, adding that interest in these drugs that mimic the incretin hormone Demand for appetite suppression and blood sugar control remains strong. Bansal expects sales of Eli Lilly’s diabetes treatment Mounjaro to grow 14% from the first quarter to the second quarter, while sales of Zepbound will grow 59% in the same period. But how the pricing will shape up will not be known until the results are released on Thursday. Bansal said he expects prices for both drugs to be higher than expected even if prices soften this season. “Ultimately, the overall demand environment for incretins continues to be strong, and NVO raised its fiscal 2024 revenue guidance by 2% at the midpoint, following a 1% increase last quarter,” he said. Eli Lilly may also adjust its Revenue forecasts, especially given its advancements in manufacturing, could help remove tilsiparatide from the FDA’s shortage list. David Song, investment partner at Tema ETFs, said investors will also be watching for any updates Eli Lilly provides on the drugs it is developing. Song said Eli Lilly has a “leading position” with Orforglipron, its oral GLP-1 drug in development. However, there are other pipeline updates to look forward to in the second half of the year, including MariTide data from Amgen and CagriSema data from Novo. J.P. Morgan analyst Chris Schott expects tilsiparatide’s health outcomes data to be a key catalyst for Eli Lilly’s stock in the coming months. “While there are many early-stage pipeline updates from competitors in the obesity space, we do not believe these drugs are differentiated or likely to capture meaningful share, and we believe LLY and Novo will maintain dominance in the incretin space. The view remains unchanged. He expects Mounjaro and Zepbound to have sales of $16.5 billion by the end of this year, growing to $27 billion by 2025.
What Wall Street is paying attention to | Real Time Headlines
RELATED ARTICLES