In calling Eli Lilly the "tortoise" and Novo Nordisk the "hare," BMO Capital Markets says that Lilly is surpassing its rival in the diabetes and obesity market.
The tortoise (Eli Lilly) has caught the hare (Novo Nordisk), according to a report from BMO Capital Markets, which cites the superior commercial and clinical portfolios of the Indianapolis company compared to those of its Danish rival.In pronouncing the change of the guard, BMO has downgraded Novo’s shares from “outperform” to “market perform.” Translation: The analysts are advising investors to hold Novo shares rather than buying more of them.The report comes as Lilly and Novo remain the two fastest-growing large pharmaceutical companies, based largely on booming sales of their diabetes and obesity products. With their surges over the last few years, Lilly and Novo have become the drugmakers with the largest market caps in the U.S. and Europe, respectively, with Lilly’s value nearly twice that of second-place Johnson & Johnson.While the momentum for Lilly is accelerating, that for Novo is slowing. In 2024, Lilly and Novo grew by 32% and 26%, respectively. This year, the gulf between their growth is expected to widen, with Lilly projecting another 32% increase in revenue at the midpoint of its estimate, compared to Novo guiding for growth of between 16% and 24%. “Our market perform thesis asserts that Novo Nordisk shares will remain less competitive vs. other peers in the cardiometabolic market (namely Lilly),” BMO analyst Evan Seigerman wrote in a report to investors. “We expect Lilly’s Mounjaro and Zepbound to continue to take incremental U.S. share from Novo’s Ozempic and Wegovy.”Seigerman also points out that among the companies, Lilly has the most promising cardiometabolic candidate in its clinical portfolio in oral GLP-1 orforglipron. Today, Lilly posted data that live up to the company’s pledge that it could create an oral drug with “efficacy, safety and a tolerability profile that is similar to that of an injectable single-acting GLP-1,” Dan Skovronsky, M.D., Ph.D., Lilly’s chief scientific officer, said during the company’s most recent quarterly conference call.With the Lilly trial result and BMO report, Novo’s shares dropped by 8% on Thursday to $58.08. Conversely, Lilly's stock price jumped about 14.5% to $840. “While Novo had the headstart with approval of semaglutide, we believe that this first mover advantage has waned, with Lilly's tirezepatide taking share rapidly,” BMO's analysts wrote. “We see this trend only accelerating with orforglipron and retatrutide.”Semaglutide is the generic name for Novo's GLP-1 products Ozempic and Wegovy. Eli Lilly, for its part, sells tirzepatide as Mounjaro and Zepbound for diabetes and obesity, respectively.In addition, retatrutide is Lilly’s next-generation weight loss candidate. In a phase 2 trial, the injected drug triggered a median weight loss of 24%. Another factor in the market clash is reliable supply. Even though the FDA has removed Novo's semaglutide from its shortage list, the BMO analysts said the company's supply issues "continue to linger." “We think that physicians may have permanently shifted preference to tirezepatide, given challenges accessing product. While compounding is set to end, we do not see this as a major inflection for semaglutide sales,” the analysts added.Also contributing to physician preferences are recent head-to-head data, which have shown “clear superiority” of Lilly's tirzepatide over Novo's semaglutide, BMO said. The analysts also believe recent clinical results for Novo’s next-gen treatment CagriSema indicate it will have difficulty unseating Lilly's tirzepatide as the favored obesity drug on the market.
