Novo – Lilly: Building Capacity

Eli Lilly and Novo Nordisk are both major pharmaceutical giants with a focus on developing drugs for chronic diseases. Two of the main common areas they focus on are diabetes and, most recently, obesity. The diabetes and obesity drugs that the two companies are developing are glucagon-like-peptide-1 (GLP-1) agonists. These medications mimic the actions of the GLP-1 hormone which regulates blood sugar, slows digestion, and suppresses appetite.

Last week, Eli Lilly released their Q4 2023 results; and the week before, Novo Nordisk released their Q4 2023 results. Eli Lilly’s revenue increased by 28% to $9.4 billion while its profit increased by 13% to $2.2 billion for the quarter. The lower profit percentage increase was a result of expenses incurred in the acquisition of a few up-and-coming companies.

Novo Nordisk’s revenue grew 37% to DKK 65.9 billion. And their net profit grew 62% to DKK 21.9 billion. As of 9 Feb 2024, 1 USD = 6.9 DKK. Novo Nordisk recently became the largest listed company in Europe and has been a material contributor to Denmark’s economy.

Since the beginning of the year, Eli Lilly and Novo Nordisk’s share prices have increased by 24.9% and 18.7% respectively. In the US, it is estimated that around 40% of adults suffer from obesity. The recent drive in the share price for Eli Lilly and Novo Nordisk has mainly been driven by the demand for their obesity drugs.

Novo Nordisk and Eli Lilly are at different stages in the production and approval of their respective obesity drugs.

1. Novo Nordisk’s Wegovy has been available in eight countries since 2021 but only reached approval for all dosage levels in the US in December 2022. Due to overwhelming demand and limited supply, Novo Nordisk had to halt the sale of lower dosages to prioritize patients requiring higher doses who were facing stock shortages. The efficacy of the treatment is contingent on consistent, long-term commitment to the prescription and treatment regime. Novo Nordisk is actively working to expand production capacity to meet the needs of patients relying on these drugs.
2. Eli Lilly’s Zepbound obesity product received approval and was launched in the US in the last quarter of 2023. Notably, even before securing approval for the drug’s sale, Eli Lilly had initiated the construction of production capacity to ensure a they could hit the ground running once they received approval.

As of now, Novo Nordisk holds the lead in the race. However, the demand for these treatments remains substantial, providing ample opportunity for both Eli Lilly and Novo Nordisk to thrive in the market.

Novo Nordisk and Eli Lilly are held in the Lunar BCI Worldwide Flexible fund. They are also held by Lunar Capital’s Offshore Portfolio clients.