Novo Nordisk

Weighing In

Eli Lilly and Novo Nordisk are leading pharmaceutical companies known for their innovative diabetes and obesity treatments. Both companies have developed drugs—Tirzepatide by Eli Lilly and Semaglutide by Novo Nordisk—that mimic the glucagon-like peptide-1 (GLP-1) hormone. 

Originally designed for type-2 diabetes to control blood sugar by increasing insulin release, these GLP-1 drugs were later found to significantly aid in weight loss. In a recent study, Eli Lilly’s Zepbound has been shown to reduce patient weight by 21%. Associated with obesity, are a variety of other health issues – including cardiovascular diseases. Novo Nordisk’s Wegovy treatment decreased the risk of major adverse cardiovascular events by 20%. 

Both Novo Nordisk and Eli Lilly are investing heavily in research and development, and in manufacturing capacity. For their recent quarter, Novo Nordisk increased their R&D spending by 127% to DKK 16.2 billion (1 USD = 6.95 DKK on 30 June 2024). This accounted for 24% of revenue, roughly in line with Eli Lilly’s R&D to revenue ratio. Both companies are pushing to gain an edge over each other and the other competitors in the industry. 

The pharmaceutical industry requires extensive testing of drugs and treatments before they can be sold to patients. Some of these treatments, especially the ones related to cardiovascular diseases, can take multiple years for the treatments to be approved by the relevant authorities.  

They also require large sample sizes to show the extensiveness of their research. As it stands, Novo Nordisk currently has 45000 participants in trials or about to be in trials for Semaglutide. Eli Lilly has slightly more participants in trial for Tirzepatide. 

Even though other pharmaceutical companies may know how GLP-1 agonists work. They may not have the required resources in terms of capital and time to go after Novo Nordisk and Eli Lilly’s market share.   

Last week, Novo Nordisk and Eli Lilly released their Q2 2024 results. Novo Nordisk’s revenue was up 25% year over year to DKK 68 billion, while net income was up only 3% to DKK 20.1 billion. This was mainly due to the increase in R&D spending. Eli Lilly on the other hand had revenues of $11.3 billion, up 36% year over year. Its net income increased 68% to $3 billion. this was primarily driven by increased manufacturing capacity and pricing power.  

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This stocktake is prepared for the clients of Lunar Capital (Pty) Ltd. This stocktake does not constitute financial advice and is generated for information purposes only.

Weighing In Read More »

Novo – Lilly: Building Capacity

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.

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4 959
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11.75%
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11.75%
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11.75%
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0.00%
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18.30
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18.90
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19.04 Lunar Capital increasesymbol
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20.37
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Click here to access your account to view statements, obtain tax certificates, add or make changes to your investments.

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Disclosures
Lunar Capital (Pty) Ltd is a registered Financial Services Provider. FSP (46567)
Read our full Disclosure statement: https://lunarcapital.co.za/disclosures/
Our Privacy Notice: https://lunarcapital.co.za/privacy-policy/
The Lunar BCI Worldwide Flexible Fund Fact Sheet  can be read here.
This stocktake is prepared for the clients of Lunar Capital (Pty) Ltd. This stocktake does not constitute financial advice and is generated for information purposes only.

Novo – Lilly: Building Capacity Read More »

Ozempic: Unintended Consequences

Ozempic: Unintended Consequences

As new technologies and innovations are developed and widely implemented, a range of unintended consequences inevitably ensue. Last week, Walmart revealed that individuals purchasing weight loss medications containing semaglutide, such as Wegovy and Ozempic, at Walmart’s pharmacies have been purchasing slightly fewer groceries at its outlets. This development caused about a 2% drop in Walmart’s stock price. Other grocery retailers, fast-food chains, and sugary beverage manufacturers like McDonald’s and Coca-Cola also experienced declines in their respective share prices due to the announcement.

New innovations bring about new innovations. Ozempic, developed by Novo Nordisk, received approval from the Food and Drug Administration (FDA) in 2017 for the treatment of type-2 diabetes. Subsequently, it was observed that the drug was effective in treating individuals grappling with obesity. In 2021, Wegovy gained FDA approval specifically for obesity treatment. Wegovy and Ozempic operate as glucagon-like-peptide-1 (GPL-1) receptor agonist, essentially emulating the naturally occurring hormone GLP-1, which aids in appetite regulation and decelerates food digestion. This year, Novo Nordisk made the noteworthy discovery that their Wegovy treatment also reduces the risk of serious cardiovascular events in patients. The innovation of one drug has been able to treat people with different conditions.

As evidenced by Walmart’s recent announcement, new innovations exert influence on consumers across various dimensions. In the case of Ozempic, it was approved for treating diabetes; and subsequently observed to also treat obesity. Now, it is observed that the treatment for obesity results in a lower demand for food and beverage products.

These phenomena are highly interesting for investors:

  • ·Businesses who innovate in one product or service; but this leads to other innovations. Examples includes: Google starting as a search engines, now one of the largest advertising and content platforms in the world; Amazon starting as an on-line book stores; now one of the largest retailers in the world and a leading cloud services. Businesses that are in tune to consumers changing demands will be able to benefit from the changing landscape.

  • A positive impact on one business may negatively impact others. Retailers who have lost market share to Amazon and other online retailers; less food consumed by patients being treated for obesity.

Investors need to consistently be on the look out for these positive and negatives trends.

Novo Nordisk, Walmart, and Amazon are held in the Lunar BCI World Wide Flexible fund. They are also held by Lunar Capital’s Offshore Portfolio clients.

Key Indicators
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Lunar BCI WW Flexible Fund
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141.43
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173.87
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176.38
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24.66% Lunar Capital increasesymbol
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73 049
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73 399
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10 467
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13 212
This Week
13 431 Lunar Capital increasesymbol
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28.32% Lunar Capital increasesymbol
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S&P 500
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3 840
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4 321
This Week
4 309 Lunar Capital stocktake arrow down
% Change YTD
12.20% Lunar Capital increasesymbol
Index / Fund / Rate
Prime Lending Rate
Start of Year
10.50%
Last Week
11.75%
This Week
11.75%
% Change YTD
11.90% Lunar Capital increasesymbol
Index / Fund / Rate
USD/ZAR
Start of Year
16.98
Last Week
18.75
This Week
19.34 Lunar Capital increasesymbol
% Change YTD
13.90% Lunar Capital increasesymbol
Index / Fund / Rate
EUR/ZAR
Start of Year
18.44
Last Week
20.01
This Week
20.49 Lunar Capital increasesymbol
% Change YTD
11.12% Lunar Capital increasesymbol
Index / Fund / Rate
Brent Crude ($'barrel)
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85.95
Last Week
93.60
This Week
84.56 Lunar Capital stocktake arrow down
% Change YTD
-1.62% Lunar Capital stocktake arrow down
Source: Iress

Click here to access your account to view statements, obtain tax certificates, add or make changes to your investments.

Our email address is: [email protected]

Disclosures
Lunar Capital (Pty) Ltd is a registered Financial Services Provider. FSP (46567)
Read our full Disclosure statement: https://lunarcapital.co.za/disclosures/
Our Privacy Notice: https://lunarcapital.co.za/privacy-policy/
The Lunar BCI Worldwide Flexible Fund Fact Sheet  can be read here.
This stocktake is prepared for the clients of Lunar Capital (Pty) Ltd. This stocktake does not constitute financial advice and is generated for information purposes only.

Ozempic: Unintended Consequences Read More »

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