Contrarian Opinion: Novo Nordisk Is A Better Buy Than Eli Lilly Right Now

The headline-grabbing battle in the pharmaceutical sector today pits Eli Lilly (NYSE: LLY) against Novo Nordisk (NYSE: NVO). The battlefield is GLP-1 weight loss drugs. This is a new type of drug that has been something of a miracle for people who have long struggled with weight loss. And the long-term opportunity is huge.

Right now, Eli Lilly is in the clear lead, with its highly successful Mounjaro and Zepbound. But Novo Nordisk hasn't given up; it recently released a pill version of Wegovy. The contrarian view of this contest is that investors are giving Eli Lilly too much credit and Novo Nordisk too little. Here's why dividend investors should go with Novo Nordisk.

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Novo Nordisk has its work cut out for it

Novo Nordisk was the first to market with a GLP-1 drug. That head start didn't last long, as the company struggled to meet demand. This fact allowed compounders to make generic versions of Wegovy in the important U.S. market. Meanwhile, Eli Lilly's Mounjaro and Zepbound proved more effective and quickly gained market share.

The performance difference between the two companies in the weight loss space is material. In the first quarter of 2026, Novo Nordisk's obesity care business, its Wegovy franchise, grew 22%. Eli Lilly saw sales of Mounjaro and Zepbound increase 125% and 80%, respectively, in the same quarter.

That said, the Wegovy pill appears to be more effective than Eli Lilly's GLP-1 pill offering, which is a different drug from its highly successful Mounjaro and Zepbound. Importantly, Novo Nordisk's pill appears to be attracting new customers to the GLP-1 space, as many people don't like taking shots. The big takeaway here is that the pharmaceutical industry is intensely competitive and Eli Lilly doesn't have a lock on the GLP-1 market. Or, to put that another way, Novo Nordisk is behind, but it isn't out of the race.

Novo Nordisk wins on yield and valuation

Eli Lilly is a well-run healthcare business, and there's no reason to sell it if you own it. However, it is hard to deny that the stock is richly valued. While its price-to-earnings ratio is below its five-year average of nearly 57x, it is still quite high at 37x. The average drug stock's P/E is a touch under 24x. On the dividend front, the average drug stock's yield is around 1.7% while Eli Lilly's is 0.65%.

Eli Lilly isn't likely to interest dividend investors or value investors. But Novo Nordisk will be attractive to both of those investors. On the yield front, Novo Nordisk has a well above market 4% yield. And the payout ratio is roughly 40%, so the dividend doesn't appear to be at risk. Then there's the valuation: Novo Nordisk's P/E of roughly 10x is well below the industry average and its own five-year average of 27x.

Novo Nordisk has warned investors that 2026 will be a difficult year. However, the key is that the company expects lower prices to hurt in the near term, with volume more than making up for that in the long term. Strong early adoption of the Wegovy pill and the fact that it appears to be attracting new customers to the GLP-1 space are early signs that this scenario is playing out as expected.

This isn't a knock on Eli Lilly

The reason that Novo Nordisk wins this competition isn't that Eli Lilly is a bad company. In fact, Eli Lilly is doing exceptionally well right now. The problem is that Wall Street recognizes this fact and has afforded the stock a lofty valuation. Novo Nordisk, by contrast, is being treated as if it has lost the GLP-1 race, which isn't necessarily the case, given the early strength of its GLP-1 pill. Meanwhile, the negative mood around Novo Nordisk has created an opportunity to buy the stock cheaply and with a high yield. If you are a contrarian, that's likely to sound very attractive.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Eli Lilly. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.