Eli Lilly vs Novo Nordisk in the Weight Loss Drug Market: Here's What Investors Need to Know.

Eli Lilly (NYSE: LLY) and Novo Nordisk (NYSE: NVO) have made headlines over the past few years for selling one of the world's most in-demand products: weight loss drugs. Lilly is the maker of tirzepatide, approved for type 2 diabetes under the name Mounjaro and for weight loss as Zepbound. Novo's semaglutide is sold for those indications as Ozempic and Wegovy, respectively.

Demand has been high for these drugs -- so high, that they were on the U.S. Food and Drug Administration's drug shortage list back in 2024. Lilly and Novo ramped up their production and manufacturing infrastructure to meet demand, and supply has returned. But people continue to rush to these drugs, and analysts' forecasts call for the obesity drug market to reach almost $100 billion by the end of the decade. So, weight loss drugs are on track to deliver more growth to companies in the field.

Now, in this Eli Lilly versus Novo Nordisk story, here's what investors need to know.

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The popularity of GLP-1 drugs

Most drug classes aren't exactly household names. But GLP-1 drugs have become the exception. These products, sold by Novo and Lilly, are part of this class, and due to their popularity, everyone is talking about GLP-1 drugs these days -- not just researchers and doctors.

GLP-1 drugs work by acting on hormones that control blood sugar levels and appetite, and therefore, they help patients lose weight. Novo was the first to enter the market with its GLP-1 drug Ozempic back in 2017, then followed up with Wegovy in 2021. Meanwhile, Lilly entered the market with Mounjaro and Zepbound in 2022 and 2023, respectively.

Patients take these drugs as injections weekly, and in a period of months, shed a significant number of pounds.

Though Novo was first to market, the company began losing market share in the U.S. to Lilly back in June of 2024. At that point, prescriptions of Novo's GLP-1 drugs declined, while Lilly's started rising. As of February of last year, Lilly took the lead, and today the company holds 60% of the U.S. market.

Zepbound versus Wegovy

Why has Lilly been so successful? A few reasons may explain this path. Lilly conducted a head-to-head study of Zepbound versus Wegovy, and the results showed that patients lost more weight with the Lilly drug. Trial participants on Zepbound lost an average of 50 pounds in 72 weeks, while those on Wegovy lost 33 pounds.

Lilly also has been aggressive about building out manufacturing infrastructure to address current and future demand. The pharma powerhouse has committed more than $50 billion to new sites and expansions since 2020, and since then has announced 10 U.S. manufacturing sites.

However, Novo scored a win recently as it gained the very first approval of a GLP-1 drug in pill form. The FDA gave the nod to oral Wegovy in December, and early uptake of the pill beat analysts' expectations. This may offer Novo a boost in the coming quarters, but Lilly remains close behind -- regulators are considering Lilly's oral weight loss candidate, orforglipron, and may reach a decision by April 10, according to Reuters.

The advantage of Lilly's weight loss pill

Orforglipron, if approved, could emerge as a formidable rival, and here's why. Oral Wegovy must be taken on an empty stomach -- and patients must wait 30 minutes before eating, drinking, or taking other medications. Orforglipron doesn't involve dietary restrictions, and that means it may be a more convenient option for people on the go.

So, though Novo still generates growth from its GLP-1 drugs, Lilly has emerged as a new leader and a potential approval of orforglipron could reinforce this leadership.

Of course, Lilly trading for 45x trailing 12-month earnings may look expensive compared to Novo, trading for only 14x earnings. But Lilly's valuation has come down from more than 75x earnings just a year ago, and it's worth the premium considering the growth of its market share in the GLP-1 market and the levels of revenue those products are generating. In the recent quarter, Mounjaro and Zepbound together brought in more than $11 billion in sales.

This doesn't mean all investors should forget about Novo. The stock is reasonably priced, and oral Wegovy and other pipeline programs down the road could support revenue and eventually stock price gains. But growth investors may favor Lilly due to its dominance in the billion-dollar weight loss market and the likelihood that this leadership will last.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.