Eli Lilly vs. Novo Nordisk: Why Lilly Is Better Positioned Under Trump's Drug Pricing Pressure

TradingKey - Eli Lilly and Novo Nordisk, the two dominant players in the US weight-loss drug market, are experiencing vastly different investor sentiment despite facing unprecedented GLP-1 drug price cuts under the Trump administration's price cut initiative.

Eli Lilly's stock soared to a record high within days of agreeing with the Trump administration to lower drug prices in exchange for tariff benefits, while Novo Nordisk's shares remained flat. As of Tuesday, November 11, Eli Lilly's stock has climbed 30% since October, while Novo Nordisk's has fallen over 11%.

TradingKey previously analyzed that for weight-loss drug companies, joining Trump's extensive price reduction plan is a strategic "price-for-volume" adjustment. While they might experience short-term financial pressure, the potential for expanded coverage in the U.S. healthcare market could unlock a much broader market for these drugs.

Currently, Medicare and Medicaid cover 130 million people nationwide, with an estimated 50 million individuals meeting the criteria for obesity or being overweight.

Goldman Sachs noted in its latest report that Novo Nordisk anticipates Medicare channels could cover a potential 30 million obese patients, while Eli Lilly projects the combined potential patient base across both channels to reach 40 million.

Bernstein, using a 30 million-person obesity market as a benchmark, indicated this represents a $27 billion annual sales opportunity.

Another driving force behind these two weight-loss drug giants' willingness to accept the price reduction agreement is their ability to leverage significant price cuts to deter compounded generics and build a competitive moat.

While lower-cost generics won't vanish immediately, the price reductions by major brands undoubtedly offer patients a "superior" choice, as high costs have frequently been a barrier for many obese patients to continue their weight-loss drug regimens.

Goldman Sachs highlighted that although the government slashed the monthly GLP-1 treatment price from over a thousand dollars to $245, this figure remains higher than the $150 to $200 range that the market feared would be more painful for pharmaceutical companies.

This suggests that the operational pressure on both drug giants is not as severe as anticipated, and a more standardized price baseline has also reduced market uncertainty.

Goldman Sachs believes that while both face the "price-for-volume" challenge, Eli Lilly is likely to emerge as the winner, with Novo Nordisk positioned at a disadvantage.

Lilly's significant advantage stems primarily from its stronger market share, the faster launch timeline for its oral weight-loss drug (orforglipron), and more optimistic management statements. In contrast, Novo Nordisk, which has undergone management changes, has already lowered its full-year financial guidance four times this year.

Specifically, Lilly's Zepbound leads Novo Nordisk with a 60% market share in reimbursed channels and an 85% share in cash-pay channels. The oral drug orforglipron, expected to launch in Q1 next year, is projected to generate at least $1 billion in additional revenue for Lilly by 2026.

However, it is premature to definitively declare Novo Nordisk a "loser," as newly appointed CEO Mike Doustdar is implementing a series of reforms to revitalize the company.

While intense competition unfolds in the U.S. weight-loss drug market, Novo Nordisk is simultaneously taking significant price reduction measures in India. The company announced Tuesday that it would cut weight-loss drug prices in the Indian market by 33%, aiming to reclaim market share eroded by generic drugs.

In the bidding war against Pfizer for the acquisition rights to weight-loss drug developer Metsera, Novo Nordisk, which has become "Americanized" in its approach, withdrew from the deal, much to the relief of investors.

Concerns had lingered that the European pharmaceutical firm might overpay due to overly eager action, potentially burdening its already precarious financial standing.

Some analysts believe that while Novo Nordisk appeared to lose the Metsera acquisition, it signaled a shift in its strategy: moving from a conservative and slow-moving approach to one that embraces challenges more swiftly.