Is Oral Wegovy a Game Changer for Novo Nordisk?

Novo Nordisk (NYSE: NVO) was a pioneer in the weight loss drug market. The company's Wegovy sold out so quickly when it was first approved that it couldn't keep up with demand, leading to shortages. However, Novo Nordisk ultimately lost the lead in this niche to Eli Lilly (NYSE: LLY).

Still, the Denmark-based pharmaceutical giant hasn't said its last words. Novo Nordisk has made moves to try to get back on track. And recently, it earned approval for an oral formulation of Wegovy. Novo Nordisk's shares jumped following this news.

But is this new product really the key for Novo Nordisk to regain the lead in the weight loss market?

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What oral Wegovy could bring

One key reason why Novo Nordisk is losing market share to Eli Lilly is that the latter's Zepbound has proved more effective. In a head-to-head study, Zepbound led to an average weight loss of 20.2% over 72 weeks, compared with 13.7% for Wegovy. There is an argument that the oral version of Wegovy has certain advantages that make things easier for patients. First, some people simply dislike needles. The once-daily pill version of Wegovy is preferable to the once-weekly injectable one for these patients.

Second, while the original formulation requires cold storage, the pill does not. That also makes it more versatile, especially for people who are constantly traveling. True, oral Wegovy's efficacy doesn't seem to match Zepbound's either. In fairness, they have not been compared in head-to-head clinical trials, and it's always tough to make comparisons across studies. However, in a phase 3 trial, oral Wegovy led to a mean of 13.6% in 64 weeks. But even at a lower efficacy, oral Wegovy could prove competitive given its other advantages.

Eli Lilly is not far behind

Although the approval of oral Wegovy was an important breakthrough for Novo Nordisk -- as it became the first oral weight loss medicine indicated for weight management in the U.S. -- it's crucial to keep in mind that Eli Lilly should soon earn approval for its own orforglipron, an oral GLP-1 targeting diabetes and weight management.

The U.S. Food and Drug Administration is currently considering orforglipron for approval, with a PDUFA goal date (the latest by which it should approve the medicine) of April 10. Oral Wegovy seems more effective than orforglipron, which led to a mean weight loss of up to 12.4% in a phase 3 study. But orforglipron can be taken without food restriction, while oral Wegovy must be taken in the morning on an empty stomach (and patients can't eat or drink anything for half an hour after taking it). So, even with slightly lower efficacy, orforglipron could carve out a decent niche in the oral weight loss market, given its more convenient dosing regimen.

What does all this mean for investors?

Zepbound should remain the leader in its niche thanks to its market-leading efficacy. And even though oral Wegovy could have a large addressable market, orforglipron will also be competitive in that field. That's why Novo Nordisk is still unlikely to catch up to Eli Lilly in this market anytime soon. Whatever hook the former throws, the latter always seems to be able to respond with an uppercut of its own. But does that mean Novo Nordisk's shares aren't worth investing in?

In my view, the stock remains attractive, especially after the beating it took over the past two years. Novo Nordisk's revenue growth has slowed, but new approvals and label expansions, including oral Wegovy and a new indication for the older formulation to treat metabolic dysfunction-associated steatohepatitis, should make a meaningful impact on its financial results.

And there is more where that came from. Novo Nordisk is seeking approval for CagriSema, a next-generation GLP-1 weight-loss medicine. It has several others in clinical studies as well. With the weight loss market still projected to grow rapidly in the coming years, Novo Nordisk could perform well -- both financially and on the stock market -- as it rides this tailwind, even if it does not occupy the top spot.

Prosper Junior Bakiny has positions in Eli Lilly and Novo Nordisk. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.