Novo's Wegovy Pill Isn't Just Beating Expectations -- It's Obliterating Them. Is the Beaten-Down Stock a Buy Now?

The pharmaceutical industry is highly competitive and driven by innovation. Those two facts couldn't be on any clearer display than in the competition between Novo Nordisk (NYSE: NVO) and Eli Lilly (NYSE: LLY) in the newly created GLP-1 weight-loss space. While Eli Lilly looks like the winner right now, Novo Nordisk's Wegovy pill is performing better than expected. That's important, and it could turn the stock into a long-term buy for dividend lovers.

Novo Nordisk made mistakes and lost the lead

Novo Nordisk was first to market with a GLP-1 weight-loss drug. The only problem is that it couldn't keep up with the demand for its Wegovy shot. That allowed compounders to enter the U.S. market for the drug, limiting the company's growth opportunities. It also gave competitor Eli Lilly a big opening when it launched its own GLP-1 options, Mounjaro and Zepbound.

Image source: Getty Images.

Eli Lilly's drugs were also more effective, so the company's financial performance was strong while Novo Nordisk was basically left playing catch-up. Investors reacted by dumping Novo Nordisk and buying Eli Lilly. The difference couldn't be more stark, with Novo Nordisk down 40% over the past three years and Eli Lilly up over 150%.

However, there was an important change at the start of 2026. That was when Novo Nordisk released a pill version of Wegovy. Many consumers prefer pills over shots, so this development really opens GLP-1 drugs to more customers. That's been proven, with the pharmaceutical company seeing even faster growth with the pill than with the shot. And the pill doesn't appear to be cannibalizing the shot, so the GLP-1 market is indeed expanding. This is even better performance than the company had hoped for, with the pill generating 1.3 million prescriptions in the first quarter alone. One month later, when the company provided its first-quarter earnings results, the number of prescriptions had catapulted to two million.

Novo Nordisk is facing a tough year

That said, Novo Nordisk warned investors that 2026 would be a hard year. Wegovy is losing patent protection in India, which is putting pressure on the company's sales in that large market. And Novo Nordisk agreed to cut prices in the U.S. market, which is also weighing on the top line. Management expects volume to offset price over the long term as the Wegovy pill draws in more customers to the GLP-1 space. Given the pill's early success, that storyline sounds increasingly likely.

There's just one problem: the healthcare sector is intensely competitive. Eli Lilly has also come out with a GLP-1 pill, but it is a different drug from its shot. And it appears that Novo Nordisk's pill is more effective, giving it both a marketing and effectiveness edge. That doesn't guarantee Novo Nordisk's success, but it does suggest that investors may be ignoring an important opportunity.

If you are a long-term dividend investor, Novo Nordisk's historically high 3.9% yield should be on your radar. That's doubly true when you consider that the payout ratio is a very reasonable 40% or so. By comparison, Eli Lilly's yield is a tiny 0.6%.

Novo Nordisk: The risk/reward balance is attractive

Buying Novo Nordisk comes with risk, as does any investment in a highly competitive industry. However, the early success of its Wegovy pill suggests that Wall Street may be missing the long-term opportunity the company has ahead as it works through a transition year. If you don't mind being paid well to wait for better days, strong sales of Novo Nordisk's weight-loss pills are the sign that things aren't nearly as bad as investors seem to believe.

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.