Lilly, Novo Nordisk Shares Plummet as Trump Announces Price Cut to Ozempic

TradingKey - On Thursday, October 16, shares of Eli Lilly and Novo Nordisk fell sharply in after-hours trading after President Donald Trump announced a significant price reduction for the diabetes drug Ozempic. As of the time of writing, Eli Lilly (LLY) was down more than 5%, and Novo Nordisk (NVO) had fallen over 3%.

During a press conference held in the Oval Office, Trump declared that the price of Ozempic, manufactured by Novo Nordisk, would "soon drop significantly," reducing the out-of-pocket cost for patients to $150. This represents a mere 15% of its current list price of $1,000 in the US or 30% of the $499 price offered by Novo Nordisk for self-paying customers.

Eli Lilly, as Novo Nordisk’s key competitor, also produces GLP-1 weight-loss drugs, such as Zepbound and Mounjaro.

The original focus of the press conference was to announce an agreement between the US government and German pharmaceutical company Merck KGaA to lower the costs of in vitro fertilization (IVF), with the US pausing taxation on drugs in return. Previously, the US had reached agreements with biopharma companies Pfizer and AstraZeneca for drug price reductions.

In August, Trump had publicly called for 17 global pharmaceutical companies, including Eli Lilly and Novo Nordisk, to lower drug prices in the US. Since then, Novo Nordisk has been exploring pricing strategies. Additionally, Ozempic and Wegovy, produced by Novo Nordisk, are facing extra pressure due to being included in the Inflation Reduction Act (IRA) price negotiation list. Therefore, Wall Street had anticipated the US government's move against these weight-loss drug giants.

However, the administrator of the Centers for Medicare & Medicaid Services clarified that price negotiations are ongoing and no agreement has been reached until Trump is satisfied with the outcome.

Looking ahead for the GLP-1 market, analyst Thibault Boutherin noted that the US GLP-1 diabetes sector might face a decline by 2026 due to market share and pricing pressures.

Boutherin stated that the growth of Ozempic outside the US will be hampered by competition from generic drugs in Canada and emerging markets, while Wegovy's sales growth will be challenged by generics and Eli Lilly's Mounjaro and Zepbound.