Novo setbacks sharpen Lilly's lead in weight-loss drugs as trial data bites

By Maggie Fick and Bhanvi Satija

Market Impact and Competitive Outlook

LONDON, Feb 24 (Reuters) - With U.S. arch rival Eli Lilly streaking away on weight-loss prescriptions and valuation, the last thing Novo Nordisk needed was to give it a helping hand. Then came the latest trial data for the Danish company's next-generation obesity drug.

Novo unveiled late-stage trial data for its CagriSema drug on Monday that not only showed it underperforming Lilly's rival Zepbound, but appeared to show weight loss with Zepbound was better than even some of Lilly's own data had shown.

Share Price and Valuation Shifts

Novo's shares tanked 16% while Lilly jumped 5% as the trial data raised doubts about the Danish company's obesity drug pipeline and ability to claw back ground that it has lost in recent years as competition in the market has hardened.

"They literally ran a trial that said that Lilly's product is better," said BMO Capital analyst Evan Seigerman, adding that even with more trials ahead, it would be tough to win over investors after twin misses with CagriSema in just over a year.

"They've tried twice and they've now disappointed twice. So why should we believe that this is going to be any different?"

LILLY'S GRIP ON OBESITY DRUG MARKET TIGHTENS

The disappointing outcome marks a setback in Novo's efforts to fight back against Lilly, and could deepen the U.S. company's dominance in the obesity market, which Novo pioneered with the launch of its Wegovy injection in 2021.

Wegovy drove Novo to become the most valuable listed European firm in 2024, but the two companies have diverged since, with Lilly gaining a trillion-dollar valuation, while Novo has battled profit warnings, leadership churn and stalling sales. It also lost a bidding war for obesity biotech Metsera last year.

Trial Data at a Glance

The latest trial was designed to show CagriSema could be Novo's next obesity drug blockbuster, at least as effective as tirzepatide, the active ingredient of Zepbound, sold in Europe as Mounjaro.

Instead CagriSema achieved a 23% reduction in body weight over 84 weeks compared with 25.5% for Eli Lilly's tirzepatide in the trial. That was in line with earlier CagriSema data but higher than some Zepbound trials, albeit for shorter periods.

Trial Design Debated

Novo Management’s Response

Novo's management tried to play down the data, citing trial design factors. CEO Mike Doustdar called Zepbound's performance an "abnormality" - which most analysts weren't buying.

"The trial results are what they are," said one Novo shareholder, asking to speak anonymously, who dismissed management's argument as a "lame excuse". 

Novo did not immediately respond to a request for comment on the investor's statement.

Deutsche Bank: Market Coalescing Around Lilly

Deutsche Bank analysts wrote on Monday that the data meant that the diabetes and obesity market was "likely to coalesce around Lilly's portfolio", citing its strong range of products.

Product Lineup and Approvals

Lilly's Zepbound already has a clinical edge on the Wegovy injection, though Novo has scored a point by getting its weight-loss pill first to market in the United States. Lilly expects U.S. approval for its rival pill in April.

NOVO MANAGEMENT CLASHES WITH ANALYSTS

JPMorgan: Zepbound Entrenched

Analyst Reactions and Bank Notes

JP Morgan analysts said it would now "be difficult for Novo to dislodge market share from Lilly, with Zepbound well entrenched".

HSBC: CagriSema’s Value Questioned

"The trial seems to further raise the question of the value proposition of CagriSema in the obesity market landscape," Rajesh Kumar, HSBC senior global life sciences & healthcare analyst, added in a note.

During an investor call with Novo, Deutsche Bank analyst Emmanuel Papadakis asked whether CagriSema was now "obsolete" as a competitive upgrade to Wegovy. CEO Doustdar responded that, once approved, CagriSema would have the best label data.

Novo Chief Scientific Officer Martin Holst Lange added that patience was needed to see CagriSema's full potential.

But the latest news compounds earlier CagriSema misses, and leaves Novo in a tough spot.

The results likely mean Novo will face an uphill battle in persuading patients to use and physicians to prescribe CagriSema over "more effective, better tolerated Zepbound", Barclays said in a note. This leaves "Novo little to compete on apart from price." 

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(Reporting by Maggie Fick and Bhanvi Satija; Editing by Adam Jourdan and Jonathan Oatis)