Novo Nordisk and Eli Lilly Shares Decline After Drug Pricing Agreement

Impact of Drug Pricing on Market Dynamics

By Jacob Gronholt-Pedersen and Maggie Fick

Short-Term Effects on Share Prices

COPENHAGEN (Reuters) -Shares in Novo Nordisk and Eli Lilly slipped on Friday after both agreed with the U.S government to lower prices of their blockbuster GLP-1 weight-loss drugs.

Long-Term Sales Projections

The deal announced on Thursday, covering Novo's Wegovy and Lilly's Zepbound, will reduce monthly prices for U.S. government programmes, including Medicare and Medicaid, and cash payers to between $149 and $350, down from $500 to $1,000. 

Competitive Landscape in Weight-Loss Drugs

It also grants them a three-year relief from tariffs.

Novo's Market Position

NEAR-TERM HEADWIND, LONGER-TERM BOOST? 

Lilly's Strategic Moves

Novo said although lower prices would have a negative "low single-digit" impact on global sales growth next year, bigger volumes under Medicare were expected in the mid to long-term.

Lilly CEO David Ricks said the U.S. drugmaker will charge a net price of $245 for its Zepbound under the new programme. He compared this to diabetes drug Mounjaro, which has the same active ingredient, saying it represented a 20% to 35% discount.

Ricks also said that while Lilly is cutting obesity drug prices, expanded access is expected to boost sales volume.

"The deals are probably more positive than negative for both companies," said Markus Manns, portfolio manager at Union Investment, a shareholder in both.

"They are short-term negative as the price cut will hit immediately and potentially mid-term positive for the uplift in volumes," Manns added.

Novo's shares were down 3.7% at 1450 GMT to their lowest level since Mike Doustdar became CEO on August 7.

Eli Lilly shares traded 2.7% lower.  

NOVO, LILLY GO HEAD-TO-HEAD

Novo faces increasing competition from Lilly's Zepbound and compounded copycat drugs in the weight-loss drug market.

First to market when it launched Wegovy in 2021, Novo briefly became Europe's most valuable listed company as demand boomed, but has seen its market value slump by 70% since last year amid supply constraints and commercial challenges.

Lilly's shares have gained more than 15% over the past week, and Friday's dip likely reflected investors taking profits, said Kevin Gade, chief operating officer at Bahl and Gaynor.

"Initial tone is that pricing concessions on Lilly's drugs to Medicare and Medicaid will be more than offset with volume gains and the net present value from (obesity pill) orforglipron," said Gade, who holds Lilly shares.

Lilly said the lowest dose of Zepbound will cost $299 per month, with higher doses at $449 for cash-paying patients, a $50 discount to current direct-to-patient prices.

Berenberg analysts said this could lead to more than the typical annual high single-digit annual price erosion, adding that "price cut will come first, volume builds later".

WEIGHT LOSS PILLS COULD START AT $149

The agreement also includes provisions for starter doses of weight‑loss pills under development by both companies, which will cost $149 per month through government programmes and the White House's TrumpRx site, contingent on regulatory approval.

The U.S. Food and Drug Administration confirmed that the pills are being considered for expedited review under a new pathway aimed at accelerating approvals.

While Novo anticipates an FDA decision on its pill by the end of 2025, Lilly expects approval of its obesity pill, orforglipron, by March.

Jefferies analysts said the expedited review process would "likely (be) perceived as a headwind for Novo's launch" as it could limit its head-start over Lilly. 

(Reporting by Jacob Gronholt-Pedersen, Maggie Fick, Bhanvi Satija and Patrick Wingrove, Editing by Mark Potter, Caroline Humer and Alexander Smith)