Eli Lilly, Novo Nordisk to benefit as Pfizer’s weight loss drug implodes

Eli Lilly (NYSE: LLY) and Novo Nordisk NYSE: NVO) stock prices have been some of the hottest names in Wall Street. NVO has soared by over 48% this year while LLY has surged by over 61%. In total, these companies are now valued at almost $1 trillion.

Eli Lilly and Novo Nordisk have become well-known brands, thanks to their weight loss drugs. Lilly owns Mounjaro, a drug that brought in $1.4 billion in the third quarter and $797 million in Q2. A report published this week showed that Mounjaro led to faster weight loss than its peers.

Novo Nordisk owns Ozempic and Wegovy, drugs that brought in over $4.8 billion in sales. Combined, they account for a substantial share of the company’s total sales in the quarter. It believes that its sales will continue doing well in the coming years.

NVO and LLY stocks have a fresh catalyst. One of the biggest risks for the weight loss has been the growing competition from companies like Pfizer (NYSE: PFE) and AstraZeneca. For months, analysts have argued that more drugs could make the industry more competitive and reduce the market share. 

Now, Pfizer has become the first major pharmaceutical company to face a major headwind in the industry. In a statement, the company said that it would stop developing its twice-daily version of its weight loss pill. 

Pfizer noted it had observed high rates of adverse effects among patients using the drug. These challenges include mild and gastrointestinal issues. Therefore, at least for now, it means that Pfizer will miss out on the $10 billion weight loss drug industry.

It also means that Eli Lilly and Novo Nordisk will have more time to consolidate their market share in the industry. Historically, it is usually difficult to challenge companies with a strong market share in any industry. 

The announcement came as Pfizer is facing huge challenges after the end of the Covid-19 pandemic. Its stock price has crashed by over 44% from its highest point in 2023 while most analysts have turned cautious.

PFE stock price

Pfizer has now focused on inorganic growth to boost its sales. It acquired Seagen in a $43 billion as it sought to grow its cancer therapies.

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