Traders wish to know whether or not Eli Lilly is seeing the identical pricing pressures on its blockbuster weight reduction drug Zepbound that Novo Nordisk skilled with its competing drug Wegovy within the second quarter. Novo Nordisk shocked traders on Wednesday when its newest outcomes fell wanting Wall Avenue’s expectations. Shares are reeling, down 8%, after the corporate lowered its forecast for 2024 working revenue progress. Eli Lilly is scheduled to report its second-quarter outcomes earlier than the market opens on Thursday. Analysts surveyed by LSEG count on the drugmaker to earn $2.60 per share on income of $9.92 billion. Serving to to drive the practically 19% anticipated income progress from the second quarter of 2023, is demand for Lilly’s GLP-1 medication Mounjaro and Zepbound, also referred to as tirzepatide. However Novo’s outcomes triggered some promoting of Lilly’s inventory on Wednesday, with shares down 3%. Whereas Eli Lilly’s inventory stays up about 32% yr so far, considerations about rising competitors within the class have resulted in an almost 16% decline for Lilly shares over the previous month. The outlook for the weight problems medication will largely decide the place shares head from right here, analysts say. LLY YTD mountain Eli Lilly shares yr so far Why the shares are underneath strain Novo Nordisk has been working onerous to spice up manufacturing capability for its well-liked GLP-1 medication and increase entry to Medicaid sufferers. Administration stated each of those efforts will assist its long-term progress, however they’ve damage efficiency within the close to time period. Eli Lilly is making comparable makes an attempt with Zepbound, however its launch is at an earlier stage than Wegovy. Second-quarter gross sales of Ozempic, Novo’s diabetes therapy, rose 4% from the primary quarter, whereas Wegovy income grew 24% quarter over quarter. Nonetheless, Wells Fargo analyst Mohit Bansal famous that the variety of prescriptions written for Ozempic within the second quarter was up 17%, whereas Wegovy scripts grew 58%, in accordance with IQVIA, over the identical time interval. Partly, Wegovy’s web worth is declining attributable to efforts to increase entry to Medicaid sufferers in 20 states. Whereas sufferers enrolled within the federal medical insurance program sometimes aren’t lined for weight reduction drugs, the Meals and Drug Administration authorised Wegovy for use as a approach to forestall coronary heart assaults and strokes in folks with heart problems who’re chubby or overweight. This ruling opened the door for expanded protection. “Their [Novo Nordisk management’s] focus is on securing provide to handle as many sufferers as potential, and famous that worth sometimes declines with rising quantity,” Bansal wrote in a analysis notice Wednesday. Barclays analyst Emily Subject advised purchasers in a analysis notice that she can be a purchaser of Novo Nordisk shares on the weak spot. “Was this the image good quarter we would hoped for? Not essentially,” she stated. “However on the finish of the day, weight problems goes to be a quantity pushed market and the overwhelming message we received from the corporate this morning is that quantity is on observe.” Costs transferring to parity? It is also necessary to do not forget that Wegovy is priced at a premium to Zepbound. “It stays to be seen if further rebates for the upper priced Wegovy might be driving down general costs, or if it is simply trending in the direction of attaining parity pricing vs. Zepbound,” Bansal stated, including that the demand for these drugs, which mimic incretin hormones to suppress urge for food and management blood sugar, stays sturdy. Bansal expects Lilly’s diabetes therapy, Mounjaro, noticed a 14% improve in quantity from the primary quarter to the second quarter, whereas Zepbound quantity rose 59% over the identical interval. However how pricing formed up will not be identified till outcomes are launched Thursday. Bansal stated he expects each medication will prime estimates even when worth weakened considerably through the quarter. “In the end, the general demand atmosphere for incretins continues to stay very sturdy with NVO rising FY24 top-line steering by 2% on the midpoint after a 1% improve final quarter,” he stated. Lilly may alter its income forecast as properly, particularly in mild of producing beneficial properties it has made, which has helped eliminated tirzepatide from the FDA’s scarcity record. Pipeline progress David Track, an funding companion at Tema ETFs, stated traders additionally shall be specializing in any updates Lilly offers for the medication it has in growth. Track stated Lilly has “a pole place” with orforglipron, an oral GLP-1 drug it’s creating. Nonetheless, there are different pipeline updates that shall be extremely anticipated within the second half of the yr, together with knowledge from Amgen on MariTide and Novo on CagriSema. JPMorgan analyst Chris Schott expects well being outcomes knowledge for tirzepatide shall be a key catalyst for Lilly’s inventory within the coming months. “Whereas there have been quite a few early stage pipeline updates from opponents within the weight problems house, we don’t see these brokers as differentiated or as prone to dislodge significant share and our view that LLY and Novo will stay dominant within the incretin house stays unchanged,” stated Schott. He expects Mounjaro and Zepbound to achieve $16.5 billion in gross sales by the tip of this yr, then develop to $27 billion by 2025. By 2026, gross sales ought to attain $36.5 billion.
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