By Bill Alpert

Enthusiasm waned on Wall Street for weight-loss drug pioneer Novo Nordisk, after a pill tested by rival Eli Lilly produced as much weight loss as Novo's injectable Ozempic.

Guggenheim's Seamus Fernandez cut his rating on Novo Nordisk stock to Hold from Buy on Thursday, as did Evan David Seigerman at BMO Capital Markets.

The Danish drug company's shares were down 13% on the week, to $58, after Lilly reported Thursday that its pill orforglipron had helped people lose up to 8% of their weight over 40 weeks. It also meaningfully reduced the A1C measure of diabetes in the ACHIEVE-1 Phase 3 trial. Side effects weren't troublesome.

Novo Nordisk was first out with the new generation of diabetes and weight-loss treatments known as GLP1 drugs: first with Ozempic, for diabetes, and then a obesity version called Wegovy. Lilly followed, with Mounjaro for diabetes, and Zepbound for obesity. Prescription data show that Lilly is gaining U.S. market share.

"Has the tortoise caught the hare?" wondered BMO's Seigerman, in his downgrade note. "Lilly has made sizable advancements in its commercial and clinical portfolio, causing it to overtake Novo's early lead."

At Guggenheim, Fernandez had already grown cautious on Novo Nordisk's prospects earlier this week, as he worried that the Danish firm's sales of Wegovy might come up short when it reports March quarter results on May 7. In a Tuesday note, Fernandez cut his sales forecasts for Ozempic and lowered his price target on the stock 20% to $98.

Fernandez also worries about Novo's operating expenses, if its expensive-to-produce large-molecule drugs face competition from Lilly's orforglipron, which is an easy-to-make, small-molecule pill.

Pharmacies lose money on injectables like Ozempic and Mounjaro, says Fernandez, so they'll have incentive to push Lilly's pill.

"Lilly appears positioned to aggressively take share," he writes.

At the least, Novo Nordisk may have to crank up its research and development spending to find competitive compounds, says the Guggenheim analyst. The GLP1 category will get increasingly competitive. While Pfizer abandoned a pill this week that it had been developing, companies like Amgen and Viking Therapeutics have differentiated offerings in testing.

"Novo's franchise is now also facing incremental price risk and in our view, will have to spend more aggressively on the [selling, general, and administrative expenses] line to promote a robust but increasingly challenged brand," says Fernandez.

Looking ahead, Novo Nordisk can hope for a boost if it has positive results from two drug trials, known as evoke and evoke+, which will be the first to test whether GLP1 drugs can ward off Alzheimer's disease. Lilly, for its part, has a stream of other Phase 3 studies reporting on its pill, orforglipron.

Fernandez has now pulled his price target for Novo Nordisk altogether. BMO's Seigerman dropped his to $64.

Write to Bill Alpert at william.alpert@barrons.com

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April 18, 2025 15:20 ET (19:20 GMT)

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