Investors want to know whether Eli Lilly is seeing the same pricing pressures on its blockbuster weight loss drug Zepbound that Novo Nordisk experienced with its competing drug Wegovy in the second quarter. Novo Nordisk shocked investors on Wednesday when its latest results fell short of Wall Street’s expectations. Shares are reeling, down 8%, after the company lowered its forecast for 2024 operating profit growth. Eli Lilly will report its second-quarter results before the market opens on Thursday. Analysts surveyed by LSEG expect the drugmaker to earn $2.60 per share on revenue of $9.92 billion. Helping to drive the nearly 19% expected revenue growth from the second quarter of 2023, is demand for Lilly’s GLP-1 drugs Mounjaro and Zepbound, also known as tirzepatide. But Novo’s results triggered some selling of Lilly’s stock on Wednesday, with shares down 3%. While Eli Lilly’s stock remains up about 32% year to date, concerns about increasing competition in the category have resulted in a nearly 16% decline for Lilly shares over the past month. The outlook for the obesity drugs will largely determine where shares head from here, analysts say. LLY YTD mountain Eli Lilly shares year to date Why the stocks are under pressure Novo Nordisk has been working hard to boost manufacturing capacity for its popular GLP-1 drugs and expand access to Medicaid patients. Management said both of these efforts will help its long-term growth, but they have hurt performance in the near term. Eli Lilly is making similar attempts with Zepbound, but its launch is at an earlier stage than Wegovy. Second-quarter sales of Ozempic, Novo’s diabetes treatment, rose 4% from the first quarter, while Wegovy revenue grew 24% quarter over quarter. However, Wells Fargo analyst Mohit Bansal noted that the number of prescriptions written for Ozempic in the second quarter was up 17%, while Wegovy scripts grew 58%, according to IQVIA, over the same time period. In part, Wegovy’s net price is declining due to efforts to expand access to Medicare patients in 20 states. While patients enrolled in the federal health insurance program typically aren’t covered for weight loss medications, the Food and Drug Administration approved Wegovy to be used as a way to prevent heart attacks and strokes in people with cardiovascular disease who are overweight or obese. This ruling opened the door for expanded coverage. “Their [Novo Nordisk management’s] focus is on securing supply to address as many patients as possible, and noted that price typically declines with increasing volume,” Bansal wrote in a research note Wednesday. Barclays analyst Emily Field told clients in a research note that she would be a buyer of Novo Nordisk shares on the weakness. “Was this the picture perfect quarter we’d hoped for? Not necessarily,” she said. “But at the end of the day, obesity is going to be a volume driven market and the overwhelming message we got from the company this morning is that volume is on track.” Prices moving to parity? It’s also important to remember that Wegovy is priced at a premium to Zepbound. “It remains to be seen if additional rebates for the higher priced Wegovy could be driving down overall prices, or if it’s just trending towards achieving parity pricing vs. Zepbound,” Bansal said, adding that the demand for these medications, which mimic incretin hormones to suppress appetite and control blood sugar, remains strong. Bansal expects Lilly’s diabetes treatment, Mounjaro, saw a 14% increase in volume from the first quarter to the second quarter, while Zepbound volume rose 59% over the same period. But how pricing shaped up won’t be known until results are released on Thursday. Bansal said he expects both drugs will top estimates even if price weakened somewhat during the quarter. “Ultimately, the overall demand environment for incretins continues to remain very strong with NVO increasing FY24 top-line guidance by 2% at the midpoint after a 1% increase last quarter,” he said. Lilly could adjust its revenue forecast as well, especially in light of manufacturing gains it has made, which has helped removed tirzepatide from the FDA’s shortage list. Pipeline progress David Song, an investment partner at Tema ETFs, said investors also will be focusing on any updates Lilly provides for the drugs it has in development. Song said Lilly has “a pole position” with orforglipron, an oral GLP-1 drug it is developing. However, there are other pipeline updates that will be highly anticipated in the second half of the year, including data from Amgen on MariTide and Novo on CagriSema. JPMorgan analyst Chris Schott expects health outcomes data for tirzepatide will be a key catalyst for Lilly’s stock in the coming months. “While there have been a number of early stage pipeline updates from competitors in the obesity space, we do not see these agents as differentiated or as likely to dislodge meaningful share and our view that LLY and Novo will remain dominant in the incretin space remains unchanged,” said Schott. He expects Mounjaro and Zepbound to reach $16.5 billion in sales by the end of this year, then grow to $27 billion by 2025. By 2026, sales should reach $36.5 billion.
EMEA Tribune is not involved in this news article, it is taken from our partners and or from the News Agencies. Copyright and Credit go to the News Agencies, email news@emeatribune.com Follow our WhatsApp verified Channel