Novo Nordisk shares outperform Lilly's after summer plunge

However, Novo has hit some speed bumps. In September, the stock fell on disappointing data from an interim study of its weight-loss pill Monlunabant and a U.S. Senate hearing on the drugmaker's pricing of Ozempic and Wegovy. The Danish company declined to comment on its share price performance to Lilly.

US prescription trends for Wegovy also caused market unrest. Still, weekly numbers can be volatile and Peter Welford, an analyst at Jefferies, said the latest data for Wegovy's starter doses “is now just shy of volumes before the sudden decline.”

Investors are also focusing on the production capacity for the drugs in demand. Market expectations for weight-loss treatments in the next few years are “very high,” meaning sustainable production is needed, said Jared Holz, health equity strategist at Mizuho.

“If this does not come to fruition, some of these estimates will pose risks for both companies,” he said.

Lilly has poured billions of dollars into new plants and existing facilities, and as of this month there is no longer a shortage of Zepbound and Mounjaro, according to U.S. regulators.

Meanwhile, Novo Nordisk plans to purchase three production sites, although that transaction has drawn criticism on antitrust grounds. The company is confident the deal is not anticompetitive, it said in an emailed statement, adding that it had no knowledge of any competing GLP-1 products being manufactured at the sites.

Investors waiting for Novo Nordisk shares to regain some momentum are also pointing to late trial results on its experimental obesity drug CagriSema, due out this year.

The shot combines the drug in Wegovy with another weight-loss supplement, and UBS Group AG analyst Jo Walton estimates Novo Nordisk shares could move more than 10% – in either direction – depending on the outcome.

Although Novo Nordisk was the first to bring the obesity drug to market, Lilly shares have actually performed better over the long term, posting an annual return of 53% over the past five years versus Novo Nordisk's 35%.

Both companies' valuations have fallen recently as other drug developers race to enter the obesity market. Novo shares trade at about 28 times expected earnings, making the Danish stock about 34% cheaper than Lilly – although still in line with its own average valuation over the last five years.

Lower valuations for Novo Nordisk and Eli Lilly provide an “attractive entry point” for long-term investors, Mirabaud's Middleton said.

– With support from Sara Sjolin.

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