Eli Lilly overtakes: How the "second" in the weight loss drug market defeats the "first" Novo Nordisk AS

Novo Nordisk's development in the weight loss drug market may be one of the most ironic cases of "first-mover disadvantage" in business history.

In 2023, driven by the explosive demand for Ozempic and Wegovy, Novo Nordisk briefly became the most valuable company in Europe, even surpassing luxury giant LVMH. However, today, the company's stock price has plummeted over 50% in just one year, the CEO has been forced to step down, and its market share is continuously eroding, overtaken by American competitor Eli Lilly.

Faced with surging market demand, Novo Nordisk not only underestimated expectations leading to supply shortages but also failed to ramp up production, instead opting to restrict demand. This conservative strategy has given Eli Lilly valuable time to catch up. Eli Lilly's Zepbound has already surpassed Wegovy in weekly prescriptions in the U.S., its R&D pipeline is more promising, and its marketing strategy is more aggressive.

Amidst fierce competition, in the first quarter of this year, Novo Nordisk's sales growth of 19% year-on-year fell short of expectations, and the sales of its flagship weight loss drug Wegovy also did not meet expectations, leading to a downward revision of its annual sales guidance.

Analysts are beginning to question: Will Novo Nordisk become the next "pioneer" to be surpassed by latecomers?

The Fatal Mistake of Underestimating Demand, Competitors Seizing the Opportunity

Novo Nordisk's downfall began with a seemingly reasonable but ultimately disastrous judgment: they believed Wegovy would face market resistance like the earlier weight loss drug Saxenda. Based on this conservative expectation, the company set moderate production plans.

However, reality hit them hard. Wegovy reached the prescription level that Saxenda took 5 years to achieve in just 5 weeks. Former CEO Lars Fruergaard Jørgensen later recalled:

I initially thought those were patients waiting in line, with pent-up demand, and that the situation would normalize. But it didn't; demand continued to grow.

Faced with a supply shortage, Novo Nordisk adopted the strategy that pharmaceutical companies are least willing to take—restricting demand. Sales representatives were instructed to discourage doctors from prescribing to new patients, and the company even implemented a rationing system, withholding low-dose starter packs for new patients to ensure existing patients could receive high-dose medications.

The supply shortage opened the door for competitors , and the shortage gave Eli Lilly valuable time to catch up. Eli Lilly launched the weight loss version Zepbound in 2023. Clinical studies show that Zepbound can deliver more significant weight loss effects than Wegovy, capable of reducing over 20% of body weight Despite Eli Lilly facing supply shortages due to high demand, its resolution speed is much faster than that of Novo Nordisk. Currently, Zepbound's weekly prescription volume in the United States has surpassed that of Wegovy, while Mounjaro, although still lagging behind Ozempic, is rapidly closing the gap.

Loss of R&D Pipeline, Lagging Marketing Strategy, Unexpected Dismissal of CEO

In the future weight loss drug development race, the scales are tipping in favor of Eli Lilly. Eli Lilly has announced positive clinical trial data for two highly anticipated experimental drugs, including an attractive oral version.

In stark contrast, Novo Nordisk has encountered a series of setbacks in R&D. Data from March this year showed that the clinical data for the company's next-generation weight loss drug CagriSema fell short of expectations; in December last year, disappointing results from a study led to Novo Nordisk's stock price plummeting over 20% in a single day, evaporating nearly $100 billion in market value.

In terms of marketing, Eli Lilly has also seized the initiative. The company was the first to launch consumer-facing online services to sell weight loss drugs at discounted cash prices, targeting those without insurance coverage. Eli Lilly also struck an agreement with major telehealth company Ro to sell discounted weight loss drugs.

Previously, Novo Nordisk announced that due to concerns that the company was losing its first-mover advantage, CEO Lars Fruergaard Jorgensen would resign. The dismissed CEO Jørgensen remains in position while the company searches for a new chief executive officer. His predecessor, Lars Rebien Sørensen, chairman of the foundation that holds voting control over the pharmaceutical company, will join the Novo Nordisk board.

However, despite the difficult situation, Novo Nordisk has not been completely sidelined. Analyst Seigerman believes the company can still turn things around by leveraging the potential of CagriSema and developing other new drugs targeting various segments of the growing market. Recently, Novo Nordisk has shown more positive signs. The company signed an agreement with CVS to make Wegovy the preferred weight loss drug for its drug benefit plan members.

A spokesperson for Novo Nordisk stated that the company remains the global sales market leader for GLP-1 drugs, serving nearly two-thirds of patients using such drugs to treat diabetes and obesity. Analysts expect the weight loss drug market to reach $150 billion this year