Novo Nordisk’s ongoing supply issues with its blockbuster diabetes drug, Ozempic, are creating a significant opening for its rival, Eli Lilly. On Monday, Novo Nordisk, based in Denmark, disclosed that the shortage of Ozempic has deteriorated and is expected to continue well into the fourth quarter. The company is also grappling with supply constraints for Wegovy, a weight-loss medication chemically similar to Ozempic.
Eli Lilly, meanwhile, has reported an improvement in the supply chain for Mounjaro, its diabetes treatment, and Zepbound, its competing obesity drug. This development comes as Novo Nordisk faces mounting challenges to maintain its market position amid tightening inventories.
In a recent note published by the European Medicines Agency (EMA), Novo Nordisk recommended healthcare professionals limit new prescriptions for the lower doses of Ozempic, specifically the 0.25 mg and 0.5 mg strengths, until supply conditions stabilize. This guidance underscores the gravity of the supply constraints, with Novo Nordisk yet to provide any definitive timeline for resolving these shortages.
The impact of these supply issues is evident in the company’s financial performance. In the second quarter, sales of Ozempic and Wegovy fell short of market expectations, posting revenues of approximately $4.2 billion and $1.7 billion, respectively. This underperformance has created a window of opportunity for Eli Lilly, which has been quick to capitalize.
Eli Lilly’s CEO, David Ricks, stated in August that the shortages of Mounjaro and Zepbound would be resolved “very soon.” Reflecting this optimism, Zepbound generated over $1.2 billion in revenue in the second quarter, while Mounjaro sales reached $3.1 billion.
Despite the shortages, both companies’ drugs remain listed on the U.S. Food and Drug Administration’s (FDA) shortage list. However, all dosage levels of Eli Lilly’s Mounjaro and Zepbound are currently marked as “available” on the FDA’s database, suggesting that the worst may be over for Eli Lilly’s supply chain challenges.
From a stock performance perspective, Eli Lilly has significantly outperformed Novo Nordisk over the past year. Eli Lilly’s shares have surged more than 72% in the last 12 months, compared to a 47% gain for Novo Nordisk. On Tuesday, Eli Lilly’s stock remained flat, while Novo Nordisk’s American depositary receipts (ADRs) dipped by 1%. Meanwhile, Novo’s shares listed in Denmark rose by approximately 0.4%.
Key Takeaways:
- Supply Shortages Affecting Novo Nordisk: Ozempic and Wegovy, two key revenue drivers for Novo Nordisk, continue to face supply shortages, with no clear resolution in sight.
- Eli Lilly Capitalizes on Novo’s Challenges: Lilly’s improved supply status for Mounjaro and Zepbound is positioning it to capture more market share as Novo Nordisk struggles.
- Stock Performance Divergence: Eli Lilly has outperformed Novo Nordisk over the past year, reflecting investor confidence in its ability to navigate supply challenges better.
Conclusion: For investors and traders, the contrast between the supply issues faced by Novo Nordisk and Eli Lilly’s improved supply situation presents a compelling narrative. Eli Lilly appears to be in a stronger position to benefit from the market’s current dynamics, given its recent supply chain stabilization and significant stock outperformance. Meanwhile, Novo Nordisk’s lack of clarity on when its shortages will be resolved may continue to weigh on its stock performance.
