New
weight
loss
drugs
like
Ozempic
are
making
waves
in
the
pharmaceutical
world,
and
shares
of
their
manufacturers
are
soaring.
The
two
names
synonymous
with
the
trend
are
Novo
Nordisk
(NVO),
maker
of
Ozempic
and
Wegovy,
and
Eli
Lilly
(LLY),
which
produces
Mounjaro
and
Zepbound.
Morningstar
currently
rates
both
stocks
as
overvalued,
but
they’ve
seen
massive
gains
over
the
past
year
regardless.
Novo
Nordisk
is
up
more
than
82%,
while
Eli
Lilly
is
up
more
than
97%.
As
these
drugs –
known
as
GLP-1s,
initially
developed
to
treat
diabetes –
continue
to
be
refined
and
the
stocks
keep
climbing,
some
strategists
say
it
will
be
nearly
impossible
for
competitors
to
gain
a
meaningful
advantage.
“We
expect
that
Novo
Nordisk
and
Eli
Lilly
will
retain
the
vast
majority
of
the
market
for
as
far
as
you
can
see –
probably
80%
to
90-plus%,”
said
Fayez
Sarofim
&
Co.
chief
investment
officer
Gentry
Lee
at
a
panel
during
the
2024
Morningstar
Investment
Conference.
Obesity
Drug
Stocks
Morningstar
Direct
An
Enduring
Duopoly
The
two
companies
“have
pumped
billions
of
dollars
into
research
and
development,
capital
investment,
and
manufacturing,”
Lee
said.
They’ve
also
conducted
scientific
studies
that
allow
them
to
get
reimbursement
from
insurance
companies,
which
makes
their
market
dominance
even
more
durable.
“Once
you’ve
done
those
[studies],
doctors
trust
you,
you
have
a
brand
name
in
the
market,
you
have
a
sales
force
out
there
representing
those
drugs,”
Lee
added.
Together,
these
factors
mean
competing
companies
will
find
it
“exceptionally
difficult
to
break
into
the
market
in
a
meaningful
way,”
he
continued.
“Our
expectation
would
be
that
the
duopoly
will
remain
intact
for
a
long,
long
period.”
That’s
not
to
mention
the
potential
for
a
much
larger
market
in
years
ahead.
Lee
pointed
out
that
GLP-1
drug
patents
will
begin
expiring
in
the
2030s,
after
which
more
affordable
versions
will
become
available
to
more
patients.
Of
course,
expired
patents
also
open
the
doors
to
competing
manufacturers.
An
Evolving
Market
for
Obesity
Drugs
As
demand
grows
for
GLP-1
medications,
manufacturers
are
racing
to
develop
better
ones
and
scale
up
production.
“We
are
in
stage
one,”
said
Debra
Netschert,
a
portfolio
manager
for
healthcare
strategies
at
Jennison
Associates.
“This
market
is
going
to
look
totally
different
in
10
years.”
That’s
another
headwind
for
competitors.
Netschert
pointed
out
that
drugmakers
(including
Lilly
and
Novo)
are
already
developing
new
iterations
of
GLP-1
drugs
and
planning
for
the
years
ahead.
“If
[a
competitor
comes
out]
with
a
drug
in
2030
that’s
beating
Mounjaro
and
Zepbound
today,
that’s
not
really
relevant,
because
Lilly
could
have
their
first
oral
data
at
the
beginning
of
2025.”
Not
to
mention
the
additional
data
from
other
manufacturers
coming
down
the
pike.
Of
course,
no
one
has
a
crystal
ball
for
this
market,
and
today’s
top
players
aren’t
immune
to
future
competition,
especially
given
how
rapidly
weight
loss
drugs
are
evolving.
“The
biggest
risk
is
clearly
some
company
coming
up
with
new
technology
that
we’re
not
counting
on,”
Lee
said.
“They
need
to
keep
innovating
to
stay
ahead
of
those
patent
expirations
as
well.”
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