Novo Nordisk and Eli Lilly are the two success stories in anti-obesity treatments. But the Danish lab has fallen behind since the beginning of the summer, after a series of setbacks that its American rival was able to avoid. A valuation gap has opened up. Let's see why in detail.
Novo Nordisk, Europe's largest listed company, has had a respectable 2024 performance on the stock market (+14.5% to date), but is a long way from that of its rival Eli Lilly (+54%). Both laboratories were the first to launch treatments for obesity, a class of drugs that currently dominates all others due to the dizzying size of the addressable population.
Between 2021 and 2023, both titles posted breathtaking performances (Chart 1). The American group dominated its European peer, but only "marginally", if we can call a 250-point gap marginal (+250% for Lilly versus +225% for Novo).
The gap has widened since this year (graph 2), and more precisely since July.
Figure 2
The two stocks began to diverge as the positive narrative surrounding the Danish lab began to deteriorate. In July, rumors began to surface about possible hearings of Novo executives by US congressmen anxious to know more about the availability and price of certain insulins. In the same month, Roche reported progress on an anti-obesity treatment. Then, on August 7, Novo lowered its annual operating profit forecast, citing competition from Lilly's Zepbound and difficulties in ramping up production. In September, a new rumor surfaced concerning pressure from the US authorities to lower the price of Ozempic in the next round of negotiations. Then the laboratory published half-baked results from a clinical trial of its anti-obesity pill (Wegovy is injected).
All in all, the storytelling has been largely in Eli Lilly's favor since the beginning of the summer, which partly explains the divergence of the shares.
Because when it comes to stock ratios, the game is largely in favor of Novo Nordisk, which is cheaper by far on the vast majority of metrics over 2024, 2025 and 2026. This is shown in the illustration below, based on the average expectations of more than 25 to 30 analysts for the two stocks:
There's another element that has been explaining the difference between the two stocks for some time. Here are two more infographics from MarketScreener's Consensus pages, showing the evolution of analysts' earnings-per-share expectations for the two stocks.
Eli Lilly - Source: MarketScreener
Novo Nordisk - Source: MarketScreener
It's easy to see that something has changed between the two stories, justifying, for the time being, Lilly's earnings premium (you can find the deterioration in Novo's momentum in MarketScreener's ratings, on the Composite Momentum section). Pessimists will say that it serves Novo right. Optimists will say that an interesting entry point has appeared.
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