Only paradoxical at first glance: Because some people lose weight faster, others get fatter. The blockbuster pharmaceutical drugs for diabetes and obesity patients have exactly this effect. They ensure weight loss without any effort and are therefore also well received as lifestyle products. Since the drugs are expensive, the application has to be repeated regularly and not only sick people use the preparations, they bring their manufacturers fat profits.
The weight loss medications work through blood sugar-lowering ingredients that signal a patient’s brain that they are full. The business model is likely to work in the long term: According to an projection by the World Health Organization’s World Obesity Atlas, half of the world’s population will be overweight by mid-2035 if the current demographic trend continues. Among children and young people, the number of severely overweight people could even double during this period.
The year 2023 was already going really well for the US company Eli Lilly: The top-selling diabetes drug Mounjaro with the active ingredient tirzepatide has been approved since June 2022, and the newer drug Zepbound with the same active ingredient has been available in the USA as an obesity drug since November 2023 . The group’s “New Products” division, mainly Mounjaro and Zepbound, contributed around $2.2 billion to group sales in the final quarter of 2023. This rose overall by 28 percent compared to the same quarter of the previous year.
According to a statement from the group, revenue is expected to continue to rise to up to $41.6 billion in 2024. That would be an increase in sales of around 20 percent compared to 2023. The hype drug Mounjaro alone contributed almost $5.2 billion to the total sales of $34.1 billion. This is a massive jump in sales compared to the year it was approved. In 2022, the drug generated just 500 million euros in the second half of the year.
The confident forecast has convinced investors: Eli Lilly shares have risen by more than ten percent in the past five days. The one-year increase is now more than 115 percent. The majority of analysts reacted with a buy recommendation. However, with a price-earnings ratio (P/E) of 59, the US company is significantly more expensive than some of its competitors in the diet market.
The best-known products on the market include the so-called weight loss syringe Wegovy and the diabetes medication Ozempic from Novo Nordisk. The Danish group’s preparations were so successful last year that Novo Nordisk became the most valuable European group with a current market value of 491 billion euros, permanently replacing the luxury goods manufacturer LVMH at the top.
Novo Nordisk’s obesity business sales rose a strong 147 percent at constant exchange rates last year. Overall, the group had sales equivalent to around 31 billion euros, a group-wide annual increase of 31 percent. The bottom line is that consolidated profits also rose significantly, by a good 50 percent to the equivalent of 11.2 billion euros. This significantly exceeded the Danes’ annual targets, which they had forecast at 31 to 37 percent in the middle of 2023 after the initial successes with Wegovy and Ozempic. The good performance was not lost on investors, and the share price has increased by a good 70 percent over the course of one year and is currently trading at $118.70. With a P/E ratio of 35, Novo Nordisk is valued significantly more favorably than its US competitor Eli Lilly.
The US company Pfizer also planned to secure market share with the obesity drug Danuglipron. That would have been important: The group is struggling with declining sales from business with the Covid-19 vaccine Comirnaty and the antiviral drug Paxlovid. However, Pfizer had to stop the test program for danuglipron at the end of 2023: More than half of the test subjects showed side effects such as nausea and vomiting. Pfizer wants to continue researching the tolerability of the drug and expects research results this year.
Last year’s sales were $58.5 billion, a good 40 percent less than the previous year. For 2024, Pfizer wants to achieve a sales range of 58.5 to 61.5 billion US dollars and is relying on, among other things, cost savings and new products.
After all: With a P/E ratio of under 17, Pfizer shares are still valued significantly more favorably than the other two stocks presented.
This article first appeared in the business magazine “Capital”, which, like stern, is part of RTL Deutschland.
