The Food & Drug Administration announced last week that the Ozempic and Wegovy shortage for Novo Nordisk‘s (NYSE:NVO) was over. It said the Danish pharmaceutical had sufficient supply of its semaglutide therapies to meet current and future, which could mark a pivotal moment for the drug maker. 

The announcement also curtailed the ability of compounding pharmacies’ to produce cheaper, unapproved versions, strengthening Novo’s control over the semaglutide market and protecting its hefty pricing power. 

While that’s a death knell for Hims & Hers (NASDAQ:HIMS), as it will no longer be able to sell its knockoff treatment, it could be a goldmine for Novo Nordisk as analysts predict the market could be worth $100 billion to $150 billion annually by the early 2030s. 

An effective workaround

Even with the shortage, Novo Nordisk saw fourth-quarter Wegovy sales more than double to 19.9 billion Danish kroner ($2.9 billion), and full-year 2024 sales jumped 25% to $40.6 billion, driven by U.S. demand. 

The pharmaceutical’s aggressive investments, including spending $6 billion to $8 billion on factory expansions, hiring 10,000 workers, and running its facilities 24/7, position it to capitalize on this supply stability. 

With Ozempic now the world’s top-selling diabetes drug and Wegovy the leading obesity treatment, Novo retains its title as Europe’s most valuable company and could see sustained growth if it maintains its first-mover advantage over rival Eli Lilly (NYSE:LLY). 

Yet Novo Nordisk’s growth prospects are far from guaranteed, and the end of the shortage doesn’t erase deep vulnerabilities. 

Confronting reality

First, the pharma expects sales growth to slow in 2025, forecasting 16% to 24% growth in local currencies, down from 26% in 2024, as competition heats up and market dynamics shift. Eli Lilly is growing faster with Zepbound and Mounjaro, as the active ingredient tirzepitide offers a more effective result.

Novo Nordisk also cut profits in the second quarter due to weaker Wegovy sales and rebates and it missed revenue estimates in the third quarter. NVO stock is down 40% from its highs, especially after disappointing trial results for CagriSema, a new drug candidate that suffered less-than-expected weight loss outcomes.

Lilly standing pretty

Eli Lilly is riding a wave of momentum that could give it an edge over Novo Nordisk. U.S. weekly prescriptions for the fourth quarter exceeded those of its rival, resulting in revenue jumping 28% to $9.35 billion. Mounjaro and Zepbound sales soared 62% to $2.5 billion.

Now that Novo Nordisk’s supply has stabilized, Lilly can capture more share as doctors and patents have choices. Also, Lilly’s manufacturing investments, including a $2.1 billion expansion in North Carolina and a $1.5 billion facility in Germany, ensure it can meet rising demand, with capacity for 100 million pens annually by 2025. With a market cap of $825 billion, it could become the next trillion-dollar stock over the next year.

Don’t gild the lily

But Lilly’s position isn’t flawless. There are serious issues that could undermine its edge, particularly its reliance on Mounjaro and Zepbound. With patents expiring by 2037, that leaves it vulnerable to a sales vacuum as generics materials. 

The costs of its treatments are also a risk, as it draws scrutiny from lawmakers and regulators targeting high drug prices. This could force rebates, lower margins, or restricted access if insurers push back, especially since Medicare doesn’t cover weight-loss drugs, limiting Lilly’s market.

Lilly has had supply constraints of its own for Zepbound and scaling production to meet demand could stretch its capacity. Fourth-quarter gross margins also saw a 15% drop due to higher manufacturing costs, while its full-year revenue outlook fell short of expectations, signaling potential slowdowns.

Last, competitors are working on a weight loss-in-a-pill version that could significantly undermine Lilly’s (and Novo’s) injection formula.

The verdict

Eli Lilly is better positioned than Novo Nordisk in this post-shortage landscape, thanks to tirzepatide’s superior efficacy, stronger prescription growth, and robust manufacturing investments. Sales could potentially hit $50 billion to $55 billion annually if it captures 40% to 50% of the obesity market. Also, Lilly’s U.S. market dominance gives it a slight edge, especially in light of Novo’s slowing growth this year.

But it’s not a slam dunk. Lilly has a high valuation, faces pricing pressure, and has its own manufacturing risks. Novo’ Nordisks established brand and global scale could still claw back share, especially overseas. Lilly’s chances of leading the GLP-1 race long-term are higher, but investors should brace for volatility if competition intensifies or regulators crack down on pricing. The edge Eli Lilly has is real, but it’s neither deep nor wide.

 

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