Novo is betting on its next chapter as Eli Lilly gains more ground in GLP-1s

Every time Novo urges investors to look ahead, Eli Lilly gives them another reason to look back at its widening lead over the Danish drugmaker.

Novo this week laid out an ambitious strategy to reignite growth beyond its top-selling Wegovy and Ozempic injections, which face patent expirations in key markets in the early 2030s. At its Capital Markets Day on Monday, the company promised a pipeline of potential blockbuster products, including drugs that would diversify from its core area of obesity and diabetes.

But Wall Street so far isn't convinced by Novo's road map. Investors pummeled the drugmaker's stock, underwhelmed by growth targets that matched industry averages rather than outpacing them. They were also skeptical of the lack of clarity around a near-term turnaround plan.

At the same time, Lilly continues to chip away at its rival's market share — including in the burgeoning obesity pill space.

Novo hopes to keep its early lead in the oral weight loss market after the successful launch of the Wegovy pill, months ahead of Lilly's rival pill, Foundayo. Novo CEO Mike Doustdar told CNBC on Tuesday that early adoption suggests patients may have been waiting for an alternative to injections.

"If that continues to the extent that we have seen, then yes, mathematically, by the end of the decade, there is going to be a larger portion on the pill than injectable," he said.

In an exclusive interview with CNBC on Monday, Lilly CEO Dave Ricks said the drugmaker's new obesity pill, Foundayo, is slowly gaining ground in the U.S. One-third of new GLP-1 pill patients are taking Lilly's drug, and its share of that oral market is growing "week by week," Ricks told CNBC in Houston, Texas.

Lilly is also claiming an early lead in the newly established Medicare market for obesity drugs, after the federal program started covering those treatments in July. Ricks said 700,000 seniors have started GLP-1s in Medicare following the start of coverage, and 70% of those patients are on Lilly's drugs.

He added that Medicare patients have shown a particular preference for Lilly's obesity injection Zepbound, which has helped the company become the dominant player in the broader market. Lilly said in August that it held about a 61% share in the U.S. GLP-1 space in the second quarter, while Novo held roughly 39%.

While investors appeared to want more detail on Novo's plans for post-Wegovy and Ozempic growth at Monday's investor event, the drugmaker is betting that there could be more than one successor to the mega-blockbuster franchise.

For Novo, the challenge is not solely replacing revenue from Wegovy and Ozempic when they lose exclusivity and face more generic competition. It is convincing investors that the company can regain momentum in a GLP-1 market it helped establish years before Lilly came into the picture, even as its rival continues to build its lead.

Even as Novo works to turn itself around after two bruising years marked by multiple setbacks, analysts say Lilly has several advantages that could help it maintain its spot at the top of the obesity drug market.