Eli Lilly’s and Novo Nordisk’s Blockbuster Medication

For those that follow the market, the pharmaceutical industry is currently experiencing something of a renaissance due to the rise of blockbuster medication.  A blockbuster drug is a medication that generates annual sales of over $1 billion.  Weight-loss medications like Ozempic and Wegovy are among the latest drugs to reach blockbuster status. Most blockbuster drugs treat chronic conditions that affect many people. like hypertension, high cholesterol, cancer, arthritis, and diabetes — and require chronic care over the long term.

Examples of blockbuster Medications include AbbVie’s (ABBV 1.85%) Humira — an anti-inflammatory drug used to treat a host of conditions, including rheumatoid arthritis and Crohn’s disease — and Pfizer’s (PFE 0.4%) cholesterol drug Lipitor. 

Only about 12% of drugs that make it to clinical trials ultimately get FDA approval. As a result, drug companies often lean heavily on the sale of blockbuster drugs to offset the costs of research and development for drugs that never make it to market. If you’re interested in investing in a company that makes a blockbuster drug, it’s essential to consider whether it has other promising drug candidates in its pipeline. An expiring patent can cause a major source of cash flow to dry up.

Drug patents typically last for 20 years, but that doesn’t necessarily mean a company that develops a drug gets to sell that drug exclusively for 20 years.  Given the lengthy timeline for bringing a new drug to market, a company that develops a blockbuster drug often has a window substantially shorter than 20 years within which to sell the drug before competitors can sell generic versions.

Ozempic and Wegovy are two blockbuster drugs that have recently been in the spotlight. They are glucagon-like peptide-1 (GLP-1). The injectable medications were both intended to treat diabetes, but their popularity skyrocketed as word spread that both are highly effective at helping people lose weight. Novo Nordisk (NVO -0.78%), the Danish company that created the drugs, reported that Ozempic had sales of almost $9.4 billion during the first nine months of 2023, while Wegovy brought in about $3.1 billion in revenue for the same period.   

GLP treatments could be revolutionary.  GLP-1 agonists are a class of medications that help manage blood sugar levels in people with Type 2 diabetes. They mimic the action of the body’s GLP-1 hormone, which helps regulate blood sugar levels and reduces appetite. Some GLP-1 agonists can also help treat obesity. Examples of GLP-1 agonists include Byetta (exenatide), Victoza (liraglutide), Trulicity (dulaglutide), and Ozempic (semaglutide) among others.

Eli Lilly (NYSE: LLY) is making a name for itself in the diabetes and chronic weight management markets. The company’s flagship diabetes drug, Mounjaro, has been an enormous success since gaining approval from the Food and Drug Administration (FDA) in mid-2022.  While investors may not all realize it, Lilly also has another GLP-1 medication called Zepbound. Although it’s only been on the market since November, initial results are encouraging.

According to research conducted by J.P. Morgan, 9% of the U.S. population could be using a GLP-1 medication by 2030. One of the reasons for such a high number of users is that GLP-1 agonists are currently being explored in areas outside of diabetes and obesity.  In fact, back in March the FDA found that the main compound in Wegovy – “semaglutide” — has applications for treating heart disease.  As a result, Novo Nordisk was granted an expanded approval of its obesity care drug to help treat patients at risk of stroke, hypertension, and other cardiovascular complications. 

A few weeks ago, Lilly released encouraging results from a study in which Mounjaro was used to treat people suffering from obstructive sleep apnea (OSA).  In addition to heart disease and sleep apnea, J.P. Morgan’s research suggests that GLP-1 medications have use cases in arthritis, kidney disease, and even Alzheimer’s disease.

For now, Lilly’s Mounjaro and Zepbound are being used to treat diabetes and obesity patients. Last year was the first full year that Mounjaro was commercially available. Sales of the diabetes treatment topped $5 billion — providing Lilly’s second-highest source of revenue.