JPMorgan's view on the US stock market in 2024 | Pharmaceuticals: Will "weight loss giants" Eli Lilly and Novo Nordisk continue to dominate?

The "miracle" weight-loss drugs are causing a stir in the billion-dollar market, and Novo Nordisk and Eli Lilly, the two leading weight-loss drug companies, have gained significant first-mover advantages.

In the first three quarters of this year, Novo Nordisk's sales of semaglutide alone reached a staggering $14.232 billion, an 86% YoY increase. Lilly's tirzepatide achieved revenue of $1.41 billion in the third quarter, surpassing the $1 billion mark for the first time, with a YoY increase of 650%.

Will Novo Nordisk and Lilly's "impressive performance" continue in 2024? Will the hot weight-loss drug market cool down in 2024?

According to a report released by Morgan Stanley last week, with the continued fermentation of the GLP-1 weight-loss drug trend, the global weight-loss market is expected to reach $77 billion by 2030, a significant increase from the previous estimate of $54 billion, with approximately 25 million people in the United States using obesity drugs:

As we have been emphasizing over the past two years, 'obesity' is seen as the 'new hypertension', and we believe that 'weight-loss drugs' will become the largest pharmaceutical market ever. In the past year to year and a half, the use of obesity drugs in the United States has far exceeded expectations, mainly due to the expansion of insurance coverage and a significant increase in patient demand.

At the same time, with a significant improvement in supply issues next year, the global weight-loss drug market will further expand.

Morgan Stanley believes that in the face of such a huge weight-loss drug market, Lilly and Novo Nordisk's "dominant" position is difficult to shake, and they continue to be "overweight" on these two companies:

We believe that Lilly and Novo Nordisk have a wide "moat" in the field of weight-loss drugs, including clinical data, optimization of next-generation products, and billions of dollars of investment in the supply chain over the years.

From a clinical data perspective, we believe that Lilly and Novo Nordisk's clinical trial results in 2024 will further demonstrate the ability of GLP-1 drugs to develop multiple indications related to obesity. In the past year, GLP-1 has successively included multiple major indications such as cardiovascular disease, heart failure, and chronic kidney disease (such as liver, brain, intestines, and pancreas).

GLP-1 products have always been "stronger than the previous generation": after Lilly launched Bydureon, Novo Nordisk developed liraglutide; Lilly then launched dulaglutide, and Novo Nordisk responded with semaglutide; now, Lilly has introduced tirzepatide. Therefore, it has always been a battle between Novo Nordisk and Lilly.

Morgan Stanley believes that Lilly's GLP-1 drugs will exceed expectations in sales in 2024, becoming a key driver of its revenue growth, while Novo Nordisk will overcome its production capacity bottleneck and achieve a 30% revenue growth target:

Our 2024 forecast for the two companies' main GLP-1 drugs shows that Lilly's Mounjaro/Zepbound sales will exceed the general consensus. Novo Nordisk has already actively reduced the supply of Wegovy and Ozempic starting doses, and we expect the supply chain for Wegovy in 2024 to be significantly strengthened, with Novo Nordisk achieving 30% revenue growth in 2024. In 2024, we will see more clinical trial results regarding the multi-adaptive certificate.

According to the report by Morgan Stanley, they are closely monitoring the performance of potential competitors such as Novo Nordisk and Eli Lilly. However, it is expected that the clinical trial results of these companies will not exceed the standards set by Novo Nordisk and Eli Lilly. There are several key events in the next year that may have an impact on the obesity drug market:

• The launch of Lilly's Zepbound (Tirzepatide) injection and the expansion of Novo Nordisk's Wegovy production capacity: The expansion of supply for these products is crucial to achieving short-term and long-term sales goals. Both Lilly and Novo Nordisk are facing capacity constraints in 2023, and both companies have taken measures to increase supply in 2024. It is expected that the capacity of both companies will be somewhat limited until 2025.

• OSA (obstructive sleep apnea), HF (heart failure), and SELECT-LIFE studies: These are the three clinical trial results related to obesity that we are most concerned about in 2024. It is expected that Zepbound will show positive results in the OSA and HF trials, further supporting the advantages of this drug (and the class) beyond weight loss.

• Wegovy's SELECT-LIFE study is a 10-year study of SELECT participants, with data from multiple patient subgroups being regularly released to support a deeper understanding of the long-term effects of GLP-1 drugs in obese patients, such as diabetes prevention.

• Novo Nordisk's oral Amycretin Phase 1 study: Although still in the early stages, we believe that the data may indicate the potential for this drug to become the best oral product, capable of achieving weight loss effects surpassing Zepbound/Wegovy.

• This result is crucial for Novo Nordisk's prospects in the oral diabetes obesity market and the company's ability to expand its "tail" capabilities after the expiration of the Wegovy patent in 2032.

• Phase 2 study results of Amgen's dual-target weight loss drug AMG133: Among the results of competitors in 2024, we are most interested in Amgen's AMG133, which, according to early data, shows comparability with Zepbound and may have a dosing interval of every 4 weeks or longer (Zepbound/Wegovy is weekly). It is expected that AMG133 will generate sales of $3.3 billion by 2030.