How Ozempic maker Novo Nordisk blew its lead -2-

Lilly had its own struggles producing enough tirzepatide, but it quickly turned to new ideas that aligned with the way many patients were behaving - like consumers, not patients.

The company launched LillyDirect, a direct-to-consumer platform that connects prospective patients with physicians, in January 2024 and started selling Zepbound in vials, which are cheaper and easier to make, to the growing number of cash-paying customers later that year.

Lilly's tirzepatide came off the FDA's drug-shortage list two months earlier than semaglutide, and Lilly kept pressing its advantage. Earlier this year, it came out with the multidose KwikPen for Zepbound, which is less expensive than the single-dose pen. The KwikPen is what is available to Medicare beneficiaries.

The company now plans to keep its manufacturing capacity at around 80% to 90% to ensure there's room to ramp up in case demand for its medicines spikes again, according to Chief Financial Officer Lucas Montarce. It's something Lilly has never done before.

"This is about Lilly's ability as a U.S. company to turn on a dime to increase manufacturing," said a former Novo employee and longtime industry strategist, speaking on the condition of anonymity.

'They bet the house on semaglutide'

Around 2018, it became clear that semaglutide didn't just help people with diabetes better manage their blood sugar. It also helped them lose weight - a lot of it.

The leaders at Lilly paid very close attention to semaglutide, according to Jan Lundberg, who ran research and development at Lilly from 2010 to 2018. Lundberg, a Swede who is now retired, quit a prominent job at AstraZeneca in London to take a position at Lilly's headquarters in Indianapolis.

Lilly doubled down on R&D, albeit with some failures, as part of an internal strategy called "timely valued medicines" that prioritized experimental therapies that could beat the standard of care, according to Lundberg. Instead of putting another GLP-1 like semaglutide into trials, Lilly decided to pair a GLP-1 with a GIP receptor agonist in what Lundberg described as a "very close collaboration between R&D and the business unit." This combo would become tirzepatide, the main ingredient in Mounjaro and Zepbound.

"When the semaglutide data came, Lilly wanted to create something as good or superior to semaglutide quickly," Lundberg said.

In early 2018, Novo produced data showing that semaglutide helped people with obesity lose 13.8% of their body weight. But by October of the same year, Lilly started pointing out that tirzepatide could also help people lose weight, although it wouldn't launch an obesity-specific trial until 2019. Lundberg said Lilly initiated head-to-head studies comparing tirzepatide to semaglutide by mid-2019. That was "one reason for our success," he said.

In the most important Phase 3 trials, Zepbound's highest dose instigated a 20.9% weight loss, while Wegovy's produced a 14.9% weight loss. And in a head-to-head trial designed by Lilly, Zepbound also came out on top. Not only did Zepbound help people lose more weight, some doctors believed it came with fewer of the gastrointestinal side effects that make it hard for some patients to stay on these drugs.

"All my new starts are usually going to be Mounjaro and Zepbound," said Scott Isaacs, an endocrinologist in Atlanta who used to consult for Novo. "Why not start with the best?"

By 2025, Lilly took the lead in the booming market for weight-loss drugs. Tirzepatide generated $36.5 billion in revenue in 2025. By contrast, Novo Nordisk's semaglutide franchise posted about $33.5 billion in revenue last year.

Lilly and Novo's strategies have continued to diverge. Lilly now has two GLP-1 drugs for weight loss - Zepbound and the new GLP-1 pill Foundayo - and two more in the works.

It's also developing retatrutide - a highly efficacious injection that pairs GLP-1 and GIP with glucagon - which could be approved in late 2027 or early 2028, bringing in $5.4 billion in estimated annual sales by 2030, according to analyst estimates compiled by FactSet. Not only did retatrutide produce 28% average weight loss in a clinical trial, a less powerful dose delivered the same weight loss as Zepbound - with high tolerability. And it already has a place in the culture. People are buying the raw ingredients from China and mixing their own versions of the drug at home. They call it "ratatouille" or "reta."

Another experimental Lilly drug called eloralintide is even better on the tolerability front, potentially setting up the medication for use on its own or with other medications. The amylin injection is in Phase 3 studies, with clinical data arriving possibly by 2028 and sales of $2.6 billion by 2030.

Lilly "has the pieces in place to further raise the standard of care in the obesity space," J.P. Morgan analysts wrote in a note in June. "We see the company, if anything, further extending its leadership position in the $200bn+ incretin/obesity market longer term."

Meanwhile, Novo's weight-loss strategy hinges almost entirely on semaglutide. It sells semaglutide as an injection, a high-dose injection and a pill. Even its experimental next-generation shot, CagriSema, includes semaglutide.

Novo revealed in February that Lilly's Zepbound outperformed its own experimental next-generation shot in a clinical trial that Novo itself designed. Its stock fell 16.5% that day.

"They bet the house on semaglutide," said Michael Leuchten, a longtime industry analyst at Jefferies. "Yes, there were manufacturing or capacity issues. Yes, there was a misunderstanding of what the obesity market would be, but I think in fairness, if Novo had the lineup of assets that Lilly created, their life might have been more easy."

One novel asset in Novo's pipeline is zenagamtide, a GLP-1/amylin agonist, which is in Phase 3 trials as an injection and is also being tested as a pill. It also moved a triple agonist similar to retatrutide into Phase 2 trials this year. But Novo's future is still tied up with semaglutide. CagriSema, which could get approved in December, is expected to produce about $4.3 billion in obesity sales by 2030, according to a FactSet estimate. The Wegovy pill is widely considered to have had the best pharmaceutical launch of all time. Lilly's GLP-1 pill Foundayo, approved four months later, is still playing catch-up.

The pills, which are less effective than injections, are commonly used by people who want to lose less weight or are trying to maintain their weight loss after using the injectable drugs. Younger people and men also prefer the pill over an injection, according to Novo. The pills are important to both companies' growing GLP-1 franchises, though analysts say injections will still account for the lion's share of the GLP-1 market, and any newer, more effective shots like retatrutide will be reserved for people with severe obesity under clinical oversight.

"I don't think the race is finished," said Stephen Farrelly, global lead for pharmaceuticals and healthcare at Dutch bank ING Group. "We do believe this is going to be a massive new industry. There's a long road left to run on GLP."

Wegovy has claimed several other follow-on FDA approvals, such as for reducing the risk of cardiovascular events like heart attacks, but it was Lilly that pursued approval of a GLP-1 for sleep apnea, opening the door to a lucrative category without a single other competing medication.

"It wasn't so much that [Lilly] would really make different decisions from Novo," said Brian Smith, a management professor at the University of Hertfordshire and an adviser to pharmaceutical companies. "It's that they just made them faster."

'There was a culture that wasn't rewarding performance'

Lars Fruergaard Jørgensen was paid tens of million of dollars less as CEO of Danish drugmaker Novo Nordisk than his counterpart at U.S. rival Eli Lilly.

Inside Novo's offices, factories and headquarters - which is designed in the shape of an insulin molecule - a Danish ethos of humbleness rules, analysts and former employees say. Workers speak directly with each other, something that several former employees in the U.S. told MarketWatch they appreciated. The focus has been on consensus, rather than making quick decisions, they added. Jørgensen, the former CEO, took the bus to work events and raised his hand to speak on Microsoft Teams calls, according to Nadeem Sarwar, a former Novo employee who posted online about his experience at the company. Jørgensen worked in a co-working space shared with colleagues and espoused "the Novo Nordisk way," telling "60 Minutes": "The values are based on ordinary human decent values." Jørgensen declined to comment.

Novo didn't pay its executives top dollar. Jørgensen earned about $8 million at Novo in 2024, while Lilly CEO David Ricks received a compensation package of $29.2 million, regulatory filings show.

Novo spent a lot of money on other things, however. It hired a net 28,800 employees between 2022 and 2024, a 60% headcount increase in three years, according to the company's annual reports, resulting in a workforce of 77,349. Lilly ended that same year with 47,000 employees. Novo's capital expenditures skyrocketed by 664% in three years to about $6.5 billion in 2024, regulatory filings show, not including the $11 billion acquisition of Catalent's manufacturing facilities. Its operating expenses soared some 80% in three years to about $16.8 billion in 2024.

Novo's spending ramped up so much that it became one of the top employers in Denmark. Denmark's economy grew 1.8% in 2023, driven nearly completely by Novo's manufacturing output, according to Statistics Denmark. The rest of the Danish economy shrank.

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08-05-26 1253ET