The emerging battle for market share in the lucrative obesity market, which analysts at Goldman Sachs estimate could be worth more than $100 billion by 2030, is starting to heat up.

Sales of market-leading weight-loss drug Wegovy more than doubled to around £1 billion in the first quarter of 2024, helping to drive total sales for Danish drugmaker Novo Nordisk (NOVO-B:CPH) up 24% to DKK 65.3 billion or £7.5 billion.

Despite topping consensus earnings estimates and increasing full year sales and profit forecasts, the shares fell 4% on the day of the results (2 May) on concerns over lower prices of Wegovy in the US.

Don’t feel sorry for shareholders though. After all, they have enjoyed a whopping 430% gain over the last five years as excitement over future profit growth has propelled the shares ever higher to the point where Novo briefly became Europe’s largest company by market capitalisation.

The company’s chief executive Lars Fruergaard Jorgensen played down price concerns saying: ‘With the volume opportunity we have at hand, that significantly outweighs what we see in terms of lower price points.’

There is a debate in the US over the high cost of Wegovy, which has a list price of $1,349 per month or about £1,100 compared with around £150 in the UK.

With roughly 40% of US adults being medically obese, strain on the healthcare system has led to insurers like Medicaid restricting access to Wegovy.

Competition in the obesity space was inevitable and it seems to be arriving thick and fast. The US’s biggest healthcare company Eli Lilly (LLY:NASDAQ) launched its own obesity drug Zepbound in late November 2023.

Some analysts project sales of the weekly injectable treatment could top $1 billion in its first year on the market and potentially become the biggest selling drug of all time.

If first quarter results are a good guide, Zepbound looks well on its way to meeting those expectations. Reporting on its first quarter (30 April) Lilly revealed Zepbound generated $517.4 million of sales as the company posted 28% growth in group sales and a 74% increase in earnings per share.

Further competition concerns knocked Novo Nordisk shares on 3 May after US biotech firm Amgen (AMGN:NASDAQ) revealed ‘encouraging’ results for its own weight-loss drug MariTide which is undergoing late-stage clinical trials.

Amgen chief executive Robert Bradway highlighted the drug’s differentiated profile which will likely entail monthly injections rather than weekly doses under the current regime for both Wegovy and Zepbound.

Given the high stakes, investors should expect further twists and turns as the obesity market evolves. 

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