The GLP-1 Power Shift: Novo Nordisk's Struggles and Eli Lilly's Rise

The GLP-1 receptor agonist market, once a fortress for Novo Nordisk, is now a battleground. In 2025, the Danish pharmaceutical giant's dominance has eroded under a cascade of compounding pressures: supply chain failures, regulatory missteps, and a lag in innovation. Meanwhile, Eli Lilly has seized the opening, leveraging superior efficacy, aggressive pricing, and a robust pipeline to redefine the obesity and diabetes treatment landscape. For investors, the question is no longer whether Novo's 20% stock decline reflects undervaluation—it's whether the company can reverse its trajectory in a market now tilted decisively toward its rival.

Novo Nordisk: A Perfect Storm of Strategic Missteps

Novo's challenges began with a critical miscalculation: underestimating the explosive demand for GLP-1 drugs in obesity treatment. By 2024, Wegovy and Ozempic faced severe shortages, leaving patients and physicians frustrated. This created a vacuum that Eli Lilly's Zepbound and Mounjaro quickly filled. Compounding the issue, Novo's inability to scale production exacerbated the problem, creating a self-reinforcing cycle of lost prescriptions and delayed manufacturing.

The proliferation of compounded GLP-1 drugs further eroded Novo's market share. Despite the FDA's 2025 announcement ending the legal basis for mass compounding, unauthorized semaglutide products continued to flood the market. Novo's lawsuits against compounding pharmacies have yielded limited results, with an estimated one million patients still using these knockoff versions. This not only undercut Novo's pricing power but also damaged its brand equity.

Innovation has also faltered. Novo's CagriSema, a combination therapy, delivered only 22.7% weight loss—below the 25% target—while Eli Lilly's tirzepatide-based drugs achieved 27%. The gap widened further as Novo lagged in developing an oral GLP-1 alternative, a critical next step for patient adoption.

Eli Lilly: A Masterclass in Execution

Eli Lilly's ascent in the GLP-1 space is a study in strategic precision. By 2025, the company had captured 53% of the U.S. market, driven by Zepbound and Mounjaro's superior efficacy and pricing. Zepbound's vial format, priced 30% lower than Wegovy, appealed to cost-sensitive patients, while tirzepatide's 27% weight loss results outperformed Novo's offerings.

Lilly's supply chain agility was another differentiator. While Novo grappled with shortages, Lilly ramped up production, ensuring consistent availability. This was paired with aggressive DTC marketing and telehealth partnerships, expanding access to patients previously locked out by formulary restrictions.

The pipeline is equally compelling. Orforglipron, an oral GLP-1/GIP agonist, is on track for 2026 obesity approval, while retatrutide—a triple-agonist in Phase III—could redefine the market. Analysts project Mounjaro and Zepbound to generate $36 billion and $25.5 billion in revenue by 2030, respectively.

Valuation and Risk: A Tale of Two Giants

Novo Nordisk's current P/E ratio of 14.46 is a stark contrast to its historical averages, suggesting a value play. However, the company's revised revenue growth projections (8–14% for 2025) and operating margin contraction (10–16%) indicate structural challenges. Analysts remain split, with a “Hold” consensus and a wide range of price targets ($57–$160). While the stock appears oversold, the risks of compounded drug competition and innovation gaps cannot be ignored.

Eli Lilly, by contrast, trades at a lofty TTM P/E of 64.24x, reflecting high growth expectations. Yet, forward guidance suggests this premium will normalize as earnings expand. With a 29% operating margin and 73.69% ROE, Lilly's financials are robust. Analysts rate it a “Buy,” with a 34% revenue growth forecast for 2025 and a $691.50 price target.

Investment Implications

For long-term investors, Novo Nordisk's 20% decline may appear attractive, but the company's strategic missteps and regulatory headwinds suggest the discount reflects deeper risks. Its recent $4.1 billion U.S. manufacturing investment and partnership with CVS Health are positive steps, but these are reactive measures in a market now dominated by Lilly.

Eli Lilly, meanwhile, offers a more compelling case. Its pipeline, pricing power, and supply chain resilience position it to outperform in the GLP-1 space. While its valuation is rich, the projected earnings growth and market expansion justify the premium. Investors seeking exposure to the obesity-drug boom should prioritize Lilly over Novo, which faces an uphill battle to reclaim its former dominance.

In the GLP-1 arms race, Novo Nordisk's missteps have handed Eli Lilly a commanding lead. The question for investors is no longer whether the market will grow—it's who will reap the rewards. For now, the answer is clear.