Regulatory Risk and Market Share Vulnerability in the GLP-1 Sector

The GLP-1 receptor agonist (GLP-1 RA) sector has become a cornerstone of modern medicine, with blockbuster drugs like Novo Nordisk’s Ozempic/Wegovy and Eli Lilly’s Mounjaro/Zepbound dominating the obesity and diabetes markets. However, the sector’s explosive growth has exposed vulnerabilities tied to regulatory enforcement and compounded drug loopholes. These dynamics are reshaping the competitive landscape, with Novo Nordisk and Eli Lilly adopting divergent strategies to navigate the challenges.

FDA Enforcement: A Double-Edged Sword

The U.S. Food and Drug Administration (FDA) has taken a cautious approach to regulating GLP-1-related supplements and compounded drugs. Despite the surge in demand for GLP-1 medications, enforcement actions have been sparse. For instance, in December 2024, the FDA issued a single warning letter to supplement company Veronvy for marketing products like “Elily Veronvy” that claimed to mimic pharmaceuticals and deliver “extreme weight-loss results” [1]. This limited regulatory response has allowed the supplement market to exploit the GLP-1 trend, creating a gray area where unapproved products make drug-like claims.

The FDA’s inaction has also emboldened compounding pharmacies. In 2025, the agency removed Ozempic and Mounjaro from the drug shortage list, theoretically ending the legal justification for compounded versions. However, compounding pharmacies have circumvented this by rebranding their products as “personalized” formulations, altering dosages or adding ingredients to bypass restrictions [6]. This loophole has created a parallel market for cheaper, unapproved alternatives, directly challenging the dominance of Novo and Lilly.

Market Share Shifts: Novo’s Legal Battles vs. Eli’s Innovation

Novo Nordisk has responded aggressively to compounded drug threats. The company has filed over 130 lawsuits against compounding pharmacies, arguing that these products are unsafe and violate intellectual property rights [1]. Novo’s legal strategy aims to protect its market share, particularly for Wegovy, which saw a 36% sales increase in the U.S. in Q2 2025 [3]. However, the company faces headwinds: compounded drugs are siphoning customers in the out-of-pocket market, where price sensitivity is high. Additionally, Novo’s stock has suffered due to profit warnings and underwhelming results from its experimental drug CagriSema [3].

Eli Lilly, by contrast, has focused on innovation to solidify its position. Zepbound, its GLP-1 drug for chronic weight management, captured 57% of the U.S. market in Q2 2025 [1]. The company is also advancing experimental therapies like orforglipron and bimagrumab, which offer benefits such as muscle preservation and reduced gastrointestinal side effects [5]. These innovations not only address unmet patient needs but also create a moat against generic or compounded competitors.

Financial and Regulatory Pressures

The GLP-1 sector’s financial dynamics are equally complex. In 2023, GLP-1 drugs contributed 1.7% to overall U.S. drug spending, despite being used by less than 3% of patients [1]. By 2025, the market is projected to reach $13 billion, with long-term growth potential exceeding $100 billion as indications expand into heart disease and addiction [2]. However, this growth is tempered by rising costs and regulatory scrutiny. The Inflation Reduction Act and potential tariffs on pharmaceutical imports add uncertainty, while health plans are implementing prior authorization and value-based contracts to manage expenses [4].

Investment Implications

For investors, the GLP-1 sector presents both opportunities and risks. Novo Nordisk’s aggressive legal stance and direct-to-consumer initiatives (e.g., NovoCare) aim to mitigate compounded drug threats, but its reliance on a narrow product portfolio and recent R&D setbacks could hinder long-term growth. Eli Lilly’s diversified pipeline and focus on innovation position it as a stronger contender, though its success depends on the commercial viability of upcoming therapies.

Conclusion

The GLP-1 sector is at a crossroads. While the FDA’s limited enforcement and compounded drug loopholes have created a fragmented market, companies like Novo Nordisk and Eli Lilly are adapting through legal, strategic, and technological means. Investors must weigh these factors carefully: Novo’s defensive tactics and Eli’s offensive innovation each carry distinct risks and rewards in a rapidly evolving landscape.

Source:
[1] Managing Sustainable Drug Spend: 5 Trends Reshaping Pharmacy Benefits in 2025 [https://www.pharmacytimes.com/view/managing-sustainable-drug-spend-5-trends-reshaping-pharmacy-benefits-in-2025]
[2] Pipelines Report 2025: Anti-obesity boom [https://www.pharmalive.com/pipelines-report-2025-anti-obesity-boom/]
[3] Novo Nordisk Faces Rising Competition Amidst Market Challenges for Wegovy [https://growthshuttle.com/novo-nordisk-faces-rising-competition-amidst-market-challenges-for-wegovy/]
[4] Medical cost trend: Behind the numbers [https://www.pwc.com/us/en/industries/health-industries/library/behind-the-numbers.html]
[5] Healthy Returns: New Weight Loss Drug Data Show Eli Lilly... [https://www.cnbc.com/2025/06/25/healthy-returns-eli-lilly-novo-nordisk-release-weight-loss-drug-data.html]
[6] How Compounded GLP-1s Are Challenging Big Pharma ... [https://www.forbes.com/sites/sindhyavalloppillil/2025/07/08/a-dose-of-disruption-how-compounding-pharmacies-are-challenging-big-pharma-on-glp-1-drugs-and-drug-patents/]