How the CFOs of Eli Lilly and Novo Nordisk are coping with ‘unprecedented demand’ for weight-loss drugs

Good morning. At least one sector has shrugged off the current economic uncertainty, and now the industry leader has some company: Novo Nordisk’s Ozempic is seeing stiff competition from Eli Lilly as both pharmaceutical giants grapple with surging demand for weight-loss drugs.

Indianapolis-based Eli Lilly (no. 142 on the Fortune 500) is the maker of Mounjaro, classified as Type 2 diabetes drug but which has led to weight loss among patients, and Zepbound, an obesity medication, approved by the FDA in November. The firm's Q1 revenue growth of 26% was driven by new products, primarily by these medications, CFO Anat Ashkenazi said on Tuesday’s earnings call.

Mounjaro sales were $1.8 billion globally, and $1.5 billion in the U.S., up from $568 million and $536 million, respectively, a year earlier. Worldwide revenue for Lilly rose 26% to $8.77 billion year over year, and the firm raised its full-year revenue projection by a range of $2 billion to as high as $43.6 billion.

“Unprecedented demand” led to wholesale backorders of Mounjaro and Zepbound at the end of the quarter, Ashkenazi said on the call. “Each week, hundreds of thousands of people fill scripts for Mounjaro and Zepbound, yet we understand the frustration of those facing prescription delays or uncertainties. While we are working tirelessly to ramp up supply and expect meaningful increases in shipment volumes in the second half of the year, demand continues to outstrip even increased supply.”

The company plans on "rapidly expanding manufacturing capacity," David A. Ricks, Lilly's chair and CEO, said in a statement. Ashkenazi added on the earnings call: “We have six sites right now between the two sites in North Carolina, a site in Ireland, two sites in Indiana, a site in Germany, and then the seventh one that we just purchased. They are all either ramping up or under construction."

When I sat down with Ashenazi in November, she defined the CFO role: “Whether an organization is going through tremendous success and growth, or challenging times, the CFO should anchor the organization back to its core mission and values—and chart the course forward.”

The course forward for Denmark-based Novo Nordisk (no. 151 in the Fortune 500 Europe), the maker of Ozempic and Wegovy, also includes addressing the skyrocketing demand for its products. The firm reported on Thursday that net sales in Q1 were up 24%, and sales within diabetes and obesity care increased by 25%, mainly driven by glucagon-like peptide 1 (GLP-1) diabetes sales growth. (Novo Nordisk commands about 56% of the total market for GLP-1 drugs.) The company also said there were periodic supply constraints of Ozempic in the beginning of the first quarter due to demand.

CFO Karsten Munk Knudsen said on Thursday during Novo Nordisk's earnings call that the prices of both Ozempic and Wegovy should come down in the U.S. largely due to “increasing volume and competition.” More than 25,000 people start using Wegovy each week—five times more “compared to where we started this year," he said.

To expand manufacturing capacity, Novo Nordisk parent Novo Holdings is planning to acquire Catalent, one of the largest drug-manufacturing contractors in the U.S., for $16.5 billion. Novo Nordisk then plans to buy three of Catalent’s manufacturing sites for $11 billion, the company announced in February. For the 2024 outlook, the company said its sales growth is now expected to be between 19% and 27%.

And the sector isn't slowing down. The global obesity drug market could reach $77 billion in 2030, Mark Purcell, Morgan Stanley's European Biopharmaceuticals analyst, stated in a 2023 research report. He'd previously predicted it would reach $54 billion.

"Supply shortages may have put a limit on near-term growth," Purcell said in the report, "but the industry’s pipeline has rapidly expanded to unlock new treatment options."

Have a good weekend.

Sheryl Estrada
sheryl.estrada@fortune.com

María Soledad Davila Calero curated the Leaderboard and Overheard sections of today’s newsletter.

This story was originally featured on Fortune.com