Yahoo Finance Eli Lilly, Novo Nordisk stocks soar after weight-loss drug trial boosts outlook
Surprising initial data from a study by Novo Nordisk announced Tuesday shows the company's weight-loss drug Wegovy can also reduce heart attack and stroke risks by 20% over five years in some patients.
Novo said the eagerly awaited study results, which have not been peer reviewed yet, showed that patients on Wegovy had a 20% lower incidence of heart attack, stroke, or death from heart disease compared with those on a placebo.
The five-year trial monitored obese non-diabetic patients on Wegovy and showed that they had a 20% lower incidence of cardiovascular events (the details of which were not broken down by event by Novo) than a placebo group.
The news has boosted the stocks of both Novo Nordisk (NVO), which also makes Ozempic, and Eli Lilly (LLY), maker of Mounjaro, a Type-2 diabetes drug also linked to weight loss. Both companies were up more than 15% in Tuesday's session, well above some analyst estimates. Morgan Stanley estimated Lilly would trade up more than 5% based on the data.
Lilly will also be testing Mounjaro for additional benefits in a trial that is set to end October 2027.
The boost puts Eli Lilly in the top spot for market capitalization among healthcare giants, at more than $500 billion, overtaking United Health Group (UNH) after it added more than $70 billion Tuesday, according to Lee Brown, Third Bridge global sector lead for healthcare.
"That's really remarkable given its market cap," Brown said. "You're talking about a 20% year-over-year increase. For a company of this size that's truly impressive, investors are happy."
The insurance coverage question
The 20% reduction in stroke and heart attack risk was better than experts expected, and could help boost the argument that insurers should cover the drugs.
In a note Tuesday, Leerink Partners analysts said the trial results "may raise the bar" for future drugs, like Eli Lilly's, and provides a "perception positive for LLY and the GLP-1 class in terms of payor coverage."
Currently, insurers and employers provide a mixed bag of coverage decisions. Some insurers are requiring prior authorization or have stopped coverage of the weight loss drugs, known as GLP-1s for the hormone they mimic that helps slow digestion. But there are indications of some increase in coverage.
Eli Lilly's earnings Tuesday showed that Medicare Part D access has increased to 73% of eligible patients, compared with 60% in the prior quarter, according TD Cowen analysts. Meanwhile, commercial insurers saw 67% of prescriptions paid compared to 55% in the prior quarter for Mounjaro.
That's good news for a market with no signs of slowing demand, an ongoing shortage of some drugs, and a large cash pay population.
Mounjaro sales contributed to strong revenue results for the company in the second quarter, totaling $980 million — more than the $740 million Wall Street consensus.
The market opportunity has only grown with Novo's new trial results.
"It'll be interesting to see as they progress with Mounjaro whether they'll demonstrate a similar effect. I suspect it will," Third Bridge's Brown said.
Novo Nordisk said Tuesday it has filed with the FDA and in the UK for an expansion of the use of Wegovy for reducing adverse heart attack and stroke risks.
Follow Anjalee Khemlani on Twitter @AnjKhem.
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