A Hard No on Eli Lilly After Latest in Weight-Loss Drug War
But might we buy Novo Nordisk on weakness?
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This makes two days of winning for Eli Lilly LLY.
On Thursday morning, Hims & Hers Health HIMS got the bad news that the FDA has determined that there was no shortage of Eli Lilly's GLP-1 medical tirzepatide, which is the active ingredient in both Mounjaro (for diabetes) and Zepbound (primarily for obesity). This determination was viewed as a negative for any company selling compounded versions of therapies based upon GLP-1 agonists. HIMS sold off 7.7% on Thursday after taking an 8.3% hit on Wednesday ahead of the news (on Fed meeting day).
Fast forward to Friday morning: Danish pharmaceutical giant Novo Nordisk NVO posted late-stage clinical trial data for its next generation obesity drug, CagriSema. Apparently, the once-a-week injectable therapeutic helped patients reduce weight by 22.7%, which was below the 25% that the firm had forecast. What CagriSema is, is a combination of semaglutide and cagrilintide. Semaglutide is the active ingredient in the firm's current weight-loss therapeutic, Wegovy, which competes against Lilly's Zepbound much in the same way Ozempic competes against Mounjaro. Apparently, over the span of 68 weeks, the drug candidate was well-tolerated by subjects involved. NVO shares sold off sharply in response.
But Wait, There's More...
Gan & Lee Pharmaceuticals of China, this week, received FDA clearance to run a head-to-head Phase 2 trial of its own weight loss candidate, the injectable GZR18 against Lilly's tirzepatide (the force behind Mounjaro & Zepbound). GZR18 will be tested for efficacy for both weight loss and in the treatment of type 2 diabetes.
Buy Novo Nordisk on Weakness?
Readers can see that NVO put together a head-and-shoulders pattern from this past February through early October with a $117 pivot. That would put the downside target just around $88. I see the shares trading with an $83 handle this morning, so they have come in enough. The daily MACD is now postured bearishly, and the stock's relative strength is about as weak as RSIs go. Technically, it is time to think about initiating NVO on the long side. I'd say that, at least now, that the air is out of the balloon, NVO is a candidate.
Buy Eli Lilly on Strength?
Readers will see that this stock, though it was my top performer for the first half of the year, has been in a lousy place for some time, technically. Readers will immediately see the giant double-top pattern that stretched from April into November. The pattern runs with a pivot of $748, which had been under pressure until this morning. I don't mean to scare people, but technically, should that pivot crack a target price of more than $100 below pivot is possible.
My Thoughts
Obviously, as America in general slides into a state of decreasing metabolic health, problems like obesity and diabetes will continue to grow. These problems are almost epidemic in this country and in other developed nations as high-carb diets including highly-processed foods remain popular. That said, there is a lot of competition on the way in this space and it is unlikely that there are just the "big two" going forward.
Since the beginning, the Lilly drugs have done a more effective job in producing weight loss in patients. That said, I would not get back into LLY with a chart that looks like that. I would consider taking a look at NVO a few days after the dust from this sell-off settles. Not that I would commit. Additionally, NVO pays a better dividend than LLY.
The plan for me? A hard no on LLY on strength and a definite maybe on NVO on weakness. That said, the final words from the movie "Gladiator" come to mind... "just not today."
At the time of publication, Guilfoyle had no positions in any securities mentioned.
