Eli Lilly is gaining on Novo Nordisk in the obesity race

Novo Nordisk had a big head start in the race to dominate the weight-loss market. But Eli Lilly is catching up fast.

The two companies’ divergent earnings reports this week showed that Indianapolis-based Lilly is moving faster than its Denmark-headquartered counterpart in the race to win the GLP-1 war.

On Wednesday, Novo Nordisk reported that quarterly sales of Wegovy, its weight-loss medication, came in about 14% short of Wall Street expectations. Its stock cratered, bringing Lilly down as well. The next day, Lilly provided a more sanguine picture. Its fast-growing GLP-1 medications, Mounjaro and Zepbound, beat analysts’ estimates, allowing the company to increase its revenue outlook for the year by $3 billion. Its stock surged 9.5% on Thursday, lifting Novo with it.

For the quarter, Lilly posted $4.3 billion in combined sales for Zepbound and Mounjaro. That compares with about $5.9 billion for Novo’s Ozempic and Wegovy. By 2026, analysts expect Zepbound and Mounjaro to bring in $30 billion, compared with over $40 billion for Novo’s two key products, according to consensus estimates on FactSet. But a quicker manufacturing ramp-up by either company could change things.

At this point, the market will buy as much as Lilly and Novo can make. Excess demand is being supplied by a range of pharmacy compounders across the country. So Eli Lilly’s significant guidance bump indicates it feels increasingly confident about its ability to increase manufacturing as it invests heavily in plants in Indiana, North Carolina, Ireland and Germany. Novo also boosted its sales-growth guidance range, though not as significantly.

In a market with seemingly unlimited demand but constrained supply, whoever can get more product out the door fastest is likely to cement its place in the market and take the leading position.

As of now, Novo is the market leader. Its drug Ozempic, approved for diabetes but taken off-label for weight loss, has been ingrained in the popular culture. Wegovy, which has the same active ingredient as Ozempic but is marketed for weight loss, was approved by the Food and Drug Administration in 2021. By contrast, Eli Lilly’s Zepbound was only approved last fall.

And yet, while Novo got there first, it didn’t move with nearly as much zeal to expand capacity. Less than a year after approval, Eli Lilly’s weekly prescription volume of Zepbound is about where Novo was with Wegovy volume more than two years in, according to JPMorgan data. And while all doses of Eli Lilly’s Zepbound and Mounjaro are no longer on the FDA shortage list as of earlier this month, the lowest dose of Wegovy continues to be listed in shortage.

To be fair, Novo said it likely has enough manufacturing capacity at this stage, but has deliberately limited starter doses to ensure it can keep supplying patients. “We have been now consistently saying to physicians and also FDA that we want to have a responsible approach to starting patients,” Chief Executive Lars Fruergaard Jørgensen said on an analyst call. “So you can trust that when you start treatment with Wegovy from Novo Nordisk, we take care of you.” And Novo is moving to expand aggressively as well. The company has committed to investing $6.8 billion in expanding manufacturing capacity and to paying $11 billion for three sites previously owned by Somerset, N.J.-based Catalent.

Evan Seigerman, a senior research analyst at BMO Capital Markets, said that while Lilly and Novo make similar drugs, they have very different cultures. “Novo Nordisk is a scrappy Danish company that primarily sold insulin. Suddenly it became the biggest pharma company in Europe by market value, and they’re experiencing growing pains,” he said. “Lilly has more experience with launching blockbuster drugs. They launched Prozac.”

Differences in culture and location underpin a different geographic approach as well, he said. While Novo has sought to introduce its GLP-1 drugs around the world simultaneously, Lilly is much more focused on first conquering the more profitable U.S. market, he said.

During its analyst call, Lilly announced it would soon start selling Zepbound in single-dose vials. The medication is currently available in pre-filled pens, which are complex to make. The pens, not the drug itself, are creating a manufacturing bottleneck. Once the vials are available, patients will be able to inject themselves by using a syringe. The company has also introduced a multidose pen in markets outside the U.S., something Seigerman said could eventually be done in the U.S.

There is a reason Lilly and Novo have now become the two largest pharma companies in the world in terms of market cap. They are both expected to benefit from the weight-loss bonanza. But that doesn’t mean there won’t be a leader in a race of two.

Write to David Wainer at david.wainer@wsj.com