Berenberg analysts have adjusted their forecasts for obesity drug patient penetration following positive data on co-morbidities, competitor weight-loss results, and discussions with physicians and payers.

Novo Nordisk (NYSE:) and Eli Lilly (NYSE:) may have a brief period of relief with limited rebate pressure due to constrained GLP-1 supply. However, analysts expect higher volumes to eventually necessitate lower prices, the investment bank noted.

As a result, Berenberg has hiked its global obesity market sales forecasts to approximately $150 billion by 2035, up from the previous $125 billion.

“Maintaining positive momentum with co-morbidity and nextgeneration datasets is critical,” said analysts, reiterating a Buy rating on LLY and Zealand Pharma, while reiterating Hold on NVO shares.

Investor discussions have increasingly focused on competition and price pressure. According to Berenberg, this is understandable given the recent spate of competitor Phase 1 readouts and ongoing US political discussions aimed at reducing the price of obesity GLP-1 drugs. Novo’s CEO is scheduled to participate in a Senate hearing on September 24 to debate the pricing of Ozempic and Wegovy.

This attention has raised investor concerns ahead of the anticipated inclusion of Novo’s semaglutide on the second list of drugs subject to direct price negotiations under Medicare, which will be announced on February 1, 2025. Analysts believe that the impact of the US Inflation Reduction Act (IRA)-related drug price cuts will be manageable for the sector, although Novo is expected to face significant challenges related to semaglutide in 2027.

The wave of clinical trial readouts in obesity is expected to continue for both incumbents and emerging competitors. The most critical for Novo is the Phase 3 CagriSema data, expected by the end of the year. The market believes Novo could surpass Lilly’s Zepbound and achieve at least 25% weight loss with this next-generation asset. Subsequently, Lilly has the opportunity to further raise the weight loss bar with Phase 3 retatrutide data expected in 2026.

“Ahead of this, Phase 3 data for orforglipron in H2 2025 could provide Lilly with the first oral, synthetic GLP-1 and shift the debate on supply/demand further.”

Looking further ahead, Berenberg analysts do not expect GLP-1 supply to meet demand until 2026 at the earliest. In the meantime, Novo and Lilly can only cater to a minority, which is likely to keep price pressure limited. They now forecast limited rebate expansion in 2024-25, but foresee a notable increase in rebates from 2026 onwards.

“As supply constraints ease and next-generation assets enter the market, Novo and Lilly will be incentivized to negotiate with the payers for broader access; this is reflected in our modeling.”

Both LLY and NVO stocks are trading on significant valuation premiums, analysts added, when compared to non-obesity peers. However, they believe that this is “warranted given the far superior growth outlook.”



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