Did Eli Lilly Just One-Up Novo Nordisk?


The pharmaceutical industry is scrambling for breakthroughs in weight loss treatment. Demand for medications such as Ozempic, Wegovy, Mounjaro, and Zepbound is rising. All of these diabetes and obesity treatments are developed by just two companies: Novo Nordisk (NVO -0.41%) and Eli Lilly (LLY -0.34%). The two pharma giants are competing intensely.

While Novo Nordisk currently holds a commanding lead in the glucagon-like peptide 1 (GLP-1) market, Lilly may have just outmaneuvered its rival. Let’s dig into a unique partnership that Lilly just struck and assess how it could help the company catch up to Novo Nordisk.

A match made in heaven

Earlier this year, Lilly released a direct-to-consumer online pharmacy called LillyDirect. The platform aims to facilitate patient care by helping people find doctors or have treatments delivered directly to their doors.

This sounds like a hefty logistics effort, doesn’t it? Well, Lilly just struck a partnership with one of the world’s leading logistics specialists, Amazon. Although Amazon is best known for its e-commerce and cloud computing technologies, the company has mastered delivery services.

Amazon Prime is a subscription service that provides free two-day delivery for items found in the company’s online marketplace. Amazon’s speedy delivery and Lilly’s patient care look like a match made in heaven.

A person receiving a package

Image source: Getty Images.

What the partnership could spell for Lilly

The partnership with Amazon comes at an interesting time. While 2023 was a great year for both Novo Nordisk and Eli Lilly, executives at the companies have been warning investors about hefty investments they’ve been making to mitigate supply and demand problems. In fact, earlier this year, Novo doled out $16.5 billion to acquire drug subcontractor Catalent to help bolster manufacturing efforts for Wegovy and Ozempic. 

According to data compiled by Statista, Amazon Prime has over 200 million members across 20 countries. Eli Lilly now has a lucrative opportunity to provide patient care to Amazon’s base of Prime members.

Is now a good time to buy Eli Lilly stock?

Lilly competes with Novo Nordisk on the diabetes side through its blockbuster drug Mounjaro. For obesity, it has the recently approved Zepbound — Lilly’s answer to Wegovy.

Wegovy just scored a major win from the Food and Drug Administration (FDA), as it was granted an expanded indication to start treating patients with heart disease. This news should ignite a sense of urgency for Lilly as it works to scale up production of Zepbound.

The relationship with Amazon should help Lilly penetrate a growing diabetes and obesity market. Given that 2024 will be the first full year that Zepbound is commercially available, it will be interesting to monitor its progress against Wegovy. Moreover, I’ll be curious to see if Lilly’s management attributes any portion of the company’s growth to the partnership with Amazon.

While the strategic deal with Amazon is not reason enough to pour into Lilly stock, I think this relationship will be good for the company’s growth. Tapping into Amazon’s enormous customer base could help Lilly in the long term.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adam Spatacco has positions in Amazon, Eli Lilly, and Novo Nordisk. The Motley Fool has positions in and recommends Amazon. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.



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