Novo Nordisk and Lilly Slash GLP-1 Prices as Oral Approvals Widen Market Access, Intensifying Competitive Pressure

What happened

Novo Nordisk and Eli Lilly have cut prices for their GLP-1 drugs, including Ozempic and Wegovy, driven by the approval of oral pill versions that expand patient access and increase market competition. This move underscores the escalating pricing war in the obesity and diabetes treatment space, where Lilly's tirzepatide has demonstrated superior efficacy, threatening Novo's market share as highlighted in the DeepValue report. The report already notes Novo's dependence on defending GLP-1 pricing against such threats, with recent guidance cuts and a ~55% stock decline reflecting mounting challenges. Despite strong free cash flow and a low valuation at ~12x earnings, these price reductions could accelerate net margin erosion and undermine the ~77% DCF-based upside if cash flows prove less resilient. Investors must now scrutinize Novo's execution on capacity expansion and pipeline innovation to mitigate these headwinds.

Implication

The price cuts directly threaten Novo's revenue and profitability, likely necessitating downward revisions to earnings and cash flow projections in valuation models. This development amplifies the report's identified risks, such as payer pushback and Lilly's competitive edge, increasing the urgency for Novo to defend market share through execution. Valuation upside from the DCF, estimated at ~77%, now appears more speculative as faster price erosion could reduce future cash flow durability. Monitoring quarterly sales, net pricing trends, and formulary access becomes critical to assess the severity of margin pressure and share loss. Long-term, Novo's investment case hinges even more on successful capacity ramps and pipeline advancements to offset pricing headwinds and sustain growth.

Thesis delta

The original thesis posits significant upside if Novo can defend GLP-1 cash flows against competition and pricing pressure. This news of price cuts suggests that pricing erosion is accelerating, shifting the risk/reward balance towards greater caution by increasing the likelihood of margin compression. Consequently, the investment case now demands higher confidence in Novo's ability to execute on innovation and scale amidst intensified market dynamics.