Market Watch: Novo Nordisk Crashes 15% as Next-Gen Obesity Drug Loses Head-to-Head Trial Against Eli Lilly's Tirzepatide

The REDEFINE 4 trial was an open-label, head-to-head study pitting Novo Nordisk's CagriSema — a combination of semaglutide and cagrilintide, a hormone that affects appetite via the amylin pathway — against Eli Lilly's tirzepatide at the 15 mg dose. After 84 weeks, patients taking 2.4 mg of CagriSema achieved 23% body weight loss compared to 25.5% for those on tirzepatide. Crucially, CagriSema did not meet its primary endpoint of demonstrating non-inferiority, meaning the drug statistically failed to prove it was at least as good as the rival treatment.

Novo's Chief Scientific Officer Martin Holst Lange attempted to contextualize the results, noting that the open-label design — where participants knew which treatment they were receiving — could introduce bias in favor of the well-known market drug. He also pointed to 'slightly surprising results' for tirzepatide, which in Lilly's own earlier studies had shown 20.2% weight loss over 72 weeks. The implication was that tirzepatide may have outperformed its historical benchmarks in this particular trial, but the market was unconvinced by the argument.

Despite the disappointment, Novo CEO Mike Doustdar maintained that 'CagriSema has, right now, the best weight efficacy than any product currently in the market,' and the company confirmed it would explore additional trials including higher-dose combinations. Novo filed CagriSema for FDA approval late last year, with a decision expected by late 2026. However, Jefferies analyst Michael Leuchten warned that the drug's 'commercial positioning is increasingly unclear,' estimating CagriSema could account for 15% to 25% of Novo's revenue by 2030 and forecasting that the company could spend up to $35 billion on M&A this year to diversify its pipeline.

The divergence between these two pharmaceutical titans has become dramatic. Eli Lilly now trades at a P/E ratio of 46.0x with a market capitalization of $995.5 billion, while Novo Nordisk has collapsed to a P/E of just 10.95x with its market cap shrinking to $178.2 billion. To put that in perspective, Lilly is now worth roughly 5.6 times more than Novo — a gap that was virtually nonexistent just two years ago when both companies were neck-and-neck in the obesity drug race.

The financial trajectories tell an equally compelling story. Eli Lilly reported Q4 2025 revenue of $19.3 billion with a net profit margin of 34.4%, capping a year where quarterly revenue grew from $12.7 billion in Q1 to $19.3 billion in Q4. Lilly has guided for approximately 25% sales growth in 2026. Novo Nordisk, by contrast, reported Q4 2025 revenue of DKK 78.4 billion with a net margin of 34.0% — still profitable, but the company warned earlier this month that sales and profit growth would decline by 5% to 13% in 2026 due to competition, lower U.S. prices, and loss of exclusivity for Wegovy and Ozempic in certain markets.

Lilly's Q4 Zepbound revenue alone hit $4.2 billion in the U.S. — a 122% spike from the prior year — as tirzepatide-based products have overtaken Novo's semaglutide franchise in total U.S. prescriptions. The KwikPen launch on Monday, offering the convenience of one device for a full month of treatment, adds further competitive pressure at a critical moment.

Eli Lilly's quarterly revenue trajectory over 2025 illustrates the explosive growth dynamics of the GLP-1 market — and how decisively Lilly has captured the momentum. Revenue climbed from $12.7 billion in Q1 2025 to $15.6 billion in Q2, $17.6 billion in Q3, and $19.3 billion in Q4, representing a 42.6% increase over a single calendar year from the year-ago Q4 figure of $13.5 billion.

Gross margins have remained exceptionally strong, running at 85.1% in Q4 2025, up from 82.2% a year earlier. The company's operating income margin hit 45.5% in Q4, reflecting operating leverage as GLP-1 production scales. Diluted EPS for Q4 came in at $7.39, bringing full-year 2025 EPS to approximately $22.92 — a dramatic improvement from 2024 levels that were weighed down by one-time charges.

Analyst estimates project Lilly's revenue continuing to climb, with consensus expecting roughly $21.0 billion for Q3 2026 and $23.4 billion for Q4 2026. The estimated EPS for these quarters sits at $9.11 and $10.07, respectively, suggesting Wall Street sees the growth trajectory sustaining well into next year. At current levels, Lilly trades at approximately 36x trailing earnings — a premium, but one the market appears willing to pay for a company with clear therapeutic dominance and multiple growth levers including the upcoming GLP-1 pill launch expected in Q2 2026.

Monday's trial failure is not an isolated setback but rather the latest in a cascade of challenges that have battered Novo Nordisk over the past 18 months. The stock has now fallen roughly 50% since its 2025 peak, and the fundamental pressures are intensifying on multiple fronts. Beyond the CagriSema disappointment, Novo faces growing competition from compounding pharmacies that sell copycat semaglutide at significantly lower prices — a phenomenon Novo has described as 'illegal mass compounding that poses a significant risk to patient safety.'

The compounding threat materialized most visibly through telehealth firm Hims & Hers, which offered a Wegovy pill copy at a steep discount before pulling it after the FDA said earlier this month it planned to take legal action, including referring Hims to the Department of Justice. While regulatory enforcement may eventually curb compounding competition, the near-term revenue impact has been real and measurable.

Novo's full-year 2025 operating cash flow came in at DKK 119.1 billion, but free cash flow dropped sharply to DKK 29.0 billion from DKK 69.7 billion in 2024, reflecting a massive DKK 90.1 billion in capital expenditures as the company races to expand manufacturing capacity. Total debt stood at DKK 131.0 billion against DKK 194.0 billion in equity as of year-end 2025, yielding a debt-to-equity ratio of 0.67x. The current ratio of 0.80x signals short-term liquidity pressure, though the company's strong operating cash generation provides a buffer. Still, with the 2026 guidance calling for declining growth and the CagriSema setback casting doubt on the pipeline's ability to recapture market leadership, Novo finds itself at a strategic crossroads.

The most provocative question emerging from Monday's carnage is whether Novo Nordisk at 10.95x trailing earnings represents a generational buying opportunity or a justified re-rating of a company losing its competitive edge. As noted by Seeking Alpha analysts, NVO now trades at roughly 13x forward earnings with a nearly 4% dividend yield — metrics that 'price in worst-case scenarios' for a company that still generated over DKK 100 billion in net income in 2025.

The bull case centers on the fact that Novo still sells enormously successful products. The Wegovy franchise generated DKK 79.1 billion in net revenues in 2025, representing 35.9% year-over-year growth. The company successfully launched the first GLP-1 pill for weight loss in the U.S. earlier this year, and semaglutide remains the most widely studied GLP-1 compound with a vast evidence base across cardiovascular, metabolic, and even neurodegenerative indications. Analyst consensus estimates project quarterly revenue in the DKK 68-73 billion range through 2026, suggesting stabilization rather than collapse.

The bear case, however, is formidable. CagriSema was supposed to be Novo's answer to tirzepatide — the next-generation weapon that would re-establish clinical supremacy. Without it, the company faces the prospect of competing on price, convenience, and lifecycle management rather than efficacy leadership. Jefferies' forecast that CagriSema could drive 15-25% of revenue by 2030 now carries significant execution risk, and the suggestion that Novo may need up to $35 billion in M&A spending highlights how urgently the company needs to diversify beyond its existing GLP-1 platform. With Eli Lilly also preparing to launch a rival GLP-1 pill in Q2 2026, every competitive advantage Novo once enjoyed appears to be eroding.