Better Buy: Eli Lilly vs. Novo Nordisk. The answer is becoming increasingly clear.

It seems like only yesterday that the only thing the medical world could talk about was vaccines to combat the COVID-19 pandemic. Companies such as Pfizer, ModernaAnd Johnson & Johnson made countless headlines as each of these companies played an integral role in the development of vaccines to treat COVID-19.

While these three players are still contributing to the medical world beyond COVID vaccines, healthcare appears to be moving on to its next big thing: weight loss. Input Eli Lilly (LLY -0.02%) And Novo Nordisk (NVO 0.21%)the manufacturers of blockbuster glucagon-like peptide-1 (GLP-1) agonists such as Mounjaro, Zepbound, Ozempic and Wegovy – all of which are used either to treat diabetes or for chronic weight control.

To illustrate just how big of a tailwind these companies have in weight loss, consider that Lilly’s market value is greater than that of Pfizer, Moderna, and J&J combined! In addition, Novo Nordisk is now the most valuable company in Europe – ahead of the luxury fashion group LVMH Moët Hennessy.

While it’s clear that Lilly and Novo Nordisk are having a moment right now, which of these stocks is the better investment? I’ll look at some recent news surrounding Lilly and Novo Nordisk and end my analysis by determining which company I think represents a better opportunity.

Wegovy vs. Zepbound

Although Lilly and Novo Nordisk are each approved to treat weight loss, it is important to understand the intricacies of their respective medications. Novo’s Ozempic is approved by the U.S. Food and Drug Administration (FDA) to treat diabetes, while Wegovy is primarily prescribed to treat obesity. Likewise, Lilly’s Mounjaro is FDA-approved for diabetes, while its sister drug Zepbound is aimed at chronic weight control.

Earlier this month, Lilly released results from a clinical trial in which the company directly compared Zepbound to Wegovy. Over a 72-week period, Lilly tested Zepbound and Wegovy in a population of adults with obesity or patients with “at least one weight-related medical problem and no diabetes.”

According to the study results, patients who took Zepbound experienced an average loss of 20% of their body weight. In comparison, those who took Wegovy lost about 14% of their body weight. A secondary endpoint was the discovery that about 32% of patients who took Zepbound lost a quarter of their body weight, while those who took Wegovy lost only about 16%.

Novo’s latest fumble

On December 20, Novo announced data from a Phase 3 clinical trial introducing its newest weight loss candidate, CagriSema. CagriSema combines the main active ingredient in Wegovy and Ozempic, semaglutide, with an amylin-based compound called cagrilintide.

According to the study data, patients who took CagriSema experienced an average reduction in body weight of 22.7%. Although this significantly exceeds the results of Ozempic, only 40% of study patients achieved the targeted 25% weight loss.

To make matters worse for Novo, CagriSema’s average weight loss, at about 23%, is barely greater than Zepbound’s (i.e. the 20% I referenced above).

NVO data from YCharts.

Novo shares were completely devastated by the CagriSema news, with the stock plunging as much as 28% in just one day.

Lilly is more than just a weight loss company

While the lion’s share of attention surrounding Lilly is focused on its advances in the weight loss space, it’s important for investors to understand that the company is a pretty gigantic and diverse company.

Lilly also has several high-earning drugs used to treat cancer and plaque psoriasis. This year, the FDA also approved the company’s Alzheimer’s and eczema treatments.

Although it’s early days, I expect Lilly’s entry into these markets will bear fruit sooner rather than later, further strengthening the company’s revenue and profit base by expanding its fast-growing weight loss business.

The end result

I see Lilly as the superior investment over Novo Nordisk – and honestly, I don’t think it’s anywhere close.

While I view the recent drop in Novo stock as a prime example of over-the-top panic selling, Lilly’s advances over Wegovy — combined with its diverse and growing medical portfolio — make the company hard to overlook.

I think Lilly is an easy opportunity for investors with a long-term horizon. The company is well-positioned to continue gaining momentum over Novo in the weight loss space while leading the entire pharmaceutical industry.

Adam Spatacco holds positions at Eli Lilly and Novo Nordisk. The Motley Fool has positions in Pfizer and recommends it. The Motley Fool recommends Johnson & Johnson, Moderna and Novo Nordisk. The Motley Fool has a disclosure policy.