The lucrative weight-loss drug market won’t remain a duopoly forever. With billions of dollars at stake, that was a sure thing for the current market leaders, Eli Lilly and Novo Nordisk, from the start. But the reality of the competition ahead has become more real after recent announcements from rival drugmakers Roche and Viking Therapeutics. Both companies have made progress on experimental treatments that promise to help patients shed more weight, faster. Their updates are likely to be joined by others in the coming months even as today’s incumbents develop next-generation weight-loss treatments. Still, the headlines have taken a toll. Over the past two weeks, Eli Lilly has lost about $123 billion in market value, marking its worst eight-day decline since the eight days ending March 23, 2020, when it fell 15%. Over the same period, Novo Nordisk’s shares have fallen about 10%, its worst eight-day decline since mid-August 2022, when its stock fell 11.4%. Even with the recent pullback, both stocks have made huge gains this year, with Lilly’s shares up 38% and Novo’s up about 23%. Part of the recent selloff is likely to have come from investors taking profits after a long, steady run. Indeed, a similar trend has been playing out among the large-cap tech stocks that have led the broader stock market’s gains this year. Analysts say Indianapolis-based Lilly and Denmark’s Novo have a broad enough lead in the anti-obesity category to lock in growth for a long time. UBS analyst Truong Huynh doesn’t expect a competitor to enter the market until around 2028. Even then, competitors will be limited to no more than 10% of the market through 2029, Huynh said. On Monday, UBS raised its forecast for the GLP-1 (glucagon-like peptide 1) market, expecting it to grow at a compound annual rate of 33% through 2029, reaching $150 billion in sales by 2029, up from a previous forecast of $125 billion. The higher estimate is driven by expectations that more people with obesity will seek treatment, UBS said in a research note. Other analysts have also become more optimistic about the future of weight-loss treatments. “As clinical data accumulates on cardiovascular risk, renal disease and other comorbidities, we believe the pace of access and adoption will increase,” said Rajesh Kumar, an analyst at HSBC Global Research. Kumar said concerns about competition were “fair” but “premature.” “It is true that several players are developing assets targeting obesity,” he added. “However, the time required to build clinical data and reach manufacturing scale remains a major barrier to entry.” Meanwhile, analysts say Lilly and Novo could continue to surprise on the upside as they work to ramp up manufacturing capacity. Demand for weight-loss drugs far outstrips supply. Where the competition stands Roche’s recent announcements suggest it could become the third major company to enter the anti-obesity drug market. On July 17, the Swiss company revealed that CT-996, a once-daily oral GLP-1 treatment it acquired with the purchase of Carmot Therapeutics, helped obese patients in a phase 1 clinical trial lose an average of 6.1% of their starting weight in four weeks. That was an impressive result. Orforglipron, a once-daily oral GLP-1 drug Lilly is working on, showed 3% weight loss in four weeks. Many have been hoping for an effective oral GLP-1 treatment, as both Novo’s Wegovy and Lilly’s Zepbound are delivered through a weekly injection. Patients typically prefer to take a pill rather than get an injection, and pills tend to be less expensive to manufacture. Roche will advance CT-996 to a Phase 2 trial next year, while continuing to study CT-388, which is delivered by weekly injection. It is also studying whether combination therapies make sense, which could expand the market for the drug. Roche’s ADRs are up 12.5% so far in 2024. VKTX YTD mountain Viking Therapeutics shares soared 30% last week after it revealed that VK-2735 — an injectable drug that combines two intestinal hormones, GLP-1 and GIP (gastric inhibitory polypeptide) — will move directly into a Phase 3 program after meeting with the Food and Drug Administration. The company is also exploring whether the weight-loss treatment could be given just once a month. BTIG analyst Justin Zelin said Viking appears “increasingly confident” that monthly dosing is a possibility, a milestone he believes would be “the cherry on the cake.” Like Lilly and Novo, Viking is also working on an oral drug that will move into a Phase 2 trial in the fourth quarter. Zelin expects more details on the trials at the ObesityWeek conference in San Antonio in early November. He rates Viking shares a buy and has a $125 price target, slightly above the $114 average on Wall Street, according to FactSet. Even with Viking’s strong rally last week, the stock has an 89% upside if it hits Zelin’s target. More news to come More developments in the GLP-1 space are expected throughout the second half of this year, boosting Lilly and Novo shares. Two big events on the calendar are the mid-September conference in Spain of the European Association for the Study of Diabetes and Obesity two months later. HSBC’s Kumar has identified at least 125 drug pipeline candidates for treating obesity in various stages of development. The market has heard recent updates from players including Pfizer and Amgen as well as Structure Therapeutics and Altimmune. Additionally, Lilly and Novo aren’t sitting idly by. Kumar expects a reading on Novo’s next-generation drug, CagriSema, in the fourth quarter to “de-risk Novo’s long-term growth potential.” Below is a table of some of the clinical trials investors are expecting news on later this year. — CNBC’s Nick Wells contributed to this report.
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These Drug Companies Are Going After Eli Lilly and Novo Nordisk
