Eli Lilly's stock is currently in a recovery phase following the release of trial data earlier this month regarding its highly anticipated obesity pill, orforglipron. The results from a key late-stage trial fell short of Wall Street's expectations, revealing that orforglipron resulted in less weight loss and higher side effects compared to analyst projections. Furthermore, the pill's effectiveness appears to lag slightly behind that of Novo Nordisk's oral semaglutide, which demonstrated robust results in a separate study.
After the trial data was made public, shares of Eli Lilly plummeted approximately 13%. However, since then, the stock has rebounded by about 12%. Despite the initial setback, some analysts remain optimistic about orforglipron's potential to compete in the weight loss drug market if it receives approval. This market is particularly lucrative, with a growing demand for more convenient options to address the supply shortages and access challenges posed by the expensive weekly injections that currently dominate.
Analysts have pointed out that Eli Lilly’s orforglipron may hold several advantages over Novo Nordisk's daily oral version of semaglutide, which is set to become the first needle-free alternative for obesity once it gains approval in the U.S. later this year. According to CEO David Ricks, Eli Lilly aims to launch orforglipron globally by this time next year.
Both medications function by mimicking a gut hormone called GLP-1, which helps suppress appetite and regulate blood sugar levels. However, while Novo Nordisk's semaglutide is classified as a peptide medication, orforglipron is a small-molecule drug. This distinction means that Eli Lilly’s pill is absorbed more efficiently by the body and does not impose the dietary restrictions that Novo Nordisk's drug does.
Additionally, orforglipron is expected to be easier to manufacture at scale, which is essential given the increasing demand for obesity and diabetes injections that currently exceeds supply. While neither company has disclosed pricing for their respective pills, some analysts speculate that Eli Lilly's drug could be priced lower than Novo Nordisk's oral semaglutide. This price difference could provide a significant competitive edge, especially since many health plans in the U.S. do not cover obesity treatments.
Goldman Sachs analysts predict a bright future for daily oral pills, estimating they will capture a 24% market share, equating to around $22 billion, of the projected $95 billion global weight loss drug market by 2030. They forecast that Eli Lilly's orforglipron will secure a commanding 60% share—approximately $13.6 billion—of the daily oral segment by that same year, while Novo Nordisk's semaglutide is expected to hold a 21% share, or about $4 billion.
The quest to develop a more convenient obesity pill has been challenging, with companies like Pfizer having to abandon previous candidates while introducing new options. Both Novo Nordisk and Eli Lilly are exploring additional experimental oral drugs, alongside competitors such as Viking Therapeutics, Structure Therapeutics, AstraZeneca, and Roche.
In a statement, Novo Nordisk CEO Mike Doustar affirmed the company's strong belief in the efficacy of their oral drug. The company is committed to ensuring that the product reaches patients in the U.S. without supply constraints. Dr. Mihail Misha Zilbermint, an endocrine hospitalist at Johns Hopkins Community Physicians, emphasized that without knowing the pricing and insurance coverage for these drugs, it's difficult to declare a winner between Eli Lilly and Novo Nordisk. He stated, "I think both of the drugs are going to be game changers," underscoring that cost will be the most significant factor in determining which company prevails.
Comparing results from separate clinical trials can be complex, especially as investors await the complete data from the Phase 3 studies of Eli Lilly and Novo Nordisk. Eli Lilly's ATTAIN-1 trial enrolled 3,000 patients, while Novo Nordisk's OASIS 4 study included approximately 300 participants. Currently, there are no studies directly comparing the two drugs, as stated by a Novo Nordisk spokesperson.
However, based on available data, Novo Nordisk's oral semaglutide appears to induce greater weight loss than Eli Lilly's orforglipron. In the trial, the highest dose of Eli Lilly's pill facilitated an average weight loss of 12.4% over 72 weeks. In contrast, Novo Nordisk's oral semaglutide achieved an average weight loss of up to 16.6% over 64 weeks.
Despite the slightly lower efficacy of Eli Lilly's pill, this may not significantly deter patients from opting for it. As BMO Capital Markets analyst Evan Seigerman remarked, "For many patients, 12% is a really great number." Bank of America analysts echoed this sentiment, suggesting that while Eli Lilly's weight loss results fell short of expectations, prescribers may still see value in orforglipron.
Investor concerns have arisen regarding the side effects and discontinuation rates associated with Eli Lilly's pill. However, Seigerman noted that the drug’s tolerability appears to align closely with that of Novo Nordisk's oral semaglutide. Approximately 10.3% of patients taking the highest dose of Eli Lilly's pill discontinued treatment due to side effects, compared to 2.6% in the placebo group. The primary side effects reported were gastrointestinal, including nausea and vomiting.
While 24% of participants taking the highest dose of Eli Lilly's pill reported vomiting and 33.7% experienced nausea, the side effect profile of Novo Nordisk's pill revealed that 30.9% reported vomiting and 46.6% reported nausea. Dr. Zilbermint expressed that it is challenging to determine which drug has a superior safety and tolerability profile based on the current data.
Unlike Eli Lilly's orforglipron, patients must take Novo Nordisk's oral semaglutide on an empty stomach with no more than four ounces of plain water in the morning and wait for 30 minutes before consuming food or other medications. Seigerman pointed out that these dietary restrictions could pose a challenge for some patients, particularly those with busy daily routines.
Moreover, manufacturing costs for Novo Nordisk's oral semaglutide are expected to be high due to its peptide composition, likely resulting in a higher price point compared to orforglipron. A spokesperson for Novo Nordisk confirmed that the oral semaglutide will primarily be produced in the U.S., and emphasized the company's commitment to expanding manufacturing capacity and bolstering research and development for both current and future products.
Small molecules like orforglipron are generally simpler to produce at scale, typically making them cheaper for companies to manufacture. However, the pricing strategy for Eli Lilly's drug remains uncertain. During an earnings call in August, CEO David Ricks stated that pricing would reflect the value orforglipron delivers, taking into account healthcare savings and related comorbidities.
Goldman Sachs analysts anticipate that Eli Lilly's orforglipron will be priced similarly to the company's tirzepatide, which costs just over $1,000 for a month's supply. While orforglipron is expected to be cheaper than injections due to its easier manufacturing process, it is uncertain whether it will be priced competitively. Dr. Zilbermint cautioned that the costs associated with research and development could also influence pricing.
Seigerman highlighted that commercialization strategies will be critical as Eli Lilly and Novo Nordisk contend in the market. He raised questions about whether Novo Nordisk would leverage its recent agreement with CVS's pharmacy benefit manager, Caremark, which prioritizes Novo Nordisk's Wegovy over Eli Lilly's Zepbound. The potential for preferential treatment for Novo Nordisk's oral semaglutide remains unclear, as does whether Eli Lilly will utilize its direct-to-consumer pharmacy, LillyDirect, to offer orforglipron.
With other obesity pills still in earlier development stages, drawing direct comparisons with Eli Lilly and Novo Nordisk's drugs is challenging without more extensive trials. However, experts suggest that emerging contenders may struggle to match the offerings from these leading companies.
In summary, while Eli Lilly's orforglipron may face challenges following the recent trial data, the competitive landscape for obesity treatments remains dynamic, with both Eli Lilly and Novo Nordisk racing to establish themselves as frontrunners in this lucrative market.
