Eli Lilly (NYSE: LLY) currently leads the weight loss market thanks to Zepbound. Given that analysts project that this area will gain more popularity in the coming years, that may give a strong wind to the drug maker. However, the bears will point out that Eli Lilly may face more problems. First, increased competition will erode its market share.
Second, Eli Lilly’s new launch may make Zepbound sales do little to grow the market. Therefore, the company’s pipeline will not maintain it, however the argument goes. In my opinion, the second way of thinking misses an important point about Eli Lilly’s strategy in this market: The company is building a portfolio of different therapies that will help it dominate this space for the next decade.
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Consider retatrutide, arguably Eli Lilly’s most promising pipeline candidate. This drug mimics the actions of three different gut hormones, while Zepbound only mimics two. Addressing three different mechanisms can provide retatrutide efficacy. And so far, studies have shown evidence of this. Putting aside the difficulty of comparing results across trials, retatrutide posted an average weight loss of 28.7% at the highest dose in a 68-week phase 3 study.
Zepbound’s performance was relatively unimpressive, with a 20.2% weight loss over 72 weeks in a separate trial. Based on these results, it may seem like a foregone conclusion that retatrutide will compete with Zepbound. However, managers said they will primarily target people with very high body mass indexes (BMI) who need aggressive weight loss options.
Consider that an estimated 9% of US adults age 20 and older — or about 22 million people — are obese (having a BMI greater than or equal to 40). Assuming a 30% penetration in this patient group, or about 6.6 million people, and an annual price of about $10,000 (which is more or less in line with other weight loss medications), the market for anti-obesity treatments in this particular niche could be worth $66 billion at its peak. Eli Lilly, eventually, will meet competition in this corner as well.
Others, such as Novo Nordisk, are developing their own triple agonists. But if Eli Lilly manages to capture a 20% to 30% share of this market, retatrutide could reach about $19 billion in weight management. That is before we explain that it will also target diabetic patients. What does this mean for Eli Lilly? Retatrutide and Zepbound can coexist, as can Foundayo, a new oral GLP-1 pill for which the drugmaker recently received approval.
Foundayo is also targeting its broad market niche for chronic weight management: Patients who avoid injections and prefer oral pills. Here’s an important point for investors: Eli Lilly will want to introduce drugs that target more areas of weight loss as it grows over the next decade. And given the pipeline of the drug manufacturer, it is well established that it will remain the leader for a while. Healthcare stocks remain strong buys for those GLP-1 drugs.
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Prosper Junior Bakiny has positions in Eli Lilly. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a policy of disclosure.
Eli Lilly Doesn’t Take Zepbound — It’s Building an Obesity Empire was first published by The Motley Fool.
