Novo Nordisk, Lilly facing increased competition in obesity drug market

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While Novo Nordisk (NVO) and Eli Lilly (NYSE:LLY) will likely rule the obesity drug market for the next decade, rivals such as Amgen (NASDAQ:AMGN) and Pfizer (NYSE:PFE) could soon be snacking on their lunch, a scenario that has not yet been priced into the stocks, according to a Morningstar report.

"We expect new therapies launching beginning in 2026 from firms including Amgen and Pfizer could grow to roughly one quarter of the market by 2032," Morningstar said.

Morningstar added that its sees Novo Nordisk and Lilly's valuations as "rich," with investors having priced in the huge market opportunity of the obesity market, "but leaving little room for new entrants." The research firm added it sees rivals such as Amgen and Pfizer gaining up to a third of the global obesity market in ten years.

Novo Nordisk's Wegovy, also known as semaglutide, has grabbed headlines for months about its ability to melt pounds. The product, which belongs to a class of drugs known as GLP-1 agonists, received FDA approval for weight loss in 2021. An earlier version of the drug was approved in 2017 for the treatment of diabetes under the brand name Ozempic.

Eli Lilly is also set to enter the game with its approved GLP-1 agonist Mounjaro, also known as tirzepatide. Already approved for diabetes, a recent study showed Mounjaro could be even more effective than Wegovy in helping patients shed unwanted pounds. Lilly is currently in the midst of initiating a head-to-head study between the Wegovy and Mounjaro and could launch the product for obesity by the end of the year.

Amgen and Pfizer's drugs are also chugging along in development. Amgen was slated to begin Phase 2 testing of its anti-obesity compound AMG-133, which contains a GLP-1 agonist, earlier this year. Pfizer's offering, a GLP-1R agonist called danuglipron, is currently in Phase 2 testing for obesity and diabetes.

Increased competition in the obesity drug arena would likely lead to lower prices, which could end up boosting demand, especially if the drugs are covered by insurance.

MorningStar estimates that the average global price for GLP-1 therapies will climb a high of around $5,400 in 2024 but then decline as more products make their way to market to around $2,800 by 2032. In the US, Morningstar sees the price dropping from a high of around $8,000 to roughly $4,000, according to its report.

All in all, Morningstar estimates the potential market size of the obesity market at roughly $60B by 2032, with around 21M people taking GLP-1 products around the world.

The research firm sees Lilly eventually edging out Novo Nordisk as market leader by 2032, commanding around 40% of the market, fueled by sales of not only Mounjaro but also two other drugs in development. Novo Nordisk would take another 36% through sales of Wegovy and related semaglutide products. Amgen is seen grabbing 4%, Pfizer 3%, with the remaining 17% split among other entrants.

The combined market for GLP-1 drugs for the treatment of obesity and diabetes is even heftier, with Morningstar estimating sales of at least $90B by 2030. By 2032, the research firm sees Novo Nordisk and Lilly both raking in sales of around $45B apiece from the drugs, with Pfizer taking in $4B and Amgen $3B.

The game could change significantly in 2032, however, when Novo Nordisk is slated to lose patent protection for semaglutide, which would open the doors to cheaper generic competition.

More on GLP-1 drugs:

Morgan Stanley sees broader MedTech impact from weight loss drugs

Pfizer: The New Oral Weight Loss Therapy Could Be A Game Changer

Pfizer stock yet to imply obesity drug’s blockbuster potential – Cantor

Novo Nordisk gains as study shows cardiovascular benefits of obesity drug

Comments

[emcsqard]

“Since the pleasure of most foods is in the first few bites, eat one thing on your plate at a time, at least at the start of the meal when you can concentrate and enjoy the full flavors.”
~ Mireille Guiliano

[CJlove4all]

For this "drug" and others, how much of their base ingredients are sourced in China???

Insanity--

[rickevantodd]

I did not see any mention of the side effects of taking these drugs. Does anyone know?

[Keops]

@rickevantodd

diarrhea
vomiting
nausea

[rickevantodd]

@Keops Thank you for the follow-up. I would rather be 20 pounds overweight!

[Purewater]

@rickevantodd If you stop the drug, you apparently gain back all the weight plus more.

[medullaoblongata]

Where Boehringer/Zealand? Tirzepatide is a dual GIP/GLP1 agonist, not just a GLP1 agonist. Actually changing all my patients to dulaglutide, because Semaglutide is not available. Supply guarantee first to patients

[Bulls1]

@medullaoblongata Amgen's drug is also a dual GIP/GLP-1 agonist. It is in Phase 2 clinical trials.

[ritholtz47]

@Bulls1
How many days does it take to get approval? Amgen looks like the one next in the line.

[saff]

@ritholtz47 PFE is ahead of AMGN I believe, not 100% sure

[Investor since ‘73]

Obesity is either a direct or closely correlated contributor to a huge percentage of diseases causing unmeasurable pain and suffering. It also cuts millions of lives decades short. It’s a major reason why healthcare accounts for about 20% of our GDP.

LLY has been, by far my best investment of the past 12 months and the best is yet to come.

[emcsqard]

@Investor since ‘73
True what you say, but the cost of these drugs puts them out of the reach for those with the most need. Maybe competition will bring the cost down for the masses, improving their chances for better health.

[Hiwehe]

@emcsqard let them eat cake

[Investor since ‘73]

@emcsqard I expect the prices will come down not only because of competition but because once obesity is finally recognized as the health hazard that it is, these meds will be covered by Medicare and now, for the first time, our healthcare system can actually negotiate the prices of approved drugs.

[saff]

NVO and LLY have first-mover advantage which people tend not to give enough credit. Not only are their drugs already saturating the market, their research into even better versions is likely much further along.

Both are expensive, but I believe it is deserved. I'm long NVO.

[Executive overcompensation]

Eliquis was the 3rd DOAC to the market and now as 75%+ share with annual sales over $12 billion. If memory serves correctly Lipitor was the 3rd or 4th statin and eventually grossed well over $100 billion during its patent life. There is a lot of luck involved with medicines, as well as good marketing. Eliquis won with marginally better safety, but good enough because the safety measure is severe bleeding. Lipitor won with better efficacy because efficacy measure was CVD. With these weight loss meds, I think concessions to insurance companies will play a big part of market share until comparative outcomes studies of high value measures like CVD are done.

[financeminister]

Is this why fatsos are now a protected class?

[unan2010]

@financeminister time to invest in Pepsi!!!!

[D. Rockefeller]

Save some money and cut back on eating. Plus don't eat all this garbage processed "food"?

[quakerpop]

@D. Rockefeller silly comment. These drugs highlight that overweight folks have a significant biochemical difference that can be mediated. In fact, these drugs also help curb cravings for gambling, smoking and drinking. It's really powerful, impactful stuff.

[SeriousUsername]

@quakerpop Gaslighting and excuses.
From a financial standpoint it makes more sense to invest in anti obesity drugmakers than say peloton or gyms, but I wish it werent so.
People are just lazy and dont want to take responsibility.
Everybody just wants pills to solve all their problems.

[quakerpop]

@SeriousUsername wrong across the board. Some people can have a drink or play the tables. for some it ruins their lives. Some people are satiated by "normal" portions of food, some have an impulse to keep eating long after basic caloric needs are met. fighting back against that urge takes a much greater effort than for a normal weight person, which is time consuming and stressful. These drugs kill that urge to eat more than the body's basic caloric need and remarkably, they also help to curb the urge to drink to excess and potentially to gamble to excess...indicating that there are actual structures in the brain that promote addiction and excess that can actually be curbed. Is it possible to lose weight with exercise and diet? Absolutely....however the statistics on how many lose weight and keep it off are damning. If these drugs help, then i don't see the issue. It's a massive breakthrough. Oh, and by the way, I'm 5'11 and 175'. I'm not a candidate, so this isn't about me. I do respect the science however.

[LiveFreeAZ]

NVO is not standing still.

[ritholtz47]

Who has next shot at the weight lost drug? Surprised Merk is no doing anything. They had a obesity drug before.

[saff]

@ritholtz47 Merck's biggest focus has been capitalizing on Keytruda and oncology generally which is a big change for it, as it has historically been more focused on other health issues.

[grok42]

@ritholtz47 Zealand Pharma has several weight loss drugs in their pipeline including GLP-1.

[HPBunker]

The drug companies should all be acquiring fast food chains and soft drink manufacturers. The synergy with their obesity drugs would be amazing. They could even package free samples with Happy Meals, 12-packs of Coke, etc. Why are they not doing this?

[quakerpop]

@HPBunker you misunderstand the method of action. These drugs cure cravings for unhealthy foods and make people unable to eat more than a little bit before they get nauseous. It basically curbs the interest in food. It's actually bearish for junk food companies. I think everyone in the country should be on this stuff

[Guy Whitehead]

@quakerpop not unhealthy foods. Excess foods period. Although perhaps excess could be defined as unhealthy.

[quakerpop]

@Guy Whitehead correct, but not entirely. They even make unhealthy foods like cake become unappealing after a few bites. It isn't just hunger cues - from what I've read, it actually takes the joy out of eating foods like cakes, cookies, etc. They simply just don't taste as good.

[civ-e]

i find the first sentence of the article (which is also the thesis) to be contradictory and hard to reconcile.

[2959]

LLY maybe approval by the end of the year. Meanwhile NVO keeps on trucking with already approved products. Can’t wait for the trail results with semaglutide and the possible slowing/reduction of Alzheimer’s.

[Et20]

Kind of strange to speculate on drugs not yet approved 10 years out.

[saff]

@Et20 Not really; par for the course in pharmaceuticals. The biggest 20 or so pharma companies have deep pipelines with promising technology that can be 'gamed out' a decade ahead.

[RWilliam]

In a few years do they gain it back, as usual? On the drug for life? Nothing is with out side effects or negative effects.

[investor-quest]

@RWilliam Yes, generally you regain the weight if you stop the drug. Similar to a drug for high blood pressure. If you stop that drug, your high blood pressure returns.

[RWilliam]

@investor-quest thx!