The obesity drugs that powered huge investor gains in 2023 are poised to inspire more corporate dealmaking, scientific breakthroughs and better patient access in the year ahead, analysts say.
Eli Lilly & Co.
LLY,
and Novo Nordisk
NVO,
the dueling pharmaceutical giants currently dominating the obesity-drug race, will likely rack up more wins in 2024 as they seek to stay ahead of a growing pack of contenders. But there’s still plenty of room for more players in this niche, analysts say, as companies develop pill versions of the popular GLP-1 drugs as well as new drug candidates that promote weight loss while preserving lean muscle.
Key clinical-trial data emerging over the next year “will really start to dictate who will be the competitors against Lilly and Novo,” said Damien Conover, director of healthcare research at Morningstar.
While new, next-generation obesity drugs aren’t likely to hit the market in 2024, fascination with these medications isn’t about to fizzle out, with some analysts projecting the market could grow to $100 billion over the next five to seven years. But with Novo and Lilly shares up more than 50% this year, investors are looking for the up-and-comers in the fast-growing market.
The spotlight on the powerful new drugs and their broader health benefits, meanwhile, should help spur expanded insurance coverage of the medicines and better public understanding of obesity in the year ahead, experts say.
“We’re making leaps forward in the public understanding of this condition, but there’s still plenty of misunderstanding,” including the notion that patients can get a quick weight-loss fix with these medications and then move on, said Ted Kyle, founder of the obesity and health-advocacy group ConscienHealth. “Weight loss is just a tiny part of taking care of obesity,” Kyle said. “The big part is managing health over the long term.”
Here are five trends to watch in the obesity-drug world in 2024.
1. More wins for Lilly and Novo
With Zepbound, the most potent obesity drug on the market, hitting U.S. pharmacy shelves in recent weeks, “Lilly is off to the races,” said Evan David Seigerman, managing director of biopharma equity research at BMO Capital Markets. While it’s still early, Zepbound appears to be having “a very robust launch,” Seigerman said.
Zepbound “is the drug to beat right now,” Conover said, and in 2024, “the biggest competitor for Lilly is Lilly.” The company is developing the even more powerful next-generation drug retatrutide, which in a Phase 2 study helped patients lose an average 58 pounds after 48 weeks. Lilly is also working on orforglipron, a pill version of the GLP-1 drugs.
Analysts also see several potentially positive developments in 2024 for Novo Nordisk. A Wegovy label expansion next year could reflect the cardiovascular benefits demonstrated in the trial results released by the company this year.
Novo is also expected to release some late-stage trial data in 2024 for CagriSema, which combines Wegovy with the investigational drug cagrilintide and so far appears to promote more weight loss than Wegovy alone, with limited side effects. The company recently launched a clinical trial testing CagriSema against Lilly’s Zepbound. CagriSema “could create a longer trajectory for Novo” in the obesity-drug market, Conover said.
“This party is just getting started,” Cantor Fitzgerald analysts wrote in a recent report initiating coverage of Novo Nordisk’s stock with an overweight rating and a $120 price target.
2. More dealmaking
Obesity drugs have been at the center of several major deals this year — a trend that’s likely to accelerate in 2024, analysts say.
Roche Holding AG
RHHBY,
earlier this month struck a deal to buy obesity-drug developer Carmot Therapeutics for up to $3.1 billion, while AstraZeneca PLC
AZN,
said in November that it would license an experimental obesity and diabetes treatment from Shanghai company Eccogene.
There are still plenty of deals to be made in the obesity-drug world in 2024, analysts say. In years past, many big pharmaceutical companies “left cardiometabolic drugs because the innovation wasn’t there, the pricing power wasn’t there. They don’t have them in their pipeline,” Conover said. Now, the opportunity is too big to ignore, so “they’ll go into their deep pockets of cash and go after smaller firms that have stayed in the space.”
Potential targets for such deals, analysts say, include companies like Viking Therapeutics Inc.
VKTX,
which is working on a drug that mimics the actions of the gut hormones GLP-1 and GIP, similar to Lilly’s Zepbound. Other smaller players like Zealand Pharma
ZLDPF,
could also look interesting to the big companies, analysts say.
In addition to acquisitions, “there will be a whole host of partnerships,” Conover said. Altimmune Inc.
ALT,
whose investigational obesity drug pemvidutide has positive Phase 2 trial data, for example, is looking for a partner as it advances to late-stage trials.
3. No magic pills
Pill versions of the popular GLP-1 drugs could potentially be cheaper and more accessible for patients — and play an important role as maintenance medications once people achieve their target weight loss on injectables, analysts say.
But there have been some high-profile setbacks in this niche in recent weeks. Pfizer Inc.
PFE,
said earlier this month that it will halt development of the twice-daily formulation of its investigational pill, danuglipron, after patients taking the drug in a clinical trial reported high rates of nausea and other side effects. The company is continuing work on a once-daily form of danuglipron, and more data on that version, expected next year, could “reshape the competitive landscape,” Conover said.
“Pfizer’s example shows it’s not easy” to produce an oral GLP-1 drug, and the company’s recent disappointment with danuglipron probably sets Pfizer back a year in its timeline to enter the obesity-drug market, Conover said.
Structure Therapeutics Inc.
GPCR,
also released new data on its diabetes and obesity pill this week that disappointed investors and pummeled the stock. The data suggested that the pill is less effective than Lilly’s orforglipron — but with longer duration and higher dosing, Structure’s candidate still has potential and more data is expected in 2024, Leerink Partners analysts said in a research note Monday.
While there’s a popular perception that patients might prefer pills to injections, some doctors are skeptical of the pills’ potential. “I think an injectable is the way to go,” said Dr. Caroline Apovian, co-director of the Center for Weight Management and Wellness at Brigham and Women’s Hospital and a professor of medicine at Harvard Medical School. Patients on injectables, Apovian said, “seem to have much less nausea and vomiting than when you try to make it an oral agent.”
4. Drugs in development will aim to preserve muscle, rein in side effects
Drugs in the pipeline — including Lilly’s retatrutide; Novo’s CagriSema, a once-monthly injection in development at Amgen Inc.
AMGN,
; and Altimmune’s pemvidutide — are “really, really exciting,” Apovian said, because they’re demonstrating great weight-loss benefits using some different mechanisms than drugs currently on the market.
A big remaining challenge for drugmakers, Apovian said, is to deliver higher levels of weight loss without the nausea, vomiting and other side effects commonly seen with these drugs. “We’re not there yet,” she said, noting that the side effects may remain a longer-term challenge, managed through strategies such as gradually increasing dosage.
Another unmet need, analysts say, is for drugs that can preserve muscle while promoting weight loss. Significant weight loss often reduces lean muscle as well as fat. That can be a particular issue for older adults, who are also vulnerable to sarcopenia, the age-related loss of muscle mass and strength.
Some major players in the market, including Eli Lilly, are already on the case. Lilly this summer reached a deal to acquire Versanis Bio, whose lead asset bimagrumab is a monoclonal antibody designed to treat muscle loss. Roche also has muscle-preserving drug candidates, strengthening its position as it steps into the obesity market with Carmot, analysts say.
“That would be absolutely huge if you can not only provide weight loss, but the right part of the weight loss” by burning off fat but not muscle, Conover said. “Right now it’s a blunt focus.”
5. More insurance coverage, better patient access to drugs
“These drugs are no good if people can’t get them” because of lack of insurance coverage, supply issues or other obstacles, Kyle said.
The supply issues that have plagued some of the drugs currently on the market should dissipate by the end of next year, Conover said, as both Lilly and Novo are spending heavily to build additional manufacturing capacity.
Although insurance coverage of the drugs remains spotty, a potential turning point came this year with the major Novo Nordisk study demonstrating Wegovy’s cardiovascular benefits. “With that data in hand, it’s no longer possible for people to say it’s a cosmetic, behavioral issue,” Kyle said. “It’s a physiologic, life-sustaining treatment.”
The mounting evidence of the drugs’ broader health benefits is already increasing scrutiny of Medicare’s decades-old exclusion of weight-loss drugs from its coverage. Eventually, Medicare will cover the drugs, Conover predicts, although it will likely require legislative action.
Medicare coverage could also be critical for people in commercial health plans, Seigerman said, because “commercial typically mirrors Medicare.”
Roughly 50 million people in the U.S. already have coverage for obesity medications, Seigerman said, and the trend toward broader coverage should continue as drugmakers work with insurers on how to get access with “guardrails” such as prior-authorization requirements. “The employers and payers want to prevent willy-nilly prescribing of a GLP-1 that’s going to break the healthcare system,” Seigerman said. “Using it to treat patients who are actually obese, who have a medical condition, isn’t going to break the healthcare system.”
Ultimately, however, “it would help if insurance companies would cover these agents without prior authorization,” Apovian said, because all the paperwork requirements can discourage busy primary-care doctors from prescribing the drugs. Currently, she said, primary-care doctors often see patients with obesity and treat their blood sugar, blood pressure, cholesterol and other issues without ever discussing their weight. “That’s what has to change,” she said. “Primary care must be empowered or incentivized to treat the obesity first.”
