Eli Lilly Just Made a Game-Changing Move in the Billion-Dollar Weight Loss Drug Space. Here's What You Need to Know.

When you think of growth stocks, you may immediately think of technology. But this isn't the only field delivering significant revenue gains these days. In fact, you'll find one of the biggest growth themes in a surprising area: healthcare. I'm talking about the business of weight loss drugs. Today, Eli Lilly (NYSE: LLY) and Novo Nordisk lead this market, marching toward a value of $100 billion by early next decade. And others, from biotech Viking Therapeutics to pharma giant Pfizer, aim to eventually participate too.

So this market offers high growth -- but eventually competition may heat up as new drugs reach the finish line. This means it's crucial for players to continue building out their portfolios. With this in mind, Lilly just made a game-changing move in this high-growth space. Here's what you need to know.

Image source: Getty Images.

Lilly's first weight loss drug

First, though, a quick summary of what's happened in this high-potential market so far. Novo was first to market with a GLP-1 drug, a product that interacts with a hormonal pathway linked to digestion. This was semaglutide, approved as Ozempic for type 2 diabetes, then as Wegovy for weight loss. Lilly then joined the market with tirzepatide, a dual GLP-1/GIP receptor agonist -- so the Lilly drug stimulates two hormonal pathways.

The pharma giant sells tirzepatide as Mounjaro for type 2 diabetes and as Zepbound for weight loss. These Novo and Lilly drugs are injectables, but the companies also recently won approval for their oral GLP-1s -- Novo's oral Wegovy and Lilly's Foundayo.

Though Novo dominated the GLP-1 market early on, over the past year, Lilly has slipped ahead and now holds 60% share in the U.S.

As mentioned, for a particular player to stay ahead or gain market share, it's crucial to build out a full portfolio of these drugs to cater to a variety of weight loss needs. And this brings me to Lilly's game-changing move.

Offering something unique

The company scored a phase 3 win with a very promising candidate -- one that offers something unique. Lilly's retatrutide, a candidate that may help patients with greater weight loss needs, met both the primary and key secondary goals in a phase 3 trial. The trial included adults with obesity and at least one other related comorbidity.

Retatrutide at its highest dose helped patients lose an average of 28% of their body weight over 80 weeks -- and 45% of participants lost more than 30%. For reference, in a head-to-head trial of Wegovy and Zepbound over 72 weeks, patients lost about 13% and 20% of their body weight, respectively.

Though it's difficult to compare unrelated trials, this data suggests that retatrutide could be a more powerful weight loss tool than current products. Why is this the case? Retatrutide acts on three hormonal pathways involved in managing appetite and blood sugar levels, so it might offer more weight loss potential. As mentioned earlier, Novo's drugs act on one pathway, while Lilly's injectables act on two.

A lower discontinuation rate than placebo

Though the discontinuation rate was about 11% at the highest dose, the lowest dose, which also delivered significant weight loss, resulted in a discontinuation rate of 4.1% -- lower than the placebo discontinuation rate of 4.9%. Patients generally stop a drug due to adverse events, which in this case were in line with the side effects of today's commercialized GLP-1 drugs.

So, with these excellent results, retatrutide moves a step closer to the finish line. It's not yet clear when Lilly will apply for regulatory approval, but this is a late-stage candidate, so this could happen within the next couple of years.

Importantly, with its strong efficacy and safety profile, retatrutide could be an excellent addition to the Lilly portfolio -- offering yet another option for patients, and particularly for those who aim to lose a great deal of weight.

All of this means this latest trial report is game-changing for Lilly. It sets the pharma company on track to deliver another potential blockbuster this decade as the value of this market marches higher. And that could help Lilly maintain its dominance -- and generate high returns for investors.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Eli Lilly and Pfizer. The Motley Fool recommends Novo Nordisk and Viking Therapeutics. The Motley Fool has a disclosure policy.