Wegovy Pill Just Changed the GLP-1 Market. Here's Why Eli Lilly Stock Could Still Win

Eli Lilly (NYSE: LLY) received approval for Zepbound, a weight-management medicine, in November 2023. Since then, Zepbound has performed extremely well and become the best-selling anti-obesity drug, leapfrogging Novo Nordisk's (NYSE: NVO) Wegovy. However, the Denmark-based pharmaceutical leader fought back. Its latest launch in this field is an oral formulation of Wegovy that has helped it regain some market share from its main competitor. What does all this mean for both companies' prospects?

Image source: The Motley Fool.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now, when you join Stock Advisor. See the stocks »

Oral Wegovy is a smashing success

Novo Nordisk launched oral Wegovy in the U.S. in January. The drug was an instant hit and has maintained strong momentum since. In June, it crossed three million prescriptions, marking one of the strongest launches on record by volume for a pharmaceutical product in the U.S. Oral Wegovy isn't just cannibalizing the older formulation's sales either. As Novo Nordisk points out, more than 80% of new prescriptions are for patients who had never taken GLP-1 medicines before. In other words, it is expanding the market. Further, although Eli Lilly earned approval for Foundayo, a competing oral GLP-1 drug for weight loss, in April, oral Wegovy has remained the top player in this niche by far.

According to some estimates, oral Wegovy accounts for about 89% of oral weight-loss medication prescriptions in the U.S. Why is oral Wegovy performing so much better than Foundayo? Here are three potential reasons. First, "Wegovy" has become a well-known brand closely associated with weight loss. Many patients who were waiting for an oral anti-obesity pill for convenience reasons will naturally gravitate toward what they already know works. The name "Foundayo" doesn't have the same recognition.

Second, semaglutide, the active ingredient in oral Wegovy, has been on the market for years. Physicians are more likely to prescribe a compound with which they are familiar than a brand-new one, all else being equal. Third, and perhaps most importantly, oral Wegovy performed better on efficacy measures in phase 3 studies. Although these were not head-to-head clinical trials, they still matter.

Eli Lilly could turn things around

Eli Lilly's Foundayo has several advantages that could help it slowly regain market share. One of them is that it can be taken at any time, with no food or water restrictions. By comparison, oral Wegovy needs to be taken first thing in the morning on an empty stomach. Also, Foundayo could earn important label expansions that will expand its eligibility population. Right now, it is only indicated for weight loss. But it has completed phase 3 studies showing it helps diabetes patients reduce their sugar levels.

It is undergoing clinical trials across other potential indications, including obstructive sleep apnea, hypertension, osteoarthritis pain, peripheral artery disease, and more. A meaningful percentage of patients who are either overweight or obese have at least one of these comorbidities. That's why securing approvals across these indications could substantially boost Foundayo's prescription volume.

Which stock is a buy?

Novo Nordisk and Eli Lilly have moved in opposite directions over the past year. But as the top players in the fast-growing GLP-1 market, both could deliver excellent returns over the medium term. Novo Nordisk is showing, thanks to the success of oral Wegovy, that it can still challenge its biggest competitor. The Denmark-based healthcare leader has several attractive pipeline candidates that should help it maintain a strong position in this space over the next few years. The list includes UBT251, a medicine whose phase 2 clinical trial results in diabetes and weight loss -- albeit conducted in China -- were strong.

Novo Nordisk is also looking to expand its lineup and recently posted robust phase 3 study results for denecimig, an investigational hemophilia medicine. Novo Nordisk's pipeline could help it bounce back as it launches newer, better products in its core therapeutic area and elsewhere, and improves its financial results.

In the meantime, Eli Lilly should remain the leader in weight loss thanks to Zepbound, and other highly promising pipeline candidates, such as retatrutide, whose recent phase 3 results have been compared to what we typically see in bariatric surgeries. Further, Eli Lilly has a deep lineup and pipeline beyond diabetes and weight loss that should yield exciting clinical and regulatory progress over the next few years. The stock has crushed broader equities over the past five years, and it isn't done.

Prosper Junior Bakiny has positions in Eli Lilly and Novo Nordisk. The Motley Fool has positions in and recommends Eli Lilly and Novo Nordisk. The Motley Fool has a disclosure policy.