Forget Oral Wegovy: This Weight Loss Drug Could Be an Even Bigger Winner

In January, Novo Nordisk (NYSE: NVO) broke new ground in the weight-loss market by launching an oral version of its famous anti-obesity drug, Wegovy. It's the first oral GLP-1 approved for chronic weight management, and Novo Nordisk hopes it will help it regain market share in this area.

While oral Wegovy has so far had a successful launch, another oral GLP-1 could hit the market this year and eclipse it. Here's what investors need to know.

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The leader strikes again

Last year, Eli Lilly (NYSE: LLY) posted strong phase 3 results for orforglipron, an oral GLP-1 medicine, in weight management and in helping type 2 diabetes patients lower their A1C levels. Lilly has submitted the drug to regulatory authorities for approval, which could come down during the second quarter, so it's gearing up to launch orforglipron. The company already has about $1.5 billion in inventory, and management said it would be ready to roll it out about a week after approval.

Though Eli Lilly is already dominating the weight loss market thanks to Zepbound, orforglipron should help cement its lead. Here are three reasons why.

First, as Lilly noted, oral Wegovy is actually expanding the market, not just capturing existing weight-loss patients who were previously taking subcutaneous medicines. Orforglipron, then, could have a similar trajectory, helping the company attract newer patients who were hesitant to start treatment because they didn't like needles, or because the storage requirements of injections were too daunting.

Second, orforglipron does not require any food or beverage intake restrictions. By contrast, oral Wegovy must be taken first thing in the morning on an empty stomach, a (seemingly) small detail that could help the newer drug attract a meaningful number of patients.

Third -- and perhaps most importantly -- while oral Wegovy is indicated only for weight loss, orforglipron could be approved for diabetes as well. Its phase 3 performance in helping type 2 diabetes patients shed excess weight was particularly strong; it also performed better than Rybelsus -- another oral GLP-1 marketed by Novo Nordisk -- in lowering patients' A1C levels.

This strongly suggests that orforglipron could enjoy stronger adoption among physicians and patients, helping Eli Lilly dominate the oral weight loss market.

Plenty of upside left

Eli Lilly has crushed the market over the past five years, but its stock can still deliver excellent returns from here on out. The drugmaker's work in this therapeutic area is a key reason. Analysts continue to project that the anti-obesity space will grow rapidly in the coming years. And Eli Lilly not only has established itself as a leader, but also boasts pipeline candidates that put those of its competitors to shame.

Orforglipron is just one of them. Eli Lilly's retatrutide, a medicine that mimics the action of three gut hormones (no such "triple agonist" has yet been approved), posted outstanding phase 3 results last year.

Lilly should remain the leader in this field for the foreseeable future, and the company is using its success in the area to expand and diversify its pipeline. The healthcare giant is well-positioned to deliver strong financial results and above-average market returns.

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