Did Eli Lilly Just Say Checkmate to Novo Nordisk?

Novo Nordisk (NYSE: NVO) has seen revenue soar in recent years thanks to two drugs that have helped people around the world lose weight. The molecule is semaglutide, and it's sold under the name Ozempic for type 2 diabetes and Wegovy for weight loss -- but doctors have prescribed either for weight management. And this has made Novo Nordisk leader in a billion-dollar market.

But Novo Nordisk isn't alone. It soon was joined by Eli Lilly (NYSE: LLY), selling similar drugs -- the molecule tirzepatide, approved in 2022 under the name Mounjaro for the diabetes indication and approved a year later as Zepbound for weight loss. Lilly, too, saw revenue take off, quickly joining Novo Nordisk to reign in this high-growth market. Goldman Sachs analysts expect the market for weight loss drugs to hit $130 billion by the end of the decade.

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Patients self-administer, through injection, the Novo Nordisk and Lilly drugs, and they do this on a weekly basis. The pharma giants aren't stopping there, though. The next big achievement in this billion-dollar race will be the commercialization of a similar drug in oral form. And Lilly just took a major step in the right direction. Did Eli Lilly just say checkmate to Novo Nordisk? Let's find out.

Image source: Getty Images.

How weight loss drugs work

So, first a quick bit about how this class of drugs works. Novo Nordisk's are known as GLP-1 receptor agonists, while Lilly's drugs are dual GIP/GLP-1 receptor agonists -- in both cases, they act on hormones involved in the digestion process, regulating blood sugar levels and appetite. They are large molecule drugs, so complex in structure and must be administered by injection.

Importantly, Novo Nordisk's and Lilly's weight loss drugs have been highly efficacious, and demand has soared since their launch. In fact, until just recently these products have been on the U.S. Food and Drug Administration's drug shortage list -- and they only exited the list because the companies invested heavily in manufacturing to increase supply.

All of this is great, but one thing in particular could make the situation even better for patients and for the company -- and that's an oral drug that operates in the same manner as these market-leading products. Novo Nordisk offers a pill version of semaglutide, called Rybelsus, for type 2 diabetes, but it requires specific attention to food and water intake.

Other companies, such as biotech Viking Therapeutics, also aim to tackle the oral weight loss drug space. Viking has an oral dual GIP/GLP-1 receptor agonist candidate in phase 2 trials at the moment.

Lilly's leap closer to the finish line

But Lilly is ahead of the pack and just took a leap closer to the finish line with a recent clinical trial report. Lilly's orforglipron is the first oral GLP-1 drug that doesn't require food and water restrictions to successfully complete a phase 3 trial. Orforglipron, given to type 2 diabetes patients, reduced weight by an average of 7.9% at the highest dose after 40 weeks without reaching a plateau -- this suggests patients could continue to shed additional pounds.

The candidate also met its primary endpoint, lowering A1C levels -- a measure of glucose in the blood -- by an average of 1.3% to 1.6% across dosage levels from the starting point of 8%. Though this fell short of some analysts' estimates for a reduction of as much as 2.1%, the results still represent a big win for Lilly. The company says it will submit orforglipron for weight management to regulators for review by the end of the year, and it will apply for approval in type 2 diabetes next year.

Which company wins?

Now, let's get back to our question: Did Eli Lilly just say checkmate to Novo Nordisk? Well, an approval for an oral drug would represent a big victory. First, its likely many people would prefer a daily pill instead of an injection -- a pill is easier to take on the go and doesn't require a needle stick. That could spur demand for this sort of product. Second, small molecules, delivered in pill form, generally are faster and cheaper to manufacture -- and this would help Lilly maximize its profits and more easily fulfill demand.

Of course, demand is so high for weight loss drugs that the eventual availability of a pill won't necessarily crush injectable weight loss products. And in many cases, people who have been on today's drugs and have responded well to them may not want to switch to another. So, Lilly won't say "checkmate" and push Novo Nordisk out of the game -- both types of drugs should generate blockbuster revenue well into the future.

That said, a daily pill could be a game changer -- and help Lilly eventually become the No. 1 player in this billion-dollar market.

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