According to Zhijun Finance and Economics APP, as one of the leaders in the weight loss drug market, Eli Lilly (LLY.US)'s heavyweight weight loss drug Zepbound's sales performance in the third quarter fell short of expectations, causing investors to worry about the prospects of the weight loss drug market. Fortunately, Novo Nordisk (NVO.US) later released the sales performance of Wegovy, which relieved investors.

The weight loss drug market still has a broad prospect, with most institutions predicting that the market size will reach the level of one hundred billion US dollars by the end of this decade. In addition to Eli Lilly and Novo Nordisk, which currently almost dominate the weight loss drug market, many pharmaceutical companies are intensifying their research and development of weight loss drugs in order to get a share of this highly potential market.

Eli Lilly's Zepbound underperforms in sales, worrying the market, while Novo Nordisk's Wegovy reassures the market.

In its third-quarter 2024 performance announced at the end of October, Eli Lilly revealed that the sales of its heavyweight weight loss drug Zepbound (with the active ingredient tirzepatide) fell short of market expectations, which truly made investors concerned about the prospects of the weight loss drug market.

The financial report shows that Eli Lilly's third-quarter revenue was $11.439 billion, a 20% year-on-year increase. However, the market's most anticipated Zepbound sales for the quarter were only $1.26 billion, far below analysts' expectations of $1.76 billion. Similarly, the diabetes treatment drug Mounjaro, which also contains tirzepatide as the active ingredient, had sales of $3.11 billion for the quarter, also below analysts' expectations of $3.7 billion.

For the sales shortfall of Zepbound and Mounjaro in the third quarter, Eli Lilly attributed it to wholesalers cutting back on inventory of these two drugs. The pharmaceutical giant stated that increased supply allowed the company to fulfill delayed orders from wholesalers in the second quarter, leading to an increase in Zepbound and Mounjaro inventory held by wholesalers in the second quarter. In the third quarter, these wholesalers used some of the existing inventory instead of purchasing more from the company, which restrained the sales of the two drugs.

During the third-quarter earnings conference call, eli lilly executives insisted that the potential demand for drugs like Zepbound remains strong in the market. The company's CEO Dave Ricks stated: "The reason is that there is too much channel inventory. I believe we really cannot control it, nor do we want to try. But the reality is that eli lilly's downstream customers - wholesalers, retailers - are deciding for themselves at what level and in which of the 12 different dosage forms to stock which dosage form."

Dave Ricks pointed out that wholesalers are facing financial pressures and other limiting factors, and they also have to deal with the limitations of cold chain capacity to ensure the quality of drugs from production to delivery. He added that eli lilly has not yet started the company's so-called "demand stimulation activities," which involve advertising and promoting Zepbound. These efforts will begin in November. Other eli lilly executives also stated that the company is heavily investing in its direct-to-consumer website, which offers remote medical prescriptions and direct delivery of certain drugs to expand patient access channels.

Some Wall Street analysts also agree with eli lilly's statement. Citi analyst Geoff Meacham said: "The culprit is the reduction in Zepbound and Mounjaro inventory, not weak demand." Mizuho healthcare stock strategist Jared Holz also pointed out that destocking - selling existing drug inventory, rather than adding more inventory - is surprising, especially in the case of high demand for these drugs. Jared Holz added that eli lilly has invested only 10 to 15 billion dollars this year to expand its capacity, which should "help reverse some of the trends in the reports." However, some analysts disagree with eli lilly's statement. Barclays analyst Carter Gould stated that inventory factors may only explain a "small part," about 20% decline in drug revenue.

Following eli lilly's third-quarter earnings report on October 30, the company's US stocks fell more than 6%. As one of the "top two" players in the weight loss drug market, the sales performance of eli lilly's Zepbound also raised concerns among investors about signs of softening demand for weight loss drugs.

However, novo-nordisk's earnings report released a week later eased market concerns. The report showed that novo-nordisk's third-quarter net sales were 71.311 billion Danish kroner, a 22% year-on-year increase. Among them, the popular weight loss drug Wegovy (active ingredient semaglutide) had quarterly sales of 17.304 billion Danish kroner, a 79% year-on-year increase, far exceeding the market's expected 15.6 billion Danish kroner. As more insurance companies agree to cover the cost of this drug, despite a price decrease, Wegovy's sales in the US market still grew by about 50%.

Boosted by strong drug sales, novo-nordisk also raised its full-year performance guidance. Novo-nordisk expects, at fixed exchange rates, that its full-year sales in 2024 will increase by 23% to 27%, previously expected to grow by 22% to 28%; and expects full-year operating profit to grow by 21% to 27%, previously expected to be 20% to 28%.

Scale will reach billions of dollars! The future of the weight loss drug market remains promising.

By 2035, an estimated one-fourth of the global population is expected to be obese. Since GLP-1 class drugs opened the breakthrough, the momentum of global weight loss drug market development is continuously strengthening. Many pharmaceutical companies have realized the huge potential of the weight loss drug market and are investing resources in drug research and development to gain a share in the market. At the same time, established pharmaceutical companies are further expanding their market share by developing new drugs, expanding production capacity, and other means.

The market currently generally expects that the market size of weight loss drugs is expected to reach around $100 billion by 2030. BMO Capital Markets estimates that by 2030, annual sales of weight loss drugs will reach $150 billion, higher than the bank's forecast of $100 billion last year. Goldman Sachs also raised its outlook for the global weight loss drug market size in 2030 from $100 billion predicted at the end of last year to $130 billion in May of this year. Financial services company Leerink Partners predicts that by 2032, the global weight loss drug market size will increase to $158 billion.

Medical care analytics company IQVIA pointed out in its outlook for the next five years released earlier this year that in 2023, people globally spent $24 billion on weight loss drugs, a figure expected to rise to $131 billion by 2028. This represents a 27% annual growth rate, higher than the previously forecast 13% annual growth rate.

Michael Kleinrock, Senior Research Director at the IQVIA Institute for Data Science, stated that the increase to $131 billion will also depend on patients continuing to use weight loss medications and whether these drugs can be used to treat other diseases or if pharmaceutical companies develop new direct-to-consumer sales models.

Many pharmaceutical companies are entering the race. Which players are worth paying attention to?

1. Novo Nordisk

As one of the leaders in the weight loss drug market, Novo Nordisk has achieved great success with GLP-1 class drugs, especially semaglutide. However, Novo Nordisk clearly aims for more, with the company's most attention-grabbing potential product being the revolutionary weight loss therapy CagriSema.

CagriSema is a combination of semaglutide and a prandial insulin analogue called Cagrilintide. Cagrilintide, a long-acting prandial insulin analogue, acts in blood sugar regulation by slowing gastric emptying and promoting satiety, thereby preventing postprandial blood sugar level elevation. In previous studies, Cagrilintide has been shown to have better blood sugar and weight reduction effects than semaglutide alone.

It is reported that Novo Nordisk expects CagriSema to achieve at least a 25% weight reduction effect, without additional side effects compared to the previous generation weight loss drug, Wegovy. The company states that CagriSema will effectively address the issue of 'weight rebound after stopping the drug,' making it the most effective weight loss drug to date.

Global renowned pharmaceutical data consulting firm Evaluate Pharma analysts predict that 2025 will be the year for CagriSema. The organization's sales forecast for Cagrisema in 2030 is 20.5 billion US dollars (including indications for obesity, diabetes, and cardiovascular diseases). Cagrisema's Net Present Value (NPV) estimate is 81.3 billion US dollars, potentially becoming a new pillar asset, seen as critical for sustaining Novo Nordisk's revenue growth after the patent protection for Wegovy expires in 2032, ensuring Novo Nordisk's undisputed leadership position in the weight loss drug field.

Novo Nordisk's oral weight loss drug Amycretin under development is also worth mentioning. Phase I study data presented by Novo Nordisk at the European Association for the Study of Diabetes (EASD) annual meeting in September shows that in overweight/obese non-diabetic adult patients, daily oral Amycretin has good tolerability and safety, with an average weight reduction of 13.1% in just 12 weeks, compared to a placebo group with only a 1.1% average weight reduction. Additionally, at the end of treatment, patients in the Amycretin group had not reached a weight loss plateau, indicating the possibility of further weight reduction.

Eli Lilly and Co.

Eli Lilly is developing the GLP-1/GIP/GCG triple receptor agonist Retatrutide, seen as the next generation product to replace exenatide. Trial data shows that compared to exenatide, the phase 2 data of Retatrutide is even more impressive - in a phase 2 clinical trial, the average weight loss rate with Retatrutide started from the baseline weight, was 17.5% at 24 weeks, and 24.2% at 48 weeks.

Eli Lilly believes that Retatrutide is expected to further improve efficacy over exenatide, with the highest expected dose leading to a weight loss of 22-24%, mainly involving fat reduction. The company registered the 9th phase 3 clinical trial of Retatrutide on October 28, directly comparing it with exenatide for weight loss. This phase 3 clinical trial plans to enroll 800 obese patients, with an expected completion in April 2027.

Additionally, Eli Lilly's orally administered small molecule GLP-1R agonist Orforglipron has shown remarkable weight-loss effects in trials. Phase 2 clinical data indicates that once-daily oral Orforglipron resulted in an average weight loss of 14.7% in obese or overweight adults at 36 weeks. Despite the need for daily administration with the oral version, patients show higher compliance. Eli Lilly registered another phase 3 weight loss clinical trial of Orforglipron in September this year. The goal of this phase 3 trial is to evaluate the efficacy and safety of Orforglipron as weight loss maintenance therapy, with plans to enroll 480 obese patients and an expected completion in January 2026.

Eli Lilly is also considering expanding the testing subjects of its successful weight-loss drugs to individuals who are not yet overweight but at risk of gaining weight. Eli Lilly's CEO Dave Ricks stated that the company is planning to study the effects of its anti-obesity drugs on individuals who currently do not qualify as overweight based on BMI (Body Mass Index). Currently, the trial subjects for Zepbound and the experimental weight-loss drug Orforglipron are patients with a BMI of 30 or higher, or with a BMI over 27 along with weight-related health issues. Dave Ricks believes that especially for Orforglipron, this drug may bring about more moderate weight loss results compared to other treatments, hence lowering this threshold might be necessary.

Amgen

American pharmaceutical giant Amgen (AMGN.US) is testing a weight loss drug called MariTide. Previously, a small-scale early clinical trial showed that patients treated with the highest dose of 420 milligrams of MariTide lost an average of 14.5% of their weight in 12 weeks. In contrast to currently marketed weight loss drugs, MariTide appears to help patients maintain weight loss effects for a longer period after discontinuation.

Additionally, MariTide's dosing frequency may be lower than existing drugs - Novo Nordisk's Wegovy and Eli Lilly's Zepbound require weekly injections, while MariTide can be injected once a month or even longer. Lower dosing frequency may be a major selling point for MariTide, as many patients do not wish to have frequent injections.

4. Viking Therapeutics

Small pharmaceutical company Viking Therapeutics (VKTX.US) has attracted market attention to the progress of its weight loss drug VK2735. In early November, the company announced that in an early study, subjects taking 100 mg of VK2735 lost an average of 8.2% of their weight in 28 days, compared to 6.8% for patients taking a placebo. This suggests that their experimental drug VK2735 can more effectively reduce patient weight at higher doses compared to the early formula, laying a solid foundation for its competition with pharmaceutical giants such as Novo Nordisk, Eli Lilly, and others.

5. Zealand Pharma

Danish biotechnology company Zealand Pharma announced in September positive results from the Phase 1b trial of its GLP-1/GLP-2 dual agonist Dapiglutide. In addition, the company announced in June that its long-acting amylin analogue Petrelintide achieved positive top-line results in a Phase Ib trial. This may allow it to stand out in the competition with Novo Nordisk and Eli Lilly's weight loss drugs, providing a potential high safety alternative for obese patients who do not tolerate GLP-1, with a potential market size far greater than GLP-1 class weight loss drugs.

Zealand Pharma points out that the current series of clinical data and studies indicate that, compared to GLP-1 drugs, Petrelintide has the potential to provide the same weight loss effect with better tolerability, thus offering a better weight loss experience; the drug will also preserve more lean muscle and achieve higher quality weight loss.

6. Altimmune

Pharmaceutical company altimmune (ALT.US), which is not well-known, announced at the end of June the latest clinical trial data, showing that the company's GLP-1/GCG receptor dual agonist pemvidutide, developed by the company, achieved best-in-class effects in promoting weight loss while maintaining lean body mass (muscle quality).

The trial results showed that at week 48, only 21.9% of the weight lost by patients treated with pemvidutide was attributed to lean body mass, while 78.1% was attributed to fat. Prior to this, although GLP-1 class weight loss drugs had outstanding weight loss effects, there has always been a problem, that not only fat was lost, but also lean body mass - for example, approximately 40% of the weight lost by semaglutide at week 68 was lean body mass. Therefore, Altimmune's release of these positive data may help the company gain an advantage in the weight loss drug market in the future.

7. Roche

In early December last year, Swiss pharmaceutical giant Roche (RHHBY.US) announced the acquisition of American private clinical-stage biotechnology company Carmot Therapeutics for $2.7 billion in cash, and will obtain three clinically-stage assets with best-in-class potential owned by the latter in obesity and diabetes, including: CT-388, a dual GLP-1/GIP receptor agonist for the treatment of obese patients with or without type 2diabetes; CT-996, a small molecule GLP-1 receptor agonist for the treatment of obese patients with or without type 2 diabetes; CT-868, a dual GLP-1/GIP receptor agonist for the treatment of overweight or obese type 1 diabetes patients.

However, data released by Roche in September showed that the highly anticipated weight loss candidate drug CT-996 had a relatively high proportion of temporary side effects in the early stages of trials. In terms of efficacy, Roche stated that obese non-diabetic patients who took CT-996 once daily lost an average of 6.1% of their body weight in four weeks (placebo-adjusted).

It is reported that all 25 trial participants experienced mild to moderate side effects, or adverse events in industry terms. In response, Roche stated that the first-phase trial followed the conventional practice of increasing drug doses, a process known as titration, which is faster than planned later-stage trials to quickly identify any unforeseen side effects. The company stated that the frequency of adverse events "is consistent with rapid titration and early development," and "these data support further investigation of CT-996 in studies with longer duration, larger sample sizes, and slower titration rates".