Date: 6/26/2023
Author: Mr. X
It’s the ultimate dream for the pharmaceutical industry. About two out of three American adults are obese or overweight. Left to our own devices, that probably won’t change anytime soon. America’s fast paced lifestyle and the way Americans eat on the go ensures that we will continue to pile on the pounds. Unless, of course, we can find a pharmaceutical cure.
There’s an argument to be made that this is dishonest. There is something better about just eating clean and exercising. I won’t dispute that but let’s be real – an effective weight loss bill will probably be the most successful drug of all time.
We may have it. Eli Lilly (LLY) has a new drug called retatrutide that helped patients lose about 24% of their weight over the course of a year. More than this, it didn’t plateau after 48 weeks, so it might be capable of even more. It leads to a decreased appetite by manipulating hormones – GLP-1, GIP, and glucagon. For this reason, the drug is colloquially known as “triple G.”
The company already boasts a drug called Mounjaro, which is approved for use of Type 2 Diabetes patients.
Two of the biggest drugs right now are Ozempic and Wegovy, made by Novo Nordisk (NVO). NVO is up more than 17% over the last six months. Wegovy is more expensive – so expensive that insurance companies are struggling to cover it and patients often need to fight in order to get it. Still, a new poll showed about half of Americans would be willing to pay $100 a month to get the drug. In a recent study, the active ingredient in both drugs, semaglutide, showed that it could reduce body weight by 15% on average after 68 weeks if delivered in an oral form. An oral tablet, rather than an infection, is the holy grail in this market.
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However, it’s not all just opportunity. Pfizer (PFE) is down after picking danuglipron, a twice daily pill, over lotiglipron, a once daily pill. The latter has shown the possibility of causing liver damage. JPMorgan Chase analysts called it “a clear setback to the program in our view with lotiglipron expected to be the more competitive of the two assets.” Pfizer is trying to turn it into a once daily pill.
Goldman Sachs has estimated that the weight loss drugs market could reach $30 billion in a decade and could potentially expand to $100 billion. The question is which drug will seize the opportunity.
Ozempic has already had the biggest cultural impact. The demand is so great that some diabetic patients can’t even get a supply, which is a big problem considering its effect on blood sugar. Ozempic has been championed by some influencers as a substitute for Wegovy.
There’s an emerging distinction between the weight loss drugs of the future. Trials are notoriously chancy – most drugs fail in Phase III trials. Still, there’s a lot at stake here and investors need to know what may be on the way.
The two drugs you need to know about are orforglipron and the aforementioned retaturide. Orforglipron is cheap and easy to turn into a pill. It is the “easy delivery” form of weight loss drugs. We only have to look at what happened with Pfizer to see how important that is. Retaturide arguably has greater effectiveness. However, Eli Lilly (LLY) has both.
I do not own any shares in this company, nor am I planning to begin a position. LLY is such a big company that it is dangerous to make any purchase based on simply one sector. However, it is hard to think of any market that is bigger than weight loss, and LLY appears to have the definite advantage. As America and the rest of the industrialized world gets fatter, people are going to be looking for the quick fix. LLY may be in the position to give it to them, either with an easy form of delivery or with an extremely effective injection. If these results hold up in later trials, and if LLY can combine the two approaches into an oral form, its position could become dominant, considering Pfizer’s recent setback.
Mr. X is an investment analyst working in the Washington DC area who specializes in the intersection of business and public policy. After fifteen years working in politics, he writes on a classified basis for RogueInvesting.com to bring you news on what those with power are debating, planning, and doin
