BREAKINGVIEWS-Obesity pills are shaky Hail Mary for Novo Nordisk

By Aimee Donnellan

DUBLIN, Jan 13 (Reuters Breakingviews) - The obesity drug battle royal is entering a new phase. Earlier this month $266 billion Novo Nordisk NOVOb.CO launched a tablet version of its blockbuster Wegovy, the first such oral remedy to hit the market. That gives it an edge on market-leader Eli Lilly LLY.N in a potentially important new arena for weight loss treatments.

Novo Nordisk is in need of a win. In 2018 it stole a march on its rival Eli Lilly with a so-called GLP-1 injectable drug Ozempic, which was originally used to treat diabetes, and later weight-loss treatment Wegovy. But supply chain issues led to acute shortages and gave the U.S. drug giant an opening to launch its versions – Mounjaro and Zepbound, which enable patients to lose more weight than the Danish group’s ’s jabs. Less than three years later Eli Lilly dominates the obesity market. By the end of the third quarter of last year Zepbound accounted for over 70% of new U.S. prescriptions in the sector.

Pills offer Novo Nordisk a shot at redemption. The Danish group’s new oral Wegovy drug has not only won regulatory approval ahead of Eli Lilly’s equivalent product, it also appears to be better. In its latest drug trial Wegovy patients lost, on average, 14% of their body weight while taking the pills. In a similar trial Eli Lilly’s rival medication orforglipron only produced 12% weight loss. Some industry players reckon pills could substantially increase the size of the obesity market by appealing to the significant minority of people who are afraid of needles. Novo Nordisk said on Monday that oral remedies could ultimately make up some 30% of the market.

The problem for Novo Nordisk boss Mike Doustdar is that investors don’t appear to think his lead in pills will erode Eli Lilly’s broader advantage. Even after a 24% share bump following the FDA's approval of oral Wegovy in December, the Danish drugmaker’s valuation still trails Eli Lilly. It is currently valued at less than 17 times forward earnings, while Eli Lilly boasts a multiple of over 33 times. The U.S. group's more than 1 trillion-dollar valuation means it is now worth over $750 billion more than its Danish rival.

Investors are understandably wary. To start, the weight loss offered by oral drugs is considerably less than that available from jabs, which can help users shed more than 20% of their body weight. And then there are the side effects: users often experience the same gastric issues as they do from injections, such as vomiting, diarrhea, and constipation. Many may therefore prefer to stick with needle-based treatments, which would benefit Eli Lilly’s products, given their superior weight loss profile.

Besides, oral obesity drugs may end up being no less competitive than injectable ones. Eli Lilly's version may have a hidden edge. It is a so-called small molecule drug which means it's cheaper to make and distribute which opens up markets like Africa where supply chains are less developed. Users also can take the drug without fasting, unlike Wegovy. For Doustdar, pills offer only a slim chance of a comeback.

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CONTEXT NEWS

Oral weight-loss drugs could account for a third or more of the overall GLP-1 market by 2030, a Novo Nordisk executive said on January 12.

"In our first assumption, injectables dominated the market and pills played a smaller role," Ludovic Helfgott, Novo Nordisk's executive vice president for product and portfolio strategy, told Reuters at the J.P. Morgan Healthcare conference.

"We believe that the pill could actually represent up to a third-plus of that market overall as we go," he added.

Helfgott said Novo's updated view reflects a better understanding of behaviour in what he described as an increasingly consumer-driven obesity market, where many patients pay out of pocket.

Novo Nordisk launched a daily oral version of Wegovy in the U.S. earlier in January with a starting cash price of $149 per month.