Eli Lilly obesity drug delivers 20% weight loss, bolstering investment case for new therapies

Published Thu, Apr 28 202212:00 PM EDTUpdated Sat, Apr 30 202211:02 AM EDT

Christina Cheddar Berk @in/christina-cheddar-berk-b864404/

Clinical trial data released Thursday by Eli Lilly reinforces the belief that a wave of obesity treatments are on the horizon that could be gamechangers for patients struggling to lose weight and perhaps investors as well. Lilly said its Phase 3 study of tirzepatide, a diabetes drug candidate, met its goals in treating obese or overweight patients, with participants losing as much as 22.5% of their body weight — an amount that tops rival therapies on the market. "These data likely validate Street thinking that Tirzepatide would become a dominant player in the obesity market," said Wells Fargo analyst Mohit Bansal, in a research note Thursday. As CNBC PRO previously reported, tirzepatide is among a number of new therapies being developed to treat obesity and overweight that are offering patients new hope in achieving significant weight loss that approaches what can be achieved through bariatric surgery. These therapies hold greater promise than earlier weight loss medications, which were plagued with side effects and weren't as effective in helping patients shed pounds. Like Novo Nordisk's semaglutide — which is branded Wegovy as weight-loss treatment and Ozempic for diabetes treatment — Lilly's drug uses the incretin hormone, glucagon-like peptide-1, or GLP-1. Tirzepatide also has a second incretin, glucose-dependent insulinotropic polypeptide, or GIP. These hormones prompt the pancreas to produce less insulin and lower blood sugar and communicate with the brain to suppress appetite. A reduction in the amount of glucagon secretion in the liver also slows gastric emptying in the gut, promoting satiety. To date, side effects have been managable, and include nausea and diarrhea. Patients using Wegovy were able to sustain a 15% weight loss for 68 weeks in Novo Nordisk's late-stage testing. Tirzepatide goes even further, according to the study results. What Lilly's study found In the Surmount-1 clinical trial participants lost as much as 22.5% of their body weight. The study enrolled 2,539 participants, who did not have diabetes. For those who took a 10 milligram dose, the average weight loss was 21.4% of their base weight. At the 15 mg dose, patients lost an average of 22.5% of their weight. By comparison, those in the placebo group lost 2.4% of their weight during the study period. Notably, 55% of participants at 10 mg, and 63% of participants at 15 mg, achieved a weight loss of at least 20%. The study results reinforce the connection between mechanisms in the body that work against patients trying to lose weight. That relationship is key to winning health insurance coverage of treatments and encouraging more people with obesity and overweight to get medical help. "Obesity is a chronic disease that often does not receive the same standard of care as other conditions, despite its impact on physical, psychological and metabolic health, which can include increased risk of hypertension, heart disease, cancer and decreased survival," said Dr. Louis J. Aronne, an obesity expert who worked with Lilly on the Surmount-1 study, in a press release announcing the results. "Tirzepatide delivered impressive body weight reductions in SURMOUNT-1, which could represent an important step forward for helping the patient and physician partnership treat this complex disease," said Aronne, who is the director of the Comprehensive Weight Control Center and a professor of metabolic research at Weill Cornell Medicine. How big is the obesity treatment market More than 40% of U.S. adults have obesity, according to the Centers for Disease Control and Prevention , and the prevalence is expected to rise in the future. Novo has projected that only 10% of people with obesity seek medical treatment. Bansal said Wells Fargo is conservatively modeling a $4 billion peak for obesity treatment sales, but other analysts see the opportunity as larger. Perhaps, closer to $10 billion, he said. On Thursday, Lilly shares were gaining about 3%. In addition to reporting the study results, Lilly reported its first-quarter earnings, which topped expectations. Morgan Stanley analyst Terence Flynn said he expected the stock to move higher on the data. In a research note, Flynn said tirzepatide is a key component of why Morgan Stanley holds an overweight rating on the stock. Its price target is $364.00, which is about 23% higher than where shares opened Thursday. "We expect FDA action on Tirzepatide in diabetes in June, representing the next catalyst for the program," he said. Wells Fargo's Bansal said he expected any increase in the stock to be capped as investors wait for more data on an Alzheimer's treatment. "This could lead to some rotation out of LLY in coming days. Adding $6B to our obesity sales to get to $10B would add $35/sh to our LLY DCF," he said. Bansal has an equal weight rating on Lilly shares, and holds a price target of $280, on the stock, which is lower than where it's currently trading. What's the competitive landscape look like The news around tirzepatide also could put more focus on Novo's Wegovy. The drug's sales have been plagued with shortages since its launch. Still, the therapy helped Novo's obesity care sales rise by 55% last year. In Novo's pipeline is CagriSema, which combines the GLP-1 analog semaglutide with a synthetic analog of human amylin, a naturally occurring hormone made in pancreatic beta cells. Data from the company's 68-week trial isn't expected until 2024, but it is expected to produce an even greater weight loss than Wegovy or tirzepatide. Novo shares were trading lower by about 2% following the Eli Lilly news. Its shares are down more than 2.5% year to date. Pfizer has a GLP-1 receptor agonist in early-stage development. It has the advantage of being an oral treatment. Wegovy is administered via an injector pen that must be kept refrigerated. Amgen is working on a dual GLP-1 receptor agonist and GIPR antagonist, and Boehringer Ingelheim is developing a dual GLP-1/glucagon agonist. But even if these treatments are successful, commercialization remains several years out.

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