Pharma companies race to rise to the top of $44 billion obesity market | Insights | Bloomberg Professional Services

This article was written by Nada Shalash and Santiago Hernandez.

Background

The value of Eli Lilly and Novo Nordisk has grown almost 50% in the past year, far outpacing the S&P 500 as well as the broader healthcare sector, as the pair lead the burgeoning obesity market touted as the next big blockbuster in the pharmaceutical industry. Lilly and Novo are now the #2 and #3 most valuable pharma companies in the world, with Lilly trading places with Johnson & Johnson for the #1 spot for most of June – the first time that J&J was replaced as the leading pharma company in 15 years. The growth of Eli Lilly and Novo Nordisk has been driven by successful clinical breakthroughs in a class of obesity and dietary drugs. Originally developed and successfully brought to market for diabetes, Lilly and Novo have shown that their drugs, Mounjaro & Wegovy, respectively, bring significant weight loss benefits.

The issue

Obesity is the leading cause of death in the US and is becoming a rising problem in other rapidly-developing economies like India and China. Bloomberg Intelligence expects the obesity market to reach $44 billion by 2030. As a result, Lilly and Novo are racing to bring their drugs to market and scale their distribution, while other companies, hungry to be part of the largest developing market, are racing to develop obesity products to add to their portfolios. 

While both Eli Lilly’s Tirzepatide and Novo’s Semaglutide have been approved for diabetes and have been used by millions of people, only Novo has received FDA approval to sell the drug for the obesity indiciation with Lilly expected to receive FDA approval by the end of the year. Despite being officially approved in June, Novo has struggled to scale its supply chain to meet the demand of its obesity drug, branded as Wegovy, and has faced continuous shortages, causing it to re-think its launch in the international market. 

Meanwhile, as Lilly waits for full FDA approval to sell Tirzepatide, marketed as Mounjaro, it has been busy strengthening its drug pipeline to make sure it can compete against Novo’s first-mover advantage and also remain a dominant player years after Mounjaro’s launch. They recently released results of an experimental obesity drug that has yielded the strongest weight loss results of any treatment yet. Lilly also acquired obesity drug start-up Versanis Bio for as much as $2 billion, betting on the start-ups experimental drug that aims to help people lose weight while preserving their muscle mass. 

As Lilly’s and Novo’s drugs come to market, other players are attempting to enter what is expected to become the largest BioPharma market of the decade. Pfizer, hungry to find a sustainable business after the decline of the COVID-19 pandemic and its vaccines’ success, is racing to develop an oral obesity drug that can compete with Lilly and Novo’s drugs but had to halt one of the drugs in development due to safety concerns. Amgen and Viking Therapeutics are also in the process of developing their own obesity drugs, hoping to develop drugs that have a differentiated advantage from Lilly’s and Novo’s. Meanwhile, other drug companies are hoping to find their footing in the post-pandemic world and develop sustainable businesses. Johnson & Johnson for example shed its consumer-healthcare business and is hoping to streamline its portfolio and focus on the highest-growth products such as oncology offerings.