The weight loss drug industry has proven to be highly lucrative in recent times, but the spoils have been enjoyed exclusively by market dominators Eli Lilly (NYSE:LLY) and Novo Nordisk (NASDAQ:NVO).
No surprise, then, that shares of both were on the backfoot on Wednesday, after peer Roche provided early evidence two could now become three.
Roche’s Genentech unit is working on its own weight-loss drug, oral GLP-1 receptor agonist CT-996, which showed promise in an early-stage trial. Specifically, in a Phase 1 study, patients who took the drug exhibited an average weight loss (placebo adjusted) of ~6% over a period of 4 weeks.
Currently, Eli Lilly’s Zepbound and Novo Nordisk’s Wegovy, two products that belong to the same GLP-1 drug class, dominate the industry, but they are both taken as an injection (Roche is also developing a once-weekly shot, CT-388, for which it reported promising results in May).
The worrying part here for LLY is that its own, once daily, oral GLP1 offering Orforglipron, showed around 3% weight loss in a Phase 2 trial for obese patients over the same period, thus making Roche’s product seem superior.
This suggests to Deutsche Bank analyst James Shin that Roche’s drug could yet prove to be best in class.
“Overall,” Shin went on to say, “we think CT996 in conjunction with CT388 makes Roche look like the third large cap player, joining LLY & NOVO in the diabesity field.”
Also assessing the impact on LLY, Truist analyst Srikripa Devarakonda concedes the obesity landscape is “getting crowded,” and that, based on the data-to-date, Roche’s once-daily, oral pill “looks positive.” However, it’s still “early days, and we need to see more data, durability and safety over time.”
Devarakonda also notes LLY’s “vast” obesity pipeline, which features Phase 3 assets retatrutide (GGG agonist), the aforementioned orforglipron as well as earlier stage offerings such as mazdutide, bimagrumab and eloralintide (long-acting amylin agonist).
As such, given the company is “one of the two leaders with significant market with Zepbound share despite demand exceeding supply,” Devarakonda maintained a Buy rating on the shares along with a $1,000 price target. There’s potential upside of ~18% from current levels. (To watch Devarakonda’s track record, click here)
Looks like most other analysts side with the Truist view here; based on a mix of 17 Buy recommendations vs. 4 Holds, the stock claims a Strong Buy consensus rating. The average price target currently stands at $927.72, implying a ~9% upside potential. (See LLY stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
