Novo Nordisk (NVO 2.60%), a Denmark-based drugmaker, was a pioneer in the GLP-1 market. The pharmaceutical giant launched medicines like Ozempic and Wegovy, which became hugely famous and successful brand names.
However, Novo Nordisk has been rapidly losing its lead in this area to Eli Lilly (LLY 0.69%), a company with which it's battled in the market for diabetes medicines for decades. Lilly is still recording wins and recently made some clinical progress with a candidate that could grant it an even bigger edge over its competitor. Here's what investors need to know.
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Orforglipron should dominate its niche
In 2019, Novo Nordisk earned approval for Rybelsus, the first oral GLP-1 medicine to be granted the green light by the U.S. Food and Drug Administration; it's indicated for the treatment of type 2 diabetes. And earlier this year, the pharmaceutical company sent an application to the FDA for an oral form of Wegovy in weight management -- it could be the first oral GLP-1 drug in that niche.
But Eli Lilly is not far behind. Lilly released data from several clinical trials for its own oral GLP-1 drug, orforglipron. The medicine performed well across several potential indications, including diabetes and weight management. And in some of these studies, orforglipron went head-to-head against other market leaders for type 2 diabetes.
In a 40-week study dubbed Achieve-2, orforglipron demonstrated superior reductions in A1C levels in patients with type 2 diabetes, compared to AstraZeneca's dapagliflozin. The former lowered A1C levels by up to 1.7 percentage points compared to the latter's 0.8. In another 52-week clinical trial, orforglipron went head-to-head with Rybelsus, and once again, it was victorious. Orforglipron decreased A1C levels by 2.2 percentage points in this study, versus Rybelsus' 1.4. Eli Lilly is, once again, showing its dominance in this field.
Eli Lilly has plenty of upside left
Once orforglipron hits the market, it should achieve significant success. In addition to the therapy's greater effectiveness in clinical trials, its oral formulation makes it highly attractive for patients who prefer pills over painful needles.
There is another factor to consider. Medicines like Wegovy and Eli Lilly's tirzepatide (sold under the brand names Mounjaro and Zepbound) faced shortages when they were first launched; orforglipron is unlikely ever to encounter this issue. Oral pills are much faster and easier to manufacture, store, and transport. That also means orforglipron will likely come with a more approachable price tag, and might become a favorite option of price-sensitive patients or those paying out of pocket.
According to some projections, orforglipron will generate $12.7 billion in revenue by 2030. Meanwhile, Lilly's tirzepatide will maintain its incredible pace, and could reach nearly $62 billion in sales by the end of the decade (versus $16.5 billion in 2024).
In recent quarters Eli Lilly has been growing revenue much faster than one would expect from a pharmaceutical giant. And considering the impressive trajectory tirzepatide is on, not to mention the addition of orforglipron, the drugmaker should continue beating out its similarly sized peers in this department.
Lilly has other tricks up its sleeve: Its lineup features several other blockbusters, like cancer medicine Verzenio, and therapies that look likely to eventually generate over $1 billion in annual sales, like eczema treatment Ebglyss. And there are several other highly promising candidates in the pipeline. Retatrutide, a potential weight management medicine that mimics the action of three gut hormones, could be yet another breakthrough. Lilly has also been expanding the pipeline with promising candidates in several areas, including oncology, immunology, and acute pain.
The company has a great dividend program, with its payouts more than doubling in the past five years. Eli Lilly is not a cheap stock; it's trading at around 27 times forward earnings, much higher than the average of 17 for the healthcare sector. However, the stock is worth a premium given its superior financial results and excellent prospects. Eli Lilly is a great pick for both growth- and income-oriented investors.
