The race to supply weight-loss drugs to nearly half of Americans that classify as obese, is on.
Eli Lilly’s stock boomed after they released their blockbuster weight loss drug Zepbound last year, consecrating the Indiana-based drugmaker as one of the top 10 US companies with the highest market capitalization last month.
But Lilly has struggled to keep up with demand as production constraints dwindled supplies last year and compounding pharmacies filled the void. Big-name pharma companies like Pfizer and Amgen also threaten Lilly’s market dominance with promising weight loss drugs in the pipeline.
“As it becomes larger, it becomes sort of its own enemy in terms of trying to generate growth,” said Karen Andersen, director of healthcare equity research at MorningStar, who put out a cautionary report on Lilly and its biggest rival Novo Nordisk, in September of this year.
“There’s going to be continued pricing pressure on the obesity market, the more competitors probably start to reach the market.”
She expects “substantial disruption” in the obesity drug market from at least five companies: Roche, AstraZeneca, Pfizer, Amgen and Boehringer.
Lilly's is betting hard on obesity drugs, which accounted for nearly 40% of revenue in the last quarter. But overreliance on sales performance from GLP-1 weight loss drugs Zepbound and Mounjaro might harm its financial outlook in the future. Shares fell 13% last month when wholesalers overstocked the coveted drugs last quarter, dragging sales 18% lower than analysts polled by Bloomberg expected for the third quarter.
"The issue with companies that are just really experiencing super strong growth in the near-term is that people tend to extrapolate that longer term," said Andersen, "and that's when you actually model it out."
Andersen, whose company specializes on long-term forecasts rather than short-term predictions typical of Wall Street, noted that Lilly and Novo may see increased price competition as early as 2026. She also expects them to hold 70% of the GLP-1 market, which includes weight loss and diabetes drugs, for the next seven years. Although Lilly's weight loss and diabetes drugs will remain dominant in the market, predicts Andersen, they will make up 63% of the company's revenue by 2029.
But a less diversified portfolio is riskier. Issues with safety, competition, or patent expiration can mean the company takes a bigger hit.
At least that might be good news for Zepbound consumers.
Christopher Owens, 50, a product manager from Ohio has struggled with obesity and weight loss for most of his life. He started Zepbound in May and lost 104 lbs, but concerns with the drug's affordability weigh on him.
"There's an underlying anxiety that comes with having this medication, that it will be whisked away," said Owens, who wants to continue using the drug, but worries his insurance might stop covering it.
"I would have to start freelancing in addition to my current job," said Owens.
Eli Lilly’s is the world's largest pharmaceutical company in market value. Its recent growth was led by weight loss drugs Mounjaro and Zepbound, accounting for much of its $45 billion in projected revenue this year, up 34% from 2023. The company's stock trades at $831 and revenue for 2025 is predicted at $58 billion with profits of $46 billion, according to analysts polled by Bloomberg.
"I've never seen anything like it in the history of biopharma," said Evan Seigerman, managing director and senior analyst at BMO, about Lilly's success in the industry in an interview last month.
Yet the company has struggled with supply shortages and high list prices.
Last year compounded pharmacies filled the supply gap with off-brand production of tirzeptide, the active ingredient in Lilly's weight loss drugs. These copy-cat drugs usually sell for less than Zepbound's $1,200 price tag, and are allowed on the market as long as the main ingredient remains in shortage, as per the Food and Drug Administration.
Lilly tried to quash competition from compounders by meshing them in legal battles and ramping up manufacturing supply plants. The company sent hundreds of cease and desist letters to compounders and medical spas selling the drug, and even filed cases with the state court.
Eli Lilly has warned that compounded drugs, which are not FDA approved, have higher safety and efficacy concerns. Last month, the FDA said it would reevaluate its decision to take tirzepatide off the shortage list after an outsourcing trade association filed a complaint.
Read the Outsourcing Facilities Association complaint against the FDA.
Some analysts believe that once tirzepatide is officially off the shortage list, the compounded problem will fade.
"Once that happens I don't see any latitude for compounders to operate," said Seigerman in an interview prior to the FDA's decision to take the drug off the shortage list on Oct. 2.
Others believe Lilly is on a tightrope as it balances limited supplies with outsized demand, all while facing a stringent regulatory framework set by the FDA.
What happens "will be based on a regulatory outcome," said Rajesh Kumar, an equity analyst at HSBC.
Meanwhile big name pharma has begun to creep in. Pfizer and Amgen's weight loss drugs are in phase 2 of trials, which could take a few years before they come to market. Amgen's weight loss drug MariTide has trial data expected by the end of this year.
"Given Amgen’s strong commercial team, we believe that they could get a piece of the market," wrote Kripa Devarakonda, VP of biotechnology equity research at Truist in an email. "If and when they come to market."
But she does not think Lilly's dominance will be impacted in the near-term.
Devarakonda believes the company is on the forefront of obesity therapy, noting that its weight loss drugs treat "only a single-digit" percentage of eligible patients globally and that advertising for weight loss drugs has been restricted due to supply concerns.
Lilly did not provide comment for this article after requests, but the company expects to start advertising their weight loss drugs by mid-November, according to their last earnings call.