More than 2 out of 5 American adults are obese, according to the Centers for Disease Control. With this figure in mind, it’s no wonder Wall Street investment banks are telling anyone who will listen that sales of anti-obesity drugs could soar.
Last year, Morgan Stanley said the global market for obesity drugs could increase more than 15-fold to reach $144 billion by 2030. Treatments from Eli Lilly (LLY 14.56%) and Novo Nordisk (NVO -7.78%) dominate the market now, but the glucose-like peptide-1 (GLP-1) receptor agonists they market require weekly injections.
The needles used to inject Novo Nordisk’s and Eli Lilly’s GLP-1 drugs are relatively slim, but there are still plenty of folks who won’t go near them. To better serve this group, Eli Lilly and its peers are developing GLP-1 drugs that can be swallowed instead of injected.
Lilly recently read out positive results from its Achieve-1 study, a phase 3 clinical trial (the first of several) of an experimental oral GLP-1 treatment called orforglipron. Here’s a closer look at the candidate, and results from the trial, to see whether this is a good stock to buy now.
A good result from something different
Savvy pharma-stock investors know that an oral GLP-1 drug from Novo Nordisk called Rybelsus has been on the market as a diabetes treatment since 2019. It’s an orally available version of semaglutide, which is the same active ingredient in Ozempic and Wegovy.
Last year, sales of Rybelsus came in at $3.6 billion. That’s not insignificant, but it’s just a fraction of injectable semaglutide sales, which reached a whopping $27.2 billion over the same time frame.
Naturally occurring GLP-1 and synthetic semaglutide are peptide hormones. The amino-acid chain that forms semaglutide’s backbone is a short one, but it still gets cut to ribbons in our stomachs before it’s absorbed into the bloodstream. Rybelsus uses a permeation enhancer to speed up absorption, but patients have to swallow it first thing in the morning, with water, on an empty stomach.
Orforglipron acts on the same GLP-1 receptors as semaglutide, but it’s a small-molecule drug that doesn’t come apart in our stomachs before it’s absorbed. This means folks can take it as they would most medications. Without the compliance issues that have kept Rybelsus sales down, orforglipron could become a top seller.
Orforglipron’s mode of action could give it a leg up in the anti-obesity market, but it will be a while before we see pivotal data with obese patients. All of the Achieve trials are aimed at diabetes patients.
Achieve-1 was a 40-week study of diabetes patients with a body mass index (BMI) of 23 or higher. A BMI under 25 is considered healthy, while anything over 30 is considered obese. Despite starting with relatively slim patients, treatment with the lowest dose of orforglipron tested reduced patients’ weight by 2.8% compared to a placebo. The highest dosage tested reduced weight by a placebo-adjusted 5.9%.
When physicians prescribe weight-loss drugs to be taken long-term by relatively healthy people, they’re more interested in the treatment’s safety profile than its ability to reduce weight. Lilly didn’t report any serious side effects during Achieve-1, and claimed the overall safety profile was in line with popular GLP-1 drugs.
A buy now?
A good safety profile and signs of efficacy as a weight-loss treatment suggest orforglipron could become a mega-blockbuster down the road.
The best thing about Eli Lilly stock, though, is that you don’t have to wait for soaring GLP-1 sales. Tirzepatide was first approved as a diabetes treatment named Mounjaro in 2022, then as a weight management drug named Zepbound in 2023. Total tirzepatide sales surged to a whopping $16.5 billion in 2024. If Wall Street estimates for future GLP-1 drug sales play out as expected, tirzepatide alone could allow an investment in Lilly stock to outperform the broad market.
Despite a good chance to see sales soar on the back of diabetes and weight-management treatments, shares have been trading for around 36.6 times forward-looking earnings expectations. That’s a fair price to pay for a business growing at half the pace of Eli Lilly. Adding some shares of the stock to a diverse portfolio now, and holding on for the decade to come, could be a smart move — if it weren’t for a looming issue that could adversely affect the entire pharmaceutical industry.
The Trump administration recently fired around 3,500 staffers from the U.S. Food and Drug Administration (FDA), including folks directly involved in the drug development process. Even if all reviewers remain employed, they’re unlikely to maintain their previous pace of drug approvals without the support staff they used to rely on. It’s probably best to wait several months before buying any drugmaker stocks, to see if the agency can continue approving new drugs at its previous pace.
