LLY stock, Novo Nordisk to dominate Obesity despite Amgen entry (NYSE:LLY)

Bank of America argues that Eli Lilly (NYSE:LLY) and Novo Nordisk (NVO) (OTCPK:NONOF) are “undisputable leaders” in the market for obesity and diabetes therapeutics despite encouraging Phase 1 data posted by Amgen (NASDAQ:AMGN) recently for its investigational weight loss therapy AMG 133.

Novo (NVO) and Lilly (LLY) are in a race to dominate the U.S. weight loss market, where about 74% of adults are classified as either obese or overweight, two medical conditions closely linked to Type 2 diabetes.

Despite recent supply issues, Novo (NVO) has led the U.S. market for obesity treatments since the FDA approved its Wegovy (semaglutide) injection in June 2021 for chronic weight management in adults.

After winning the U.S. approval for its diabetes therapy Mounjaro, Lilly (LLY) has fast-tracked the development of the dual GIP and GLP-1 agonist, also known as tirzepatide for weight loss with the last of two Phase 3 trials expected to conclude by April 2023.

However, Wall Street does not rule out emerging entrants. Early October, Amgen (AMGN) shares surged after Morgan Stanley issued positive views on its experimental weight loss therapy AMG 133, citing a multi-billion-dollar potential.

However, BofA is more cautious. “While AMG133 data looked encouraging based on our conversation with KOLs, Lilly and Novo are still years ahead in terms of development/ commercialization in obesity and Type 2 diabetes,” the analysts led by Geoff Meacham wrote after Amgen’s (AMGN) Phase 1 update early this month.

They noted that the data from the 133-subject placebo-controlled trial, presented at a medical event on Dec. 03, indicated up to 8% weight loss after a single AMG 133 injection and up to 15% weight loss after three monthly injections.

However, BofA notes that its KOLs remain cautious about the long-term prospects of AMG 133 in terms of tolerability and safety, which, according to them, require more de-risking given its novel mechanism of action and modality.

AMG 133 is a bispecific molecule designed to act as an antagonist for glucose-dependent insulinotropic polypeptide receptor (GIPR) and an agonist for glucagon‑like peptide-1 (GLP-1). Novo’s (NVO) semaglutide is an analogue of the human GLP-1 hormone, and Lilly’s (LLY) upcoming rival tirzepatide activates both GIP and GLP-1 receptors.

“We continue to think AMG133 requires substantially more de-risking, not only in obese patients, but also Type 2 diabetes patients given the novel MoA and modality,” Meacham and the team wrote.

Arguing that about 20% of obese people also have Type 2 diabetes, the analysts also note the patient overlap as a reason for their concerns. The subjects in Amgen’s (AMGN) trial for AMG 133 were obese according to their BMI measurements but did not have diabetes or other medical conditions.

Citing the use of fewer doses and less frequent dosing in the trial, the analysts still expect a competitive profile for AMG 133 compared to semaglutide and tirzepatide, which have demonstrated ~14% and 14% – 20% in weight loss potential, respectively.

Commenting on attributes favoring the dominance of Novo (NVO) and Lilly (LLY) in the weight loss market, BofA cites the first mover advantage and the evidence supporting the long-term safety/tolerability of their respective treatments.

Despite Amgen’s (AMGN) early-stage data, the analysts reiterate the Buy rating and $390 per share target on Lilly (LLY), arguing that the latter has pulled off one of the most successful commercial rollouts in the history of GLP-1 class in diabetes.

Additionally, BofA projects that tirzepatide “is well on the path to become the next multi $10B+ mega-blockbuster,” with evidence suggesting more than 20% weight loss effect consistent with bariatric surgery, such as gastric bypass.

Read: Morgan Stanley projected in July that the market for weight loss treatments is expected to reach $54B in 2030.