A combination image shows an injection pen of Zepbound, eli Lilly’s weight loss drug, and boxes of Wegovy, made by Novo Nordisk.
Hollie Adams | Reuters
Teh appetite for blockbuster weight loss and diabetes drugs is far from satisfied.
From fresh competition to new uses, the market is quickly vaulting into a new stage of growth. But factors including insurance coverage, pricing, copycat drugs and the development of new pills will ultimately determine how far the treatments will reach.
Eli Lilly and Novo Nordisk are still the dominant players, as demand for their weekly injections shows few signs of slowing. Eli Lilly has pulled ahead in the market, saying during its third-quarter earnings call on Thursday that it gained share for the fifth consecutive quarter and that its drugs account for nearly 6 out of 10 prescriptions within the injectable obesity and diabetes class.
But both firms are focused on ramping up supply, testing new uses for their medicines and bringing the next wave of obesity drugs to patients, including more convenient pills.
Behind them is a slate of drugmakers – from biotech upstarts to pharma giants – racing to win a slice of what some analysts expect could be a roughly $100 billion market by the end of the decade. there may be plenty of room for new entrants: McKinsey projects that 25 million to 50 million U.S. patients could use GLP-1s by 2030.
Nearly every major pharmaceutical company has bet on obesity drugs, frequently enough through deals with smaller developers, including businesses based in China. While some experimental drugs are further along than others, all are likely years away
Novo Nordisk Faces Turbulence as Challenges Mount for Wegovy Maker
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Novo Nordisk, the pharmaceutical giant behind the popular weight-loss drug Wegovy and diabetes medication Ozempic, is navigating a period of significant upheaval. The company has faced criticism for overhyping expectations for its next-generation obesity drug, CagriSema, and was slow to embrace direct-to-consumer sales for its established medications. A “tepid initial response” to compounded copycat treatments further compounded the issues.
Adding to the pressure, Medicare is set to negotiate the price of Novo nordisk’s semaglutide – the active ingredient in Ozempic, Wegovy, and Rybelsus – starting in 2027, possibly impacting revenue. Eli Lilly’s competing drug, tirzepatide (Mounjaro and Zepbound), isn’t expected to be subject to price negotiations until later in the decade.
Novo Nordisk is hoping a change in leadership will help steer the company back on course.Mike Doustdar assumed the role of CEO in late July,replacing Lars Fruergaard Jorgensen after a board decision. Doustdar has quickly initiated changes,announcing plans in September to cut approximately 9,000 jobs,representing around 11.5% of the global workforce.
However, turbulence continues. Recently,several board members resigned following a dispute with the Novo Nordisk Foundation,the company’s controlling shareholder,regarding the board’s composition.
The Compounding Issue
A persistent challenge for Novo nordisk is the continued availability of cheaper, compounded versions of semaglutide.
Currently, the company is “much more vulnerable” to competition from these copycats than Eli Lilly, primarily because most contain or claim to contain semaglutide. Analysts at Cowen suggest Novo Nordisk is “already on its back foot” and cannot afford to lose further market share.
The popularity of compounded GLP-1s surged when branded injections were scarce or not covered by insurance.
Compounding pharmacies create customized drug versions to meet individual patient needs, such as those with allergies. During periods of branded drug shortages, they are permitted to produce larger quantities of compounded alternatives.
However,both Novo Nordisk and Eli Lilly have invested heavily in expanding their manufacturing capacity,which is now yielding results.
The FDA has declared an end to the shortages of both tirzepatide and semaglutide, legally restricting compounding pharmacies from making and selling copycats, except in limited cases where medically necessary. novo Nordisk announced in June…
GLP-1s and the Future of Obesity Treatment: Coverage, Costs, and the rise of pills
The burgeoning market for GLP-1 medications – initially diabetes drugs now widely used for weight loss – is facing a complex landscape of employer coverage decisions, cost concerns, and the anticipated arrival of oral alternatives. while demand for drugs like Wegovy and Zepbound continues to soar, several factors are influencing how readily these treatments will become accessible to a broader patient base.
Employer Hesitation and Cost Control
According to a recent report by the Business Group on Health,only about half of large employers currently cover GLP-1s for weight loss,and that number isn’t expected to dramatically increase in the near term. Karen Crable, a senior vice president at Corporate Synergies, a national insurance and employee benefits brokerage and consultancy, attributes this to the high cost of the drugs and concerns about employee turnover. Employers, which can experience high turnover, are also hesitant to cover costly drugs for workers who may leave the company within a few years, Crable added.
New direct-to-consumer programs from Eli lilly and Novo Nordisk – which let patients pay cash for treatments at less than half their monthly list price – may also discourage employer coverage. Employers also have questions about how oral obesity drugs, which could be available as soon as 2025, could affect demand and costs, says Karen Stitch, a director at the Business Group on Health.
However, coverage could still grow, particularly as GLP-1s gain new approvals for more chronic conditions. Wegovy is already cleared for reducing cardiovascular risk and fatty liver disease, while Zepbound is approved for sleep apnea. Novo Nordisk is also testing semaglutide in Alzheimer’s,with initial late-stage trial results expected this year. If the study demonstrates that GLP-1s reduce the risk of cognitive decline, it “would give a big boost” to both Novo Nordisk and Eli Lilly, potentially encouraging longer-term patient adherence, according to Leerink Partners analyst David Risinger.
The underlying economic argument for coverage is also gaining traction. “You’re paying for the GLP-1 drug with the hope that obesity or these other conditions will improve, so that health-care costs for these individual employees will get better as you move forward,” Stitch explained.Some plans are already implementing cost controls, such as BMI thresholds, to manage spending. Furthermore, broader Medicare coverage – with the Trump administration planning to pilot coverage of weight loss drugs under Medicare and Medicaid – could eventually prompt private insurers to follow suit.
All Eyes Are on Pills
The potential arrival of oral GLP-1 medications is poised to reshape the market. While Novo Nordisk already sells an oral GLP-1 for diabetes, both the company and Eli Lilly are developing pills specifically for weight loss.
Experts believe these pills could increase patient access and alleviate the supply shortages plaguing current injectable options. Though, questions remain about their efficacy and side effect profiles compared to injections.
Novo Nordisk’s 25-milligram oral semaglutide is expected to be the first needle-free alternative for weight loss, potentially winning approval by the end of the year. Data from phase three trials suggest its slightly more effective than Eli Lilly’s competing oral GLP-1, orforglipron.
Eli Lilly’s pill could offer advantages due to its small-molecule structure. this allows for easier absorption and eliminates the dietary restrictions required with Novo Nordisk’s peptide-based pill. Analysts also predict orforglipron will be easier to manufacture at scale, a critical factor given the current supply constraints. Eli Lilly CEO David Ricks stated the company hopes to launch its pill globally “this time next year.”
Goldman Sachs analysts forecast that daily oral pills will capture 24% – approximately $22 billion – of the 2030 global weight loss drug market.
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Pharmaceutical M&A Landscape: Limited Targets Remain
The pharmaceutical industry is experiencing a period of robust mergers and acquisitions (M&A) activity, leading to a situation where few large, independent pharmaceutical companies remain available for acquisition. This observation, recently highlighted by Covych, reflects a trend driven by factors like patent expirations, the need for innovative pipelines, and the desire for economies of scale.
Drivers of Pharmaceutical M&A Activity
Several key factors are fueling the current wave of pharmaceutical M&A:
- Patent Cliffs: Many blockbuster drugs are losing patent protection, creating pressure on pharmaceutical companies to replenish their revenue streams.Acquiring companies with promising pipelines is a common strategy to address this challenge. EvaluatePharma provides detailed analysis of patent expirations and their impact on the industry.
- Pipeline Needs: Developing new drugs is a costly and risky endeavor. M&A allows companies to quickly gain access to innovative therapies and technologies, diversifying their portfolios and reducing reliance on internal research and development.
- Cost Synergies: Combining operations can lead to significant cost savings through streamlined manufacturing, reduced administrative overhead, and optimized research efforts.
- Market Access & Expansion: Acquisitions can provide access to new geographic markets and patient populations,accelerating growth.
The Shrinking Pool of Potential Targets
As Covych noted, the availability of large, independent pharmaceutical companies is dwindling. Major players have already been acquired or have merged with others.Some recent examples include:
- Pfizer’s acquisition of Seagen: In December 2023,Pfizer completed its $43 billion acquisition of Seagen,a leader in cancer therapies. Pfizer Press Release
- Amgen’s acquisition of Horizon Therapeutics: Amgen finalized its $27.8 billion acquisition of Horizon Therapeutics in March 2024, bolstering its portfolio of rare disease treatments. Amgen Investor Relations
- Merck’s acquisition of Imago BioSciences: Merck acquired Imago BioSciences in 2022 for $1.35 billion, adding a promising pipeline of bone marrow transplant therapies. Merck News
These deals, and others like them, have significantly reduced the number of large-cap pharmaceutical companies that are potential acquisition targets.
What Remains?
While large-scale acquisitions are becoming more challenging, M&A activity continues to focus on:
- Mid-Cap Pharmaceutical Companies: Companies with market capitalizations between $2 billion and $10 billion are increasingly attractive targets.
- biotechnology Companies: Biotech firms, particularly those with promising early-stage drug candidates, remain highly sought after.
- specialty Pharmaceutical Companies: Companies focused on niche therapeutic areas are also attracting interest.
The Role of Private Equity
Private equity firms are also playing a growing role in pharmaceutical M&A, often acquiring companies with the intention of streamlining operations and then selling them to strategic buyers or taking them public. Becker’s Hospital review details the increasing involvement of private equity in the pharmaceutical sector.
Key Takeaways
- The pharmaceutical M&A landscape is highly active, driven by patent expirations, pipeline needs, and cost synergies.
- The number of large, independent pharmaceutical companies available for acquisition is limited.
- M&A activity is shifting towards mid-cap pharmaceutical companies,biotechnology firms,and specialty pharmaceutical companies.
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