The race for obesity drug assets heats up

The existing treatments for weight loss have drawn interest from across the industry, as their efficacy and sales potential become evident. Ben Hargreaves examines how the drugs have been a major commercial boon to the early leaders in the field, and how the rest of the industry is now playing catch up.

The demand for Novo Nordisk and Eli Lilly’s weight loss treatments has seen sales of the products rocket. The former’s Wegovy (semaglutide) product saw sales grow from 2.4 billion in Q4 2022 to 9.6 billion Danish kroner (DKK) in Q3 2023, and Lilly’s Mounjaro (tirzepatide) manage sales of $1.4 billion in Q3 2023 – though Zepbound will be the product’s name in weight loss going forwards. Both companies have seen a monumental rise in share price since the successful commercial take-off for the products, with Lilly’s share price increasing by nearly 60% and Novo Nordisk’s also moving up by close to 50% over the course of 2023.

The success of the treatments took the industry by surprise, which goes some of the way to explaining the meteoric rise of the companies’ share prices. It was also seen in the supply challenges that have faced Novo Nordisk, which was unprepared for the levels of demand for its semaglutide products. This can be explained by the first generation weight loss product that Novo Nordisk had launched, Saxenda (liraglutide), which had been approved by the FDA to treat obesity in 2014. The product only achieved full year sales of DKK 5.6 billion in 2020, the year prior to the entry of Wegovy onto the market. In 2022, following much publicity for the new generation of drugs, full year sales of the treatment more than doubled to DKK 10.68 billion.

Consequently, the pharma industry is expected to reap sales of $60 billion in ten years’ time within the obesity treatment segment. More broadly, the entrance of obesity treatments has changed the landscape of R&D across the industry, with rival companies rushing to bring their own treatments through the pipeline and to market.

Tipping the scales

According to the World Health Organization, there are more than one billion people worldwide who are considered obese. Obesity in children and adults leads to an increase in risk of cardiovascular disease, type 2 diabetes, certain cancers, and many other conditions. As such, there is a pressing need to find solutions that are able to lower rates of obesity, which has been estimated to cost the US between $147 billion and nearly $210 billion per year in medical expenses. Beyond medical reasons, there is also the societal pressure to lose weight or to maintain a low body fat percentage, which also drives the broader ‘weight management’ industry. 

This is an unusual position for pharma companies to find themselves in, where the weight loss products could deliver revenue based on several different markets – those needing to lose weight, and for those with weight-related health problems, such as cardiovascular issues. Outside of this pressing need, there is undoubtedly a market being created for purely aesthetic weight loss, led by the widely reported prevalence of the treatments’ use within celebrity circles. All of these reasons combined means that the potential market for obesity treatments is enormous.

Two is company, three is a crowd

With the market now clear to competitors, many larger pharma companies are racing to attain a slice of the sales. As with any later entrants onto the market, the aim for many of the products in the pipeline for weight loss is to provide a product that is substantially more effective or practical than current treatments. One major angle has been the race to develop an oral weight loss treatment, which would provide a significant boost to convenience over current treatments that require an injection.

Pfizer is one of the companies looking at breaking into the market with this approach, but has twice hit roadblocks in clinical trials. At the end of 2023, the company was forced to discontinue a twice-daily GLP-1 receptor agonist treatment candidate, after patients reported high levels of gastrointestinal problems. Pfizer will continue with the development of a once-daily formulation of danuglipron, but the setback will sting the company after a similar effort had to be abandoned over liver safety concerns earlier in the year. Novo Nordisk and Lilly are both working on their own version of an oral treatment, given the well-documented preference for oral treatments. 

As well as oral medication, other companies are pursuing targets beyond GLP-1. Shionogi currently has a treatment candidate, S-309309, going through phase 2 trials for the treatment of obesity that is an MGAT2 inhibitor. A different approach is that of Tonix Pharmaceutical, which is exploring the delivery of intranasal oxytocin for weight loss. The company began enrolment of a phase 2 study in July 2023, on the back of preliminary data suggesting that oxytocin can decrease caloric intake and increase energy expenditure.

Deal-making ramp up

Rather than pursue early-phase R&D, there are a number of pharma companies looking to invest in the space is rapidly growing. Occurring in parallel, the two frontrunners are looking to stay ahead of the crowd by also strategically snapping up smaller companies working in the space.

Rather than develop their own drug candidate, Roche moved to quickly acquire its own pipeline of weight loss programmes, through its potential $3.1 billion deal for Carmot Therapeutics. The acquisition, if completed, will add three potential treatments to Roche’s pipeline, each GLP-1 agonists, but with one of these also being a once-daily oral treatment.

AstraZeneca has also gotten involved in the space, through a potential $2.2 billion licensing deal with Chinese biotech, Eccogene. Following a similar approach to Pfizer and other late arrivals, the agreement centres on an orally active GLP-1 agonist drug, ECC5004. The potential treatment would fold neatly into AZ’s existing portfolio of diabetes treatment, such as Farxiga/Forxiga (dapagliflozin) and Bydureon (exenatide).

In order to get ahead of these potential competitors, both Lilly and Novo Nordisk announced agreements to acquire weight loss assets in 2023 – serving the twin purpose of bolstering portfolios, and also removing potential competitors from the development pipeline. Lily’s purchase was agreed in July, and will set the company back $1.93 billion on completion to takeover Versanis Bio. The biotech’s main asset is bimagrumab, a monoclonal antibody that could potentially simultaneously help to build muscle and reduce fat. The drug candidate is already being tested in phase 2b trials, both alone and in combination with Novo Nordisk’s semaglutide. Should the combination therapy be successful, it could be a major coup for Lilly to be able to partner the treatments with its own portfolio.

Similarly, Novo Nordisk completed two deals mid-way through 2023, by agreeing acquisitions for Embark Biotech and Inversago Pharma. The former could see Novo Nordisk pay just under €500 million, while the latter deal will be completed for up to $1 billion. Both deals are focused on weight loss treatments that pursue a different approach to the GLP-1 pathway. Inversago is working on peripherally acting CB1 receptor blocker therapies, with the receptor thought to play a role in appetite, and Embark is focused on a potential drug to boost calorie expenditure.

The scale of the deal-making remains relatively small, at this stage, in comparison to the size of deals occurring in other therapeutic areas. However, as more assets reach the commercial scale, this will undoubtedly change, as big pharma companies searching for growth will be prepared to spend the cash necessary to add them to their portfolio. Potentially, 2024 could see larger-scale moves, as M&A is expected to rise again, following the lean years during the height of COVID-19.