StockWatch: Price War Dampens Lilly Surge After Oral GLP-1 Wins FDA Nod

Eli Lilly (NYSE: LLY) experienced a brief surge in stock price following the FDA's approval of its oral obesity drug Foundayo (orforglipron), but the euphoria was short-lived. The stock rose 4% on the day of the announcement, moving from $919.77 to $954.52. However, by the following Thursday, the momentum had reversed, with the stock dropping 2% to $935.58. This reversal was not solely due to the broader market decline triggered by investors' concerns over the Iran war. Analysts and investors were divided on how quickly Lilly could generate sales for Foundayo, a small molecule glucagon-like peptide-1 (GLP-1) receptor agonist, in the face of intense competition from Novo Nordisk's oral Wegovy (semaglutide).

Novo Nordisk had gained an edge in the oral obesity drug market in December when the FDA approved its once-daily 25 mg tablet, Wegovy, for chronic weight management. Analysts noted that Wegovy's sales had started strong, with total prescriptions reaching 577,000 and 52,000 filled during the week ending March 20. The approval of Foundayo marked a significant milestone for Eli Lilly, but the company's ability to capitalize on this success hinges on its pricing strategy and the competitive landscape.

Eli Lilly plans to make Foundayo available directly to patients through its LillyDirect direct-to-consumer services and support platform, starting Monday. The starting dose of 0.8 mg will be priced at $149/month, with higher doses ranging from $199/month for 2.5 mg, $299/month for 5.5 mg and 9 mg doses, and up to $349/month for the highest doses of 14.5 mg and 17.2 mg. Patients paying through commercial insurance plans will be eligible for discounts that reduce the out-of-pocket cost for 1-, 2-, or 3-month prescription fills to $5.

Trung Huynh, an analyst with RBC Capital Markets, has projected that Foundayo will reach peak-year sales of $36 billion—14% above the $31.68 billion racked up by last year's best-selling prescription drug, the multi-indication cancer immunotherapy blockbuster Keytruda® (pembrolizumab), marketed by Merck & Co. However, this optimism is tempered by the competitive dynamics in the GLP-1 market. Novo Nordisk's Wegovy has already established itself as a leading product in this space, and its pricing strategy will play a crucial role in shaping the competitive landscape.

The price war between Lilly and Novo Nordisk is likely to impact the perceived value of Foundayo and its ability to capture market share. While Lilly's direct-to-consumer approach and competitive pricing may attract some patients, the existing success of Wegovy poses a significant challenge. The key question for investors and analysts is how quickly Lilly can generate sales for Foundayo and whether it can capitalize on the FDA approval to establish a strong market position in the highly competitive GLP-1 receptor agonist market.

In the coming months, the performance of Foundayo will be closely watched, not only by investors but also by the broader pharmaceutical industry. The drug's success or failure could have significant implications for the future of GLP-1 therapies and the competitive dynamics in the obesity treatment market. As the price war intensifies, both Lilly and Novo Nordisk will need to navigate the complex landscape of pricing strategies, regulatory approvals, and patient preferences to secure their positions in this rapidly evolving market.