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

Eli Lilly (NYSE: LLY) experienced a temporary 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 a head start in the oral obesity drug market when it received FDA approval for Wegovy in December. The Danish biotech giant's drug, a once-daily 25 mg tablet indicated for chronic weight management, has reportedly started strong, with total prescriptions reaching 577,000 and 52,000 filled during the week ending March 20. This early success has set the stage for a price war between Lilly and Novo Nordisk, as both companies vie for market share in the lucrative obesity treatment space.

Trung Huynh, an analyst with RBC Capital Markets, has projected Foundayo to reach peak-year sales of $36 billion—14% above the $31.68 billion racked up by last year's best-selling prescription drug, Merck & Co.'s multi-indication cancer immunotherapy blockbuster Keytruda (pembrolizumab). However, the competitive landscape poses challenges for Lilly. To maximize sales, Lilly is expected to make Foundayo available directly to patients through its LillyDirect direct-to-consumer services and support platform starting Monday.

The pricing strategy for Foundayo is designed to appeal to both individual patients and those covered by commercial insurance plans. A starting dose of 0.8 mg is being priced at $149/month, with higher doses priced at $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. Notably, high-dose patients will automatically receive the $299/month price on their first purchases and retain it if they refill their prescription within 45 days of their previous prescription. Patients paying through commercial insurance plans will be eligible for discounts that reduce Foundayo's out-of-pocket cost to patients for 1-, 2-, or 3-month prescription fills to $25.

Despite these efforts, the competition from Novo Nordisk's Wegovy could dampen Lilly's sales momentum. Analysts are closely watching the pricing strategies and market penetration of both drugs to determine which company will emerge as the leader in the oral GLP-1 receptor agonist market. As the price war intensifies, investors and analysts will need to carefully assess the potential for Foundayo to achieve the projected sales milestones, given the competitive landscape and the challenges posed by Novo Nordisk's Wegovy. The outcome of this battle will have significant implications for the future of obesity treatment and the pharmaceutical industry as a whole.