Eli Lilly stock surged closer to a record high Tuesday after the company set a new bar among weight-loss drugs.
Patients without diabetes who were diagnosed with obesity or being overweight lost an average 24.2% of their body weight after taking Lilly's next-generation anti-obesity drug, retatrutide, over 48 weeks, the company said late Monday.
This helps Eli Lilly take "the lead in obesity," SVB Securities analyst David Risinger said in a note to clients. In comparison, Lilly's already approved diabetes treatment, Mounjaro, — also in testing as a weight-loss drug — led to an average 22.5% reduction in weight over 72 weeks.
The results also line up well with Novo Nordisk's next-generation weight-loss drug, cagrisema. In patients with type 2 diabetes, cagrisema patients lost 16% of their weight over 32 weeks. Meanwhile, patients with diabetes who took Lilly's retatrutide for 36 weeks lost an average 17% of their body weight, Risinger said.
Notably, a separate study showed patients who received retatrutide had an 82% decrease in liver fat. This could give retatrutide an advantage in treating nonalcoholic steatohepatitis, or NASH. There are no approved treatments for NASH, the second-leading cause of liver transplants in the U.S.
Shares of companies working on NASH drugs — Madrigal Pharmaceuticals and Viking Therapeutics — crashed on Lilly's news.
After wavering earlier, Eli Lilly stock advanced 2.6% to close at 464.50. Also, on today's stock market, Novo Nordisk sank 0.8% to 155.98. Madrigal stock crashed 13.3% to 203.88, while Viking shares tumbled 18.2%, closing at 14.84.
Eli Lilly Stock: Strong Pipeline In Obesity Treatment
Eli Lilly's obesity pipeline "is much stronger than understood," Evercore ISI analyst Umer Raffat said in his note to clients.
Lilly and its rivals are working on weight-loss drugs that target the glucagon-like peptide-1 receptor, or GLP-1. This hormone is tied to appetite and how quickly the stomach empties itself. Mounjaro loops in a second target, while retatrutide focuses on three targets to help improve weight loss.
And in testing, Lilly could see further improvement in effectiveness for retatrutide. First, researchers enrolled a roughly equal number of men as women in Lilly's study. But other studies enrolled higher numbers of women, who tend to lose more weight on these types of drugs. Second, only about two-thirds of patients reached the highest dose of retatrutide.
This "basically means they left some (effectiveness) on the table," Raffat said. "With a slightly revised titration, perhaps more patients may be on target high dose in future (studies)."
He kept his in-line rating on Eli Lilly stock.
Showdown For Oral Weight-Loss Drugs
Lilly also seems to be taking the lead on the oral GLP-1 side, Raffat said.
On Monday, Pfizer dropped its once-daily pill due to liver toxicity problems. Instead, the company will focus on its twice-a-day pill. This puts Pfizer at a commercial disadvantage to Lilly and Novo in oral weight-loss drugs.
"This puts Lilly in a leadership position with a synthetic oral," Raffat said.
In early action Tuesday, Eli Lilly stock was in a profit-taking zone above a buy point at 375.25 out of a cup base, according to MarketSmith.com.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
