Too many drugmakers drool at anti-obesity trough

Catalent

21/02/2024 14:56

(The author is a Reuters Breakingviews columnist. The opinions
expressed are his / her own.)
    By Robert Cyran
       NEW YORK, Feb 21 (Reuters Breakingviews) - Envy is
building up in the gluttony business. Anti-obesity drugs have
turned Novo Nordisk  NOVOb.CO  into Europe’s most valuable
company, after its market capitalization doubled to exceed $400
billion in less than two years, while Eli Lilly’s  LLY.N 
doubled even more quickly to make it the world’s largest
drugmaker ever at over $700 billion. It’s no wonder their peers
want a big piece of the pie, but the odds of doing so are slim.
    Novo Nordisk’s Ozempic generated almost $14 billion of sales
for usage treating diabetes last year, and another $4.5 billion
for weight loss under a different name. Lilly’s version grew
more than 10-fold to $5.4 billion. The only limit now is how
much they can produce, in a market that Goldman Sachs analysts
estimate could reach $100 billion by 2030.
    The best hope for rivals is to develop something better. A
swallowable option, for example, would be more convenient than
the injections now available. New research might lead to
medicines that have fewer side effects or help users retain
muscle.
    Clinical uncertainty and the sheer number of similar
treatments in development makes it impractical to pick winners.
Pfizer  PFE.N  abandoned one pill last year, changed the dose of
another, and is pursuing a third. Johnson & Johnson  JNJ.N  CEO
Joaquin Duato reckons the field is too crowded to be
interesting.
    Newcomers could hit the jackpot, if Pfizer’s and
Warner-Lambert’s success with Lipitor is a guide. The
cholesterol-reducing treatment from Parke-Davis Research reached
the market a decade late and behind four other competitors, but
better efficacy helped make it the first drug to exceed $10
billion in annual revenue. It’s more the exception than the
rule, however. Doctors are reluctant to ditch medications that
work unless there’s an uncommonly big improvement. Novo and
Lilly are therefore trying to lock down the market by massively
expanding production.
    While it’s hard to say if there will be another highly
profitable breakthrough, it’s easier to expect wasteful
pursuits. Projected returns on drug development for the top 20
pharmaceutical companies was only 1.2% in 2022, down from 6.5% a
decade ago, consulting firm Deloitte estimates.
    Herd behavior is partly to blame. Since 2000, the number of
potential drugs in trials aimed at the same biological target
more than doubled, according to McKinsey. Some of these
experiments are useful, but more of them are down to a lack of
promising ventures elsewhere. Drooling at the anti-obesity
trough will simply leave many companies hungry.
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    CONTEXT NEWS 
Drugmaker Eli Lilly said on Feb. 6 that revenue from its
Mounjaro diabetes treatment was $5.2 billion in 2023, more than
10 times as much as in the previous year. Sales of Zepbound, the
same medication but under a different brand to treat obesity,
were $176 million in 2023, its first year on the market.
    Novo Nordisk said on Jan. 31 that Ozempic revenue for 2023
was 95.7 billion Danish Krone ($13.8 billion), an increase of
66% from 2022. Wegovy, the same medication when used for weight
loss, grew revenue 420% to $4.5 billion.
    Novo Holdings, the parent company of Novo Nordisk, said on
Feb. 5 that it would buy contract drugmaker Catalent for $11.5
billion to help expand production capacity for Wegovy.

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Graphic: Pharma stocks bulk up on weight loss drugs    https://reut.rs/3I0vh1m
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 (Editing by Jeffrey Goldfarb and Aditya Sriwatsav)
 ((For previous columns by the author, Reuters customers can
click on  CYRAN/ 
robert.cyran@thomsonreuters.com; Reuters Messaging:
robert.cyran.thomsonreuters.com@reuters.net))