'Eli Lilly pulls ahead': investors praise new obesity drug

Shares of pharma giant Eli Lilly, maker of best-selling obesity and diabetes drugs, jumped 5% after the company reported results from a final-stage trial of its next-generation drug, retatrutide, MarketWatch writes.

The shares of Lilly rose on the pre-market on June 8 by 5%, but then slowed down and at the moment of publication of this text the quotations added about 2%.

At the conference of the American Diabetes Association representatives of the company announced data on the course of the third phase of clinical trials of the new injectable drug retatrutide. Its use in the maximum dosage for 80 weeks led to a 28.3% weight loss in patients, but at the minimum dosage the average weight loss was 19%, MarketWatch reports. In addition, the drug reduced pain in osteoarthritis and improved the condition of patients with moderate to severe obstructive sleep apnea, as well as with type 2 diabetes.

When retatrutide was taken at a low dose, the discontinuation rate - that is, the proportion of patients who discontinued therapy before completing the course due to side effects or other reasons - was only 4.1%, the company told the conference.

"Following the release of retatrutide data and the company's investor meeting, we see it pulling even further ahead of competitors in the obesity and type 2 diabetes treatment segment," said JPMorgan analysts led by Chris Schott, their note quoted by MarketWatch. At its maximum dosage, the drug provides greater weight loss than Lilly's popular Zepbound, requiring only minor compromises in terms of tolerability, they pointed out. This version would be more suitable for patients who need significant weight loss. And a drug with less of the active ingredient could become a mass-market product, JPMorgan believes. In terms of tolerability and efficacy, they are not inferior to Zepbound, but allow for faster dosage increases.

Citi analysts led by Jeff Meacham were also impressed with low-dose retatrutide, MarketWatch reports. They said the efficacy data is so compelling that its positioning as a first-line therapy can't be ruled out. "This approach is ahead of conservative expectations on Wall Street, where the drug is seen only as the next step for patients who have had a decreased response to Lilly's tirzepatide," the Citi analysts noted. They also pointed to signs that the effectiveness of Danish pharma company Novo Nordisk's Wegovy tablets is waning, with about a quarter to a third of patients no longer losing weight. According to Citi, this could play into Eli Lilly's hands and help promote its competing oral drug Foundayo.

28 out of 33 analysts covering Lilly shares recommend buying them. Three advise to keep the securities in the portfolio, and only two - to sell. Over the past 12 months, the company's capitalization has increased by 46%, but the average Wall Street target suggests growth of about 10% more.

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