Obesity Drugs: Can New Firms Take Market Share From Eli Lilly and Novo Nordisk?

New public and private entrants are emerging to challenge the leading positions of Novo Nordisk NVO and Eli Lilly LLY in a potential $200 billion total GLP-1 market, which we expect will see 68% of sales from weight loss indications by 2031.

While initially approved for diabetes, GLP-1 drugs are gaining new indications, including the large opportunity in obesity following decades of failed attempts to create an effective and safe drug. These drugs help treat obesity because they help slow the movement of food from the stomach.

Given first-mover advantages and innovation with next-generation products, we expect Novo and Lilly to retain nearly 70% of the total market by 2031, reinforcing their wide moats. Still, we view these stocks as overvalued.

Over the next three to four years, we expect substantial disruption from next-generation obesity drugs by Roche RHHBY, Amgen AMGN, Pfizer PFE, AstraZeneca AZN, private firm Boehringer, and acquisition targets including Viking and Structure. These drugs will likely take market share and pressure drug pricing.

Here, we outline our expectations for the obesity drug market over the next few years.

Obesity Market Drivers: Solid Market Penetration and Strong, but Weakening, Pricing Support

Two key assumptions drive our outlook: market penetration rates and obesity drug pricing.

• US market penetration: We project 41% of diabetics and close to one fourth of nondiabetic obesity patients will be on a GLP-1 drug by 2031 based on the strong efficacy of the drugs and likely robust insurance coverage. Our assumed 2031 GLP-1 penetration rates are ahead of advanced drug penetration in psoriasis and atopic dermatitis, but the high media coverage of the GLP-1 class likely means higher market share gains. Internationally, we project much lower market penetration rates in obesity (especially outside of developed markets) because of the lack of robust insurance coverage, causing pricing to remain too high for most patients to utilize the drugs.
• Obesity drug pricing: Over the next two years, we expect Novo and Lilly to concede price declines to expand insurance coverage over larger patient groups. By 2027 and beyond, we expect new entrants to cause the annual pricing declines to accelerate toward 10%-15% as competitors work to gain insurance coverage. While the current GLP-1s haven’t faced as steep pricing declines as other diabetes medicines, recent pricing declines have accelerated, as we believe Novo and Lilly increased pricing competition when both firms launched a weekly GLP-1 drug. We expect the pricing pressure to accelerate as new GLP-1s reach the market with similar efficacy. Additionally, we expect forced Medicare price negotiations for Wegovy (as part of the Inflation Reduction Act) to also pressure GLP-1 pricing starting in 2027.

Why We Think Novo Nordisk and Eli Lilly Are Overvalued

We view Novo Nordisk and Eli Lilly as overvalued, with the market likely projecting too much market penetration for obesity drugs or expecting obesity drug pricing to remain stable.

In the chart below, we highlight the unlikely scenarios needed to support the current valuations of Novo and Lilly, as well as the very unlikely outcome that the stocks are currently undervalued. While Novo and Lilly have many drugs currently marketed and in the pipeline, we have isolated the scenarios to the obesity market, as we believe that is the largest factor influencing the firms’ valuations.

2031 Valuation Scenarios for Eli Lilly and Novo Nordisk

To support the current valuations of Eli Lilly and Novo Nordisk, US GLP-1 market penetration into obesity would need to reach close to 60% with international obesity market penetration reaching close to 25% with only mid-single-digit pricing declines. These high penetration rates with more-moderate pricing declines seem very unlikely. Further, for the scenario to support the stocks as undervalued, Lilly and Novo would also have to retain 85% of the market by 2031, which seems highly unlikely given the increasing competitive pressures.

New Drugs on the Horizon to Challenge Novo Nordisk and Eli Lilly

Novo Nordisk and Eli Lilly have set the bar for efficacy and side effect profiles with obesity drugs Wegovy and Zepbound, but we expect the next generation of drugs will likely reach or exceed these drug profiles and potentially increase the convenience of dosing through oral dosing or monthly injection dosing.

Potential launches from new challengers could start in 2026 with Boehringer Ingelheim and Zealand’s survodutide. Several launches in 2027 (Amgen, Altimmune), 2028 (Pfizer, Roche, Viking, and Structure), and 2029 (Roche, Viking, AstraZeneca, and Zealand) stand out to us as potentially competitive with Novo Nordisk and Eli Lilly. We expect 16 new obesity drugs could launch by 2029, with roughly $70 billion of the GLP-1 market coming from these challengers by 2031.

That said, Novo and Lilly are also advancing their next-generation pipelines, beginning with Novo’s cagrisema and Lilly’s orforglipron in 2026.

Factors that could help these new firms differentiate from Novo Nordisk and Eli Lilly include:

• increased efficacy (speed, duration, and quality of weight loss),
• gastrointestinal tolerability,
• injectable versus oral dosing, and
• availability of supply.

Upcoming Catalysts for Incumbents and Potential New, Differentiated Obesity Drugs

Public vs. Private Companies in the Obesity Treatment Market

While cardiometabolic drug development was a key area of focus for the biopharma industry up until the early 2010s, most biopharma firms (except Novo and Eli Lilly) significantly reduced research and development efforts in the therapeutic area as pricing power declined and innovation stalled. The industry heavily pivoted more toward oncology, immunology, and rare disease drugs, where pricing power remained strong and innovative scientific advancements were striving.

Given the huge obesity market opportunity combined with an increased understanding of treatment, we expect large biopharma firms to accelerate development efforts into obesity drugs through acquisitions. On the public side, close to $5 billion in upfront payments for obesity-drug-related acquisitions have occurred since 2023. This is a relatively small investment into acquisitions for one of the most innovative therapeutic areas, as the industry’s largest annual acquisitions alone typically total over $50 billion. In addition, obesity-based collaborations in 2023 between large public firms and smaller private innovators, like AstraZeneca/Eccogene and Novo Nordisk/EraCal, show strong appetite among big biopharma firms for access to novel obesity drug candidates.

On the private side, the obesity treatment sector is experiencing a surge of innovative startups, each bringing unique approaches to tackle this global health crisis. These emerging companies are attracting significant investment and exploring novel mechanisms to compete with established players like Novo Nordisk and Eli Lilly. They’re exploring trends such as muscle preservation, oral alternatives to injectables, and innovative drug delivery systems. Companies are also exploring multimodal approaches to address not only weight loss but also related complications such as diabetes and cardiovascular diseases.

Lastly, the IPO market is heating up for obesity-related startups. After raising $188 million in an upsized IPO, MBX Biosciences MBX went public on Sept. 13, potentially serving as a bellwether for the sector and catalyzing further investment. Meanwhile, BioAge Labs is planning to raise roughly $135 million for its IPO, which is expected to price this week.

These IPOs highlight continued investor interest in metabolic disease therapies and could pave the way for more startups to access public markets.