Pfizer: Solid Midstage Danuglipron Data in Diabetes and Weight Loss Supports Continued Development

Pfizer PFE published solid and detailed phase 2 data on diabetes and weight loss drug danuglipron largely in line with our expectations. We don’t expect any major changes to our fair value estimate or moat rating based on the data. If a larger phase 3 program continues to support a robust efficacy impact, we would likely increase Pfizer’s fair value estimate. Nevertheless, the data is a reminder that Pfizer has the potential to launch competitive drugs into a class that is currently dominated by Novo Nordisk and Eli Lilly. We believe Pfizer’s potential in this class is likely underappreciated and could be disruptive if it posts strong phase 3 data.

With a market potential likely well over $50 billion, the diabetes and weight loss drug market is attracting increased competition. We expect Pfizer will be the next major drug company to enter the market in a significant way. The high-dose danuglipron data suggests the weight loss potential is almost as good as Wegovy in diabetic patients. Also, the convenience of oral danuglipron could support significant market share gains, especially since the drug doesn’t have the same fasting restrictions that are part of Novo Nordisk’s Rybelsus (oral semaglutide) administration. Following Pfizer’s phase 2 data from another similar mechanism of action drug lotiglipron (PF-07081532) expected over the next nine months, Pfizer plans to take lotiglipron or danuglipron into extensive phase 3 development. We expect Pfizer will likely enter this market by 2026. Pfizer’s investment in optionality around two drugs shows the potential importance of this drug class.