One of the hottest areas in the pharmaceutical space right now is weight loss. Glucagon-like peptide-1 (GLP-1) medications such as Ozempic, Wegovy, Rybelsus, Mounjaro, and Zepbound have become staples for treating diabetes and obesity.
Eli Lilly (LLY -0.45%) is the developer of Mounjaro and Zepbound, two popular medications used to treat those conditions. The main compound in each drug is called tirzepatide, and Lilly has been actively exploring additional use cases for the breakthrough medicine.
Let's break down the GLP-1 market, and analyze why investors may not want to sleep on Lilly's future.
The rise of GLP-1 medicines
Today, GLP-1 agonists are primarily used for diabetes patients and obesity care. J.P. Morgan is forecasting that 9% of the U.S. population will be using a GLP-1 medication by 2030. According to the bank's research, the U.S. obesity market is set to grow at a 53% compound annual rate through 2030, with an addressable market reaching $44 billion.
Although it's still early, there are some indicators that GLP-1 agonists have much more potential beyond current use cases.
Image source: Getty Images.
Expanded indications are on the rise
When it comes to weight loss, Lilly's biggest rival is Novo Nordisk -- the developer of Ozempic, Rybelsus, Saxenda, and Wegovy. Today, Novo Nordisk holds roughly 60% of the GLP-1 market share, largely thanks to Ozempic. However, the Danish pharmaceutical company has shown that it's looking to grow beyond treating weight loss.
In March, Wegovy was granted an expanded indication by the Food and Drug Administration (FDA) to treat cardiovascular disease. This makes sense as diabetes and obesity are often highly correlated with cardiovascular issues such as hypertension or risk of stroke. Some research suggests that the market for cardiovascular treatments could eclipse $200 billion by next decade, so Novo Nordisk may have unlocked yet another blockbuster opportunity.
The more subtle theme here is that GLP-1 agonists could be used for many more conditions than just diabetes and chronic weight management.
Don't sleep on Eli Lilly
J.P. Morgan's research also noted that GLP-1 medications may also have positive implications for arthritis, kidney disease, Alzheimer's disease, and sleep apnea.
Earlier this month, Eli Lilly announced that it had tested tirzepatide's efficacy in obesity patients who also suffer from obstructive sleep apnea (OSA). According to the study, tirzepatide reduced the apnea-hypopnea index (AHI) by "62.8% compared to 6.4% from baseline for placebo."
Although it's only been commercially available since May 2022, the drug has already become a blockbuster. Sales of Mounjaro rocketed more than tenfold in 2023, reaching $5.2 billion and becoming Lilly's second highest revenue stream.
Even though the FDA has not yet approved Mounjaro or Zepbound to treat anything outside of diabetes and obesity, the sleep apnea opportunity could be enormous, considering that 80 million adults in the U.S. alone suffer from OSA.
Furthermore, with expanded indications already granted to competing products, I'm optimistic that tirzepatide will help Lilly launch in many other markets. Note that the sleep apnea study is not reason alone to buy Eli Lilly stock. Rather, it's a testament to the company's research and innovation efforts.
Eli Lilly shares currently trade at a forward price-to-earnings (P/E) ratio of nearly 60, so the stock is a bit pricey compared to the S&P 500. With first-quarter earnings looming on April 30, I think investors are best off dialing into the call and listening to management's commentary.
The call should provide a thorough update on the company's pipeline, and the growth outlook for its entire portfolio. Patient investors will have an opportunity to digest management's guidance, and assess whether Eli Lilly is on pace to continue disrupting in the GLP-1 market and beyond.
