Amid GLP-1 supply constraints, Lilly to prep for oral obesity market 'at risk'

Eli Lilly seems to have gotten off to a good start with weight loss drug Zepbound—clocking $175.8 million in its first quarter on the market. But the Indianapolis pharma is wasting no time preparing for the next supply challenge in obesity: oral meds.

While orforglipron just began in a phase 3 study last year, Lilly is already trying to plan for the eventual supply needs, while figuring out its place in a market that has been dominated by effective injectables. Novo Nordisk’s Wegovy has led the charge, but Lilly entered with Zepbound in the fourth quarter of last year.

Patrik Jonsson, president of Lilly Diabetes and Obesity and president, Lilly USA, said there are more than 110 million people in the U.S. with obesity and 650 million globally. The drugs are so in demand that manufacturers can’t keep up. Novo, for its part, ended up buying out CDMO Catalent yesterday for $16.5 billion to get a leg up on the race (more on that later).

“I think taking into account the current supply constraints across markets, it's impossible to reach all of those with injectables so I think that's the big opportunity for orforglipron,” Jonsson said on Tuesday’s fourth quarter earnings call.

Lilly has already shown that orforglipron spurred 14.7% weight loss at 36 weeks in a phase 2 study. If those results hold up in phase 3, Jonsson believes Lilly’s med may be best in the oral class.

Another opportunity for orforglipron is patients who have concerns about injectable medicines, which Jonsson says is about 20% of the potential market.

No matter what, if orforglipron proves out in the clinic, Lilly is going to need a lot of drug product to fill demand, just as Zepbound and Wegovy have faced. CEO David Ricks said the company plans to build out manufacturing capacity for the oral med “at risk.”

“I think given the probability we assess internally as well as the opportunity on the other side of a positive phase 3, we see that as a wise investment,” Ricks said.

It’s not like Lilly can just tack on a few machines at the same plants making Zepbound, either. Ricks said it’s totally different organic chemistry and API to make a tablet or capsule.

“We're paralleling that with our robust injectable investments and if we're wrong, okay, we'll have to eat that—if orforglipron isn't a strong product,” he continued. “But if it is, I think it does begin to change the math on supply in this category. And I think that's a bet worth taking.”

Another company making a big bet in the supply chain is Novo, which bought out Catalent yesterday, an “integral manufacturer” in the diabetes and obesity markets. Both Lilly and Novo use the supplier’s capabilities—meaning Lilly is now reliant on its competitor's services.

With Novo’s parent company Novo Holding’s acquisition of the manufacturer and intention to sell three Catalent fill-finish sites to Novo, Lilly is left with “questions about that transaction," CFO Anat Ashkenazi said during the call. 

“We intend on holding Catalent accountable to their contract with us,” Ashkenazi added.

Lilly expects its competitor to take "many years" to increase capacity even with the buy, Ricks said. Supply constraint is "not an easy problem to solve" and it could be awhile until additional capacity is up and running throughout the market. 

For example, Ricks pointed to Lilly's massive $1.7 billion investment in its Concord, North Carolina site, which was announced in 2022 and should be up and running by the end of this year. Development runs slow due to the technical complexity of such facilities which require specific know-how paired with a tight supply chain on the machines used at the sites. 

“It’s frustrating for investors, it's frustrating for us, it's even more frustrating for patients.” Ricks said. “It’s just sort of the situation we’re in.”