Lilly makes waves with next-generation diabetes drug, but GLP-1 rivals needn't panic: analysts

Eli Lilly
Eli Lilly presented positive data on candidate GIP/GLP-1 RA at the European Association for the Study of Diabetes annual meeting. (Eli Lilly)

Last week, Eli Lilly unveiled positive data for a new diabetes drug with serious potential to disrupt the GLP-1 market. But its rivals don't need to hunker down, analysts said.

At the European Association for the Study of Diabetes annual meeting, the Indianapolis drugmaker presented phase 2b results showing its dual GIP and GLP-1 receptor agonist, known for now as GIP/GLP-1 RA, could significantly reduce blood sugar and increase weight loss.

Specifically, at the six-month mark, the candidate had pared down HbA1c—an important blood glucose metric—by 2.4% compared with placebo and spurred weight loss by 12.7% in a performance that lead study investigator Juan Frias, M.D., called, “unprecedented.”

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"The next wave of innovation in the study of incretins for treating Type 2 diabetes is fascinating. We're taking the already proven benefits of GLP-1 receptor agonists and looking at a new molecule that integrates GIP action to see what additional benefits are possible," he said.

But in the meantime, though the prospect “looks like a real threat,” investors—especially those of key GLP-1 player Novo Nordisk— should “not get carried away,” Bernstein analyst Wimal Kapadia cautioned in a Thursday note to clients.

“While clearly not a positive for Novo we are not overly concerned,” he wrote.

RELATED: Novo Nordisk results show GLP-1s are job 1. Can its crucial Ozempic launch deliver?

One reason? Lilly’s up-and-comer is still a long way off. As Kapadia noted, a potential rollout in early 2023 gives Novo five years to establish Ozempic, its new long-acting GLP-1, and three years to build up another formulation of the same drug, the Danish drugmaker’s not-yet-approved oral semaglutide.

“Oral sema will take lots of share from the short-acting GLP-1s … as well as from orals,” Evercore ISI analyst Umer Raffat wrote in his own note to clients.

Plus, as Raffat's fellow Evercore ISI analyst Josh Schimmer noted in a Sunday missive to investors, the Lilly drug's performance also came "at the expense of GI symptoms including nausea and vomiting … go figure how those help control appetite/metabolic disease."

Still, expect Lilly to do what it takes to gain traction with GIP/GLP-1RA when the time comes—including shifting spending away from its GLP-1 entrant, Trulicity, Raffat said.

“This drug is setting up to be perhaps the most critical part of LLY's diabetes strategy going fwd … especially in the face of Novo's new launches,” he wrote.

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