Could Eli Lilly's Newest Weight Loss Strategy Pay Off for Decades?
Key Points
Eli Lilly is looking to increase global access to weight loss and diabetes drugs.
There is a large opportunity to exploit, given the prevalence of these conditions in low-income countries.
Eli Lilly's efforts might pay off for a very long time.
Eli Lilly (NYSE:LLY) has emerged as the leader in the weight-loss market and is posting excellent financial results, partly thanks to its position in this area. And although the company will face more competition in the next few years, it will also benefit from a rapidly expanding anti-obesity market. In fact, Eli Lilly recently announced an initiative that could broaden its reach in the global weight-loss space and help it capitalize on it for years to come.
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Making weight loss drugs more accessible
On Sept. 28, Eli Lilly announced an initiative dubbed the Lilly Change the Course Commitment. The goal is simple: Eli Lilly wants to treat as many patients with diabetes and obesity in resource-limited settings -- including low- and middle-income countries (LMICs) -- as it does in more affluent places like the U.S. before 2040. There is a massive addressable market here.
As Eli Lilly points out, roughly 70% of adults with obesity and 80% of adults with diabetes live in LMICs. Yet, there is just one adult in these countries with access to Eli Lilly's relevant medicines (which are among the world leaders) for every four adults who have access to these drugs in richer countries. Increasing access to its groundbreaking therapies could help Eli Lilly significantly expand its addressable market worldwide.
A closer look at the market opportunity
One reason pharmaceutical companies tend to target richer countries is that revenue per patient in these countries is much higher than in LMICs. However, in this case, the sheer number of potential patients in other countries could more than offset that. According to the World Health Organization, as of 2022, 2.5 billion people worldwide were overweight, and 890 million of them were obese. That's several times the entire population of the U.S., never mind the number of Americans who are overweight or obese.
In addition, about 830 million people worldwide have diabetes, although there is a significant overlap between the diabetic and obese populations. Still, that's a massive worldwide addressable opportunity. Provided Eli Lilly can manufacture some of its weight-loss medicines at scale and at relatively low cost, it could tap into this large worldwide opportunity.
That's why the company's Foundayo -- its oral GLP-1 anti-obesity drug -- may become an important part of this plan. Foundayo, a small-molecule pill, could offer manufacturing and distribution advantages over Zepbound, an injectable peptide-based medication that is currently the best-selling product in this area. Even with substantially lower prices in low-income countries, Foundayo could generate meaningful sales for Eli Lilly if it achieves significant penetration in LMICs over the next decade.
What this means for Eli Lilly's prospects
As part of its Lilly Change the Course Commitment, Eli Lilly plans to work with regulators and local health systems in LMICs, as well as with global health organizations, to train community health workers. In other words, the drugmaker could help strengthen healthcare infrastructure and build a network of connections in these countries that could outlast 2040, the year it plans to achieve its ambitious goal.
That is an important facet of this plan that investors shouldn't neglect. Eli Lilly's initiative could establish it as a more global healthcare powerhouse with a significant footprint across many LMICs, potentially giving it a competitive edge in these markets that could allow it to access more patients (perhaps including in areas outside of diabetes and weight loss) than most of its pharmaceutical peers in these countries long after 2040.
Now, it's essential to highlight that most of the company's revenue and earnings should still come from countries like the U.S. That is unlikely to change. But this initiative could materially impact the company's financial results for many years to come. There are already plenty of reasons to invest in the stock.
Eli Lilly is a leader in the weight-loss market, has a deep pipeline, has significantly diversified its portfolio in recent years, and has invested in artificial intelligence to discover and develop drugs more quickly and cheaply. This new plan is the icing on the cake.
Prosper Junior Bakiny has positions in Eli Lilly. The Motley Fool has positions in and recommends Eli Lilly. The Motley Fool has a disclosure policy.