The Obesity Drug Revolution Just Got Real

New data from a five-year Novo Nordisk trial showing major cardiovascular benefits from its drug Wegovy will add pressure on insurers to cover this new class of medications known as GLP-1s, and could eventually pave the way for Medicare coverage. That will have significant implications for our society, where four in 10 adults are obese, as well as for investors in this space’s emerging duopoly: Eli Lilly and Novo.

We always knew Wegovy, the weekly anti-obesity injections, helps patients lose weight. But now we have confirmation that the medication helps prevent strokes and heart attacks as well. Novo said on Tuesday that patients in a long-term trial, the first of its kind, had 20% fewer heart attacks, strokes, and cardiovascular deaths, combined, than those who received a placebo in the study. The reduction surpassed the study’s goal of demonstrating at least a 17% reduction in risk.

The news was described by Wall Street analysts as a best-case result, and sent the stocks of both Novo and Lilly soaring. Evan Seigerman, an analyst at BMO Capital Markets, called it a “home run scenario."

What is new about this study is that it excluded patients with diabetes. It was already known that GLP-1s, which have primarily been used in diabetic patients, help reduce heart disease for them. In fact, a study of Wegovy sister drug Ozempic had previously found that the Novo drug reduced the incidence of adverse cardiac events by about 26% relative to placebo. What the latest study, called Select, shows, is that the benefit is also conferred to non-diabetic obese and overweight patients.

Novo Nordisk said Tuesday it plans to seek U.S. and European regulatory approvals to add the evidence of a heart benefit to Wegovy’s prescribing label.

The results will also strengthen the companies’ effort to lobby for better insurance coverage, just as some employers had started balking at the cost, cutting off the medication to employees. The surging demand for GLP-1s has prompted analysts to raise their forecasts for the global obesity market, with Morgan Stanley recently revising its estimate to $77 billion in annual sales by 2030, up from $54 billion.

For now, doctors are prescribing more of Mounjaro and Wegovy than the companies can make, with a lack of manufacturing capacity frequently leading to shortages. Eli Lilly on Tuesday reported $980 million in Mounjaro sales in the second quarter, trouncing analyst estimates of $740 million on FactSet. The Mounjaro beat allowed the company to raise its annual guidance as well. Mounjaro is approved for diabetes and is expected to receive Food and Drug Administration approval for obesity treatment this year, though doctors are already prescribing it off-label.

Insurance coverage is still spotty, and how the U.S. healthcare system will deal with the immense cost remains a major question. Medicare still doesn’t cover drugs for obesity, and there is good reason to be cautious: A recent article in the New England Journal of Medicine warned that if just 10% of obese Medicare beneficiaries were to take Wegovy, it would cost the program $27 billion a year.

And while commercial coverage has grown rapidly, it is running into a difficult reality: With the drugs being so pricey—Wegovy’s list price is about $13,600 annually—employers are inevitably wondering if the drugs are worth it.

Eli Lilly and Novo were both up by more than 10% in early trading Tuesday, and shareholders have reason to celebrate. Success in the Select trial goes a long way toward convincing payers of all stripes that the drugs do more than just help patients shed some pounds.