It’ll be a while before there’s any impact, but it could be a big deal.
Eli Lilly‘s (LLY 0.42%) insatiable hunger to squeeze even more money out of its best-selling therapies is starting to look downright impressive. With its research and clinical groups firing on all cylinders, and management shoveling more funding into the fuel tank, the pace of its growth is more likely to accelerate than it is to slow down.
And if the pharma’s latest gambit pays off, it will probably start to put pressure on AbbVie (ABBV -0.77%), despite the latter company’s focus on developing treatments for what’s largely a different grouping of health conditions. Let’s elaborate on this prediction and examine the reasons it’s credible.
One pharma may be coming for the other’s lunch
Lilly’s drug Zepbound, which treats obesity, is based on the molecule called tirzepatide. Sales of Zepbound were more than $1.2 billion in the second quarter of 2024 alone, so it’s a highly lucrative product. On top of that, the same molecule is also the active component of its medicine Mounjaro, which treats type 2 diabetes — a drug that brought in more than $3 billion in sales in the same period.
Tirzepatide has already proven itself to be a highly versatile therapy. Clinical trials have recently shown it to be helpful in treating obstructive sleep apnea in people with obesity, as well as in treating heart failure in the same patient population. Soon enough, the company will likely get the nod from regulators to market the medicine for those indications, in addition to the ones it’s already approved to treat.
But Eli Lilly’s research and development (R&D) work with tirzepatide is far from over. It still needs to be tested for a smattering of conditions where it could plausibly be useful. And, considering the potential of combining it with other drugs, the size of its addressable market is likely to increase for years to come.
The next area of inquiry will be one that’s at the core of AbbVie’s wheelhouse: Immunology. Lilly plans to do a clinical trial this fall examining whether tirzepatide could be helpful for treating psoriasis when combined with another of its medicines, Taltz. Taltz is currently approved to treat psoriasis, psoriatic arthritis, and ankylosing spondylitis. The thinking is that the combination therapy may be even more effective at reducing symptoms than Taltz alone.
Interestingly, some evidence derived from clinical case reports suggests that Novo Nordisk‘s molecule semaglutide, found in its drugs Ozempic and Wegovy, may also be effective for treating psoriasis, as an adjunct to first-line therapies in patients with obesity and type 2 diabetes. As tirzepatide shares one of semaglutide’s mechanisms of action, targeting the GLP-1 receptor, it may thus be effective at controlling psoriasis as an adjunct treatment in that context as well.
Lilly is also reportedly looking at whether to try combinations of tirzepatide with medications for inflammatory bowel disease (IBD) in the near future.
For AbbVie, the threat posed by Eli Lilly is substantial, but not imminent. Its now-fading rock-star moneymaker, Humira, is indicated for a swath of immunological conditions; these include rheumatoid arthritis, psoriasis, psoriatic arthritis, ankylosing spondylitis, and Crohn’s disease. But Humira’s manufacturing exclusivity protections have now ended, so its market share is quickly being eroded by generics.
The two drugs AbbVie developed to replace Humira’s contribution to its top line, Skyrizi and Rinvoq, together cover largely the same set of indications as Humira. And there are plans to expand their coverage into additional applications within immunology.
If combinations of other medicines with tirzepatide perform as desired, they may soon be a headwind to AbbVie’s growth from its two replacements for Humira.
Don’t rush to sell or buy based on this information
AbbVie isn’t doomed. Tirzepatide probably won’t be ready to start stealing AbbVie’s market share for a few more years, if it ever happens.
Still, the crossover of a cardiometabolic drug into the immunology segment, and perhaps beyond, has tremendous potential. And, excitingly for Lilly’s investors, the anti-inflammatory capabilities of tirzepatide and closely related medicines are still in the process of being understood. The takeaway is that even if AbbVie’s medicines won’t face additional (and perhaps more effective) competition from tirzepatide, another company’s products doubtlessly will.
Interpret this new move as being bullish for Eli Lilly’s stock.
But remember that until it has an approval from regulators in hand, running clinical trials to test its drug is an expense, not revenue. Some of Lilly’s attempts at expanding tirzepatide’s indications are bound to fail, just as some are bound to succeed. With the large markets potentially in play, try to keep track of which attempts are likely to be the most meaningful financially.
