Prediction: For this important reason, Eli Lilly will dominate the multi-billion dollar weight loss drug market

Eli Lilly (LLY -1.65%) is a leader in one of the fastest-growing markets in the pharmaceutical industry: weight loss drugs. This market could grow 16 times its current size and reach $100 billion by the end of the decade, it is said Goldman Sachs Research. And right now, Lilly's two drugs she's prescribed to weight-loss patients — Mounjaro and Zepbound — are bringing in billions of dollars in revenue.

But Lilly is not alone in the market and this area could become even more crowded in the coming years. Today Lilly is competing Novo Nordiskand in the future also companies like the biotech giant Amgen and smaller biotech Viking Therapeutics to the big pharmaceutical company Pfizer could enter the market with competing products.

These and many other players are currently testing candidates in clinical trials. But I assume that Lilly will continue to dominate this billion-dollar market even with greater competition – and for one important reason.

Mounjaro and Zepbound

First, let's take a quick look at why Lilly's drugs and others in the same class are so popular. Mounjaro and Zepbound use the same drug – tirzepatide – but Mounjaro is officially approved for type 2 diabetes while Zepbound is approved for weight loss. However, doctors have prescribed both to patients trying to lose weight.

There are several reasons for this: Mounjaro was commercialized first, so it was Lilly's only option for a while. And there were frequent drug shortages, meaning doctors and patients had to resort to what was available.

Mounjaro and Zepbound are dual GIP and GLP-1 receptor agonists – they act on two hormones involved in controlling blood sugar levels and appetite. Novo Nordisk makes similar drugs, but they only stimulate the GLP-1 pathway and not both, like Lilly's drugs.

In any case, both have achieved great results in clinical trials and in the real world, and therefore doctors and patients have created demand that at certain times exceeded supply. Since the shortages, Lilly and Novo Nordisk have taken steps to increase production – and Lilly has invested $18 billion in manufacturing since 2020 to address the problem and generally bolster its production capabilities.

Now let's get to my prediction. I think Lilly's late-stage pipeline will dominate this market in the long term despite the competition. Although others are working on similar drugs in pill form (today's GLP-1 drugs and dual GIP/GLP-1 drugs are injectable drugs), Lilly is one step ahead of them all from a timing perspective.

Two potential weight loss drugs on the horizon

Today, Lilly's Orforglipron, a GLP-1 receptor agonist in pill form, is in Phase 3 trials. The company also has another candidate in Phase 3 – an injectable drug called retatrutide. This potential drug could be superior to current treatments because it acts on three hormones: GIP, GLP-1 and glucagon.

With Orforglipron, Lilly could offer patients the convenience of a pill instead of an injection. With retatrutide, Lilly offers the possibility of even greater efficacy than what we have seen from today's drugs in the same class.

Additionally, Lilly has the first mover advantage from a marketing and production perspective. Doctors and patients are already familiar with Mounjaro and Zepbound, and if they have had a good experience with these medications, they may choose another Lilly treatment. New patients may be more willing to choose Lilly's medications after hearing so many success stories about them in the media.

When it comes to production, as mentioned above, Lilly has been investing in more and more capacity for some time. A new entrant will need time to ramp up production, distribute its product and win over doctors and patients.

All of this means I'm optimistic about Lilly's future in this market, even as competition increases. I expect this pharmaceutical giant to continue to maintain its lead – and that's great news for investors who get into the stock today and stay with this story for the long term.