Weight loss drug developers slump as Eli Lilly slashes cost of some Zepbound doses

Drug companies with weight loss drugs in development are slumping in Tuesday trading after Eli Lilly announced it was reducing the cost of some dosage strengths of its obesity medicine Zepbound (tirzepatide).

The biggest decliner is Viking Therapeutics (NASDAQ:VKTX), which is down ~7%. Like Zepbound, VK2735 is a GLP-1/GIP dual agonist. It is in phase 2 for subcutaneous administration and phase 1 as a pill.

Other decliners include Zealand Pharma (OTCPK:ZLDPF), which is developing survodutide with Boehringer Ingelheim, and Altimmune (ALT), pemvidutide.

Viking’s price decline provides a buying opportunity, according to Truist. “Nothing changes about the unmet need in obesity,” writes analyst Joon Lee, who rates the stock a buy with a $120 price target (~95% upside based on Aug. 26 close). “In fact, we think the update today implies the unmet need is greater than previously thought.”

Lee added that Lilly likely made the price cuts due to growing competition from compounded versions of GLP-1 drugs from companies such as Him and Hers Health (HIMS), which sells a compounded version of Novo Nordisk’s (NVO) Wegovy (semaglutide), and is down 7% on the day. “Only making available cheaper low-doses in vial forms as opposed to the more expensive auto-injector, is a clever strategy to specifically target the compounders, in our view.”

Evercore ISI’s Umer Raffat noted that the Lilly price cut won’t impact his Zepbound sales estimates as the new price is for self-pay patients, and puts that cost on par with the net price paid by insured patients.

He added that the price cut is only for the lowest dosages, meaning patients who get the discounted Zepbound won’t see the maximum weight loss benefit.