The U.S. Food and Drug Administration is requiring Eli Lilly to conduct additional safety trials for its recently approved oral weight-loss drug Foundayo (orforglipron), sparking a 1.9% drop in the company's shares on Wednesday.
"We view this as a reflection of conservatism from FDA," BMO Capital Markets analyst Evan Seigerman said in a note, suggesting the market's reaction may be overblown. "We do not expect these studies to have any meaningful impact on the competitive positioning of Lilly's asset."
The FDA's approval letter, issued April 1, directs Lilly to complete several post-marketing studies. These include a trial to evaluate the risk of major adverse cardiovascular events (MACE) and drug-induced liver injury (DILI). The agency specifically pointed to the ongoing ACHIEVE-4 study, which compares Foundayo to insulin in patients with type 2 diabetes, as a source for this data, with a final report expected by July. Further studies will assess risks of gastroparesis, or delayed gastric emptying, and safety during pregnancy and in children.
The regulatory hurdle for Foundayo, which launched in early April, provides a potential opening for rival Novo Nordisk, whose oral Wegovy pill was approved late last year. While Lilly's stock fell, Novo Nordisk's American depositary receipts climbed 3.8%, outperforming the S&P 500's 0.8% gain. The development adds a new chapter to the intense competition between the two pharmaceutical giants in the rapidly growing market for GLP-1 obesity treatments.
Eli Lilly has highlighted Foundayo's convenience, as it can be taken at any time of day, unlike Novo's Wegovy which requires morning dosing on an empty stomach. However, Novo Nordisk has pointed to restrictions on Foundayo's label, including contraindications with oral birth control and the cholesterol drug simvastatin.
Analysts noted that while the FDA's request for multiple post-marketing studies is notable, it is not uncommon for newly approved medicines. The agency's letter also requested studies on potential links to medullary thyroid carcinoma. Citi Research analyst Graham Parry observed that similar cancer and pregnancy studies were requested for the Wegovy pill, though the specific cardiac and liver safety trials were not.
Lilly stated that there were no indications of liver damage associated with Foundayo in late-stage testing and that the FDA's requirements are "consistent with the agency's standard approach to ongoing safety evaluation."
The request for more data introduces a degree of uncertainty for investors. The successful completion of these studies could ultimately de-risk the drug and solidify its long-term market position. For now, the focus remains on the initial sales data and how Foundayo competes against its established rival.
This article is for informational purposes only and does not constitute investment advice.
