Eli Lilly’s (NYSE: LLY) latest drug, which is undergoing Phase 3 trials, has several promises in store for patients — helping them lose a significant amount of weight while also avoiding pain in their knees.
The results from its most recent study showed that after one year of taking Retatrutide, patients lost up to 28.7% of their body weight.
Pharmaceutical companies have been competing with each other to provide the most effective weight loss drug, as more doctors are prescribing them to patients as an option.
Retatrutide appears to have shown the most success so far compared to competitor Novo Nordisk (NYSE: NVO), which makes Ozempic and Wegovy.
Eli Lilly also manufactures two other weight loss drugs that are commonly used by people — Zepbound and Mounjaro.
Investors have maintained their confidence in the company as shares rose by 31% during the past year.
“Eli Lilly’s innovative culture and strong financial commitment to developing the next generation of drugs set the company apart from its peers and fuel its long-term growth,” wrote Karen Andersen, a director for Morningstar, in a research report. “Lilly holds industry-leading growth potential as it is launching several new blockbusters and patent losses are fading.”
Retatrutide Phase 3 trials were conducted with patients who had knee osteoarthritis and obesity, but not diabetes. The patients received shots every week for a total of 68 weeks of the actual drug or a placebo.
The patients who received the highest dosage of the drug lost an average of 28.7% of their body weight, or 71.2 pounds.
When people took the highest dosage of Eli Lilly’s Zepbound, the average body weight that was lost was 22.5%.
The average weight loss for its rival, Novo Nordisk’s Wegovy drug, is less than 20%.
The group that Retatrutide appeals to most is with higher body mass index scores, said J.P. Morgan analyst Chris Schott.
“We believe Retatrutide could become an important option for patients with significant weight-loss needs and certain complications, including knee osteoarthritis,” said Kenneth Custer, president of Lilly Cardiometabolic Health.
The study also found that taking the drug has a good consequence — it can lower the amount of osteoarthritis knee pain.
Eli Lilly said it plans to conduct seven additional Phase 3 trials of Retatrutide to be completed in 2026.
Eli Lilly’s portfolio of drugs
One issue facing all pharmaceutical companies is losing patents on its existing drug pipeline. Eli Lilly’s current pipeline is “well positioned to mitigate the patent losses during the next decade,’ she wrote.
The company plans to spend a low to mid-20s percentage of its revenue to pay for the development of new drugs, which is a larger investment than the high-teens industry average of its competitors.
“The robust pipeline is a result of Lilly’s strong commitment to research,” Andersen wrote.
Eli Lilly’s cardiometabolic drugs Mounjaro, Zepbound, and Jardiance as well as immunology drug Taltz, cancer drug Verzenio, and Alzheimer’s drug Kisunla “hold the highest sales potential of Lilly’s currently launched drugs,” she added.
The recently approved atopic dermatitis drug Ebglyss (lebrikizumab) and pipeline cardiometabolic drugs Retatrutide and Orforglipron “hold major blockbuster potential,” Andersen wrote.
Higher sales have also produced better margin strength. Shares of the stock increased by 25% during the past six months as investors remain confident in the future outlook of the company.
“Through operating efficacy gains from top-line growth, Lilly has expanded operating margins into the mid-40s in 2025,” she wrote. “It expects to increase gross margins through productivity initiatives and greater capacity utilization, although royalties to Chugai for orforglipron and a growing late-stage pipeline are likely to limit further upside.”
Eli Lilly’s recent launch of several drugs that are producing higher margins in several indications should produce “strong double-digit growth for the rest of the decade,” Andersen said.
As an increasing number of Americans age and a greater percentage of patients are prescribed weight loss drugs, Eli Lilly’s higher margins are likely to grow and will instill confidence in its shareholders.
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