How Roche gave up on a potential weight-loss pill worth $14 billion a year

Swiss pharmaceutical giant Roche has rejected a weight-loss pill expected to cost $14 billion a year and currently being developed by rival Eli Lilly that could have given the company a leading position in the booming weight-loss market, according to company documents and people familiar with the talks.

In 2018, three years before Novo Nordisk's Wegovy was approved as the first weekly anti-obesity drug, Roche waived its right of first refusal and did not buy a pill for type 2 diabetes from Japanese pharmaceutical company Chugai, with which it has worked for two decades.

The drug – then known as Owl-833 – was ready for early Phase 1 trials and was valued at just tens of millions of dollars, two people familiar with the matter said. Instead, Eli Lilly bought it that same year for an upfront payment of $50 million and called it orforglipron.

The daily weight-loss pill is currently still in clinical trials but could be approved by 2026. In the six years after its launch, it is expected to generate global sales of $50 billion for the Indianapolis-based pharmaceutical company, with annual sales reaching $14.4 billion in 2032, according to consensus analyst estimates.

“Roche missed a mega-blockbuster,” said David Risinger, biopharmaceutical analyst at Leerink Partners.

Roche's failure to acquire Eli Lilly's orforglipron before re-entering the race to develop weight-loss drugs five years later with the acquisition of Carmot Therapeutics highlights the challenges of developing anti-obesity drugs and how major pharmaceutical companies are now scrambling to get back into the field.

In the past, pharmaceutical companies have often passed on drugs in early development that later proved to be very lucrative, notes Louise Chen, an analyst at Cantor Fitzgerald.

In a recent example, Pfizer licensed part of an experimental drug for intestinal diseases to the biotech company Roivant Sciences for free in late 2022. In less than a year, Roivant sold the drug to Roche for $7 billion.

Eli Lilly's decision to bet on orforglipron and fund its development showed that the biggest players in insulin-based diabetes treatments “had a head start in understanding metabolism and weight loss,” said a person close to the licensing negotiations in 2018.

“Either you have the focus and expertise in a company or you don't. It's not like drugs land on your desk and become a blockbuster.”

Roche recently re-entered the weight-loss market by purchasing anti-obesity drug developer Carmot for up to $3.1 billion last year.

Since then, the company has published initial data on both an injectable drug and a weight-loss pill, seeking to threaten the leadership positions of Novo Nordisk and Eli Lilly, whose injectable weight-loss pills – Wegovy and Zepbound – are already generating billions in sales.

In the next step, the companies are now competing to develop a weight loss pill that is easily scalable and easier to administer in order to be competitive in the $130 billion annual weight loss market.

Slimming pills activate similar hormone receptors in the gut as existing injectable drugs, such as GLP-1, and thus help suppress appetite. Analysts believe Eli Lilly has the edge in this race, thanks largely to orforglipron.

The pill is scheduled to launch in 2026. It will be the only small-molecule GLP-1 drug – a type of drug based on a simple chemical formula that is easily reproduced in pill form – for at least two years. This gives Eli Lilly a chance to “saturate the world with the drug,” Risinger added.

Lilly is already investing in expanding its manufacturing capacity to meet the potentially huge demand for its weight-loss pills. In a mid-stage study, orforglipron reduced participants' body weight by up to 14.6 percent.

The manufacturing of rival pharmaceutical company Novo Nordisk's oral weight-loss pill semaglutide is more complex, which is likely to hinder its market launch.

Initial results last month from a Roche small molecule weight-loss pill showed that users experienced a 6.1 percent weight loss compared to a placebo, causing excitement among investors.

Roche's weight loss drugs, a market launch is not expected before 2028. According to analyst forecasts, Roche will only generate sales of $4 billion from its injectable and pill-based weight loss products by 2032.

However, the patents on these drugs could infringe the rights of competing drugs, according to a regulatory filing Carmot submitted before the takeover.

Roche's business development team evaluated the early version of orforglipron in 2018 but concluded that “it was not a priority,” according to a person close to the talks.

Roche had banned an earlier obesity drug – orlistat – in the 2000s because it caused gastrointestinal side effects.

After a GLP-1 drug called taspoglutide flopped in late-stage testing in 2010, Roche reduced its investments in diabetes and obesity drugs and focused instead on its cancer pipeline.

Gareth Powell, head of healthcare at British investor Polar Capital and backer of weight loss company Zealand Pharma, said: “Back then, there wasn’t the same enthusiasm for weight loss as there is today. You have to respect [Roche] for seemingly admitting they were wrong and then revisiting the issue.”

Roche said: “Research and development in healthcare always involves risks. Priorities must be set and informed decisions must be made about where to focus investments to ensure they have the greatest possible impact for patients.

“Portfolio decisions follow these principles. In 2018, neither the broader potential application of [GLP-1s] was not yet clear and scientific knowledge was not as advanced as it is today.”

Eli Lilly and Chugai declined to comment.

Roche has also achieved great success through its partnership with Chugai: the hemophilia drug Hemlibra, which costs $4.5 billion annually and is one of Roche's most expensive drugs, was licensed by the Japanese pharmaceutical company.

Chugai, in which Roche owns a nearly 60 percent stake, is still expected to benefit from orforglipron's success, as the company stands to earn up to $390 million if it meets regulatory and sales milestones.