Novo Nordisk A/S (NYSE:NVO) and Eli Lilly And Co (NYSE:LLY) have dominated the obesity drug market with their leading therapies, Wegovy and Zepbound, but the next generation of treatments could shift this dynamic.

These new drugs, expected to hit the market by 2029, aim to surpass current efficacy levels while offering more convenient dosing options, such as oral and monthly injections. This shift, driven by innovation and competition, could change the market landscape despite Novo and Lilly's current hold on the sector.

According to a report by Morningstar, the global GLP-1 market is poised to reach $200 billion by 2031, with obesity treatment expected to account for 68% of sales.

While Novo Nordisk and Eli Lilly are projected to retain two-thirds of this market, driven by first-mover advantage and robust pipelines, new competitors could claim significant market share.

Public and private biopharma firms are increasingly focusing on cardiometabolic drug development, with 16 new obesity drugs potentially launching by 2029 the report added.

This pipeline includes candidates from major players such as Roche Holdings AG (OTC:RHHBY), Pfizer Inc (NYSE:PFE), and private companies like Boehringer Ingelheim.

Roche released topline results from the ongoing multi-part Phase 1 trial for CT-996, showing data better compared to existing competitors. Despite Novo Nordisk and Eli Lilly's strong market positions, some analysts view their stocks as overvalued.

Achieving the market penetration needed to justify their current valuations would require near-unprecedented success, including capturing 75% of the U.S. obesity market and 95% of the global market by 2031.

Additionally, maintaining stable pricing seems unlikely, with increased competition and innovation expected to put downward pressure on drug prices.

Supply chain issues pose further challenges. Both companies face difficulties in manufacturing peptide-based drugs at scale, such as Wegovy and Zepbound.

While oral peptide drugs like high-dose Novo Nordisk's Rybelsus and Viking Therapeutics Inc's (NASDAQ:VKTX) VK2735 offer alternatives, they may be even harder to supply due to the higher doses required for efficacy.

Small molecule drugs, like Lilly's orforglipron and Pfizer's danuglipron, offer the best potential for scalable production, promising more streamlined manufacturing processes.

New entrants to the obesity drug market are pushing the envelope, with drug candidates from companies like Amgen Inc (NASDAQ:AMGN), Altimmune Inc (NASDAQ:ALT), and Zealand Pharma (OTC:ZLDPF) on the horizon.

In a phase 1 study, Amgen's AMG 133 showed an acceptable safety and tolerability profile and pronounced dose-dependent weight loss.

Altimmune said the body composition study of pemvidutide showed preservation of lean mass, with 25.5% of weight loss derived from lean mass and 74.5% from adipose tissue.

These next-generation drugs could challenge the dominance of Novo and Lilly, especially if they offer better efficacy or fewer side effects.

However, Wegovy and Zepbound's entrenched positions and ongoing innovation may keep Novo and Lilly at the forefront for the foreseeable future.

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