Eli Lilly (NYSE: LLY) stock has soared by double digits over the past year -- and for good reason. The pharma giant sells two of the most sought-after drugs today, weight loss treatments Mounjaro and Zepbound. Together, these drugs are adding billions of dollars to the company's top line, helping Lilly report double-digit gains in quarterly revenue.

Today Eli Lilly shares the market with rival Novo Nordisk, which sells two weight loss drugs that work in a similar way. Both companies are generating tremendous growth, though demand is actually surpassing the number of doses they're able to produce. In response, they've each increased their production capacity with a goal of meeting this high demand.

If demand continues at today's pace or greater, it's clear that both of these companies could continue to generate growth. But Lilly and Novo Nordisk aren't the only companies aware of the opportunity in the market for weight loss drugs; another that's eager to get in on this space is Pfizer (NYSE: PFE). In fact, the company recently decided to do something that could move it one step closer to joining Lilly in particular. Is this latest move by Pfizer bad news for Lilly? Let's find out.

Struggling to meet demand

First, a bit of background on the Lilly and Novo Nordisk drugs. They work by acting on hormones involved in the regulation of blood sugar levels and appetite, and they've delivered fantastic results in clinical trials and in the real world. As mentioned, demand has climbed so much the companies are struggling to keep up with it. And patients who haven't been able to access the drugs have even turned to compounding pharmacies for copies -- because the making of copies is allowed during drug shortages.

Pfizer isn't present in the weight loss market right now, but the company has its hopes set on a candidate called danuglipron, one that works in much the same way as the Lilly and Novo Nordisk drugs. Late last year the pharmaceutical powerhouse ended development of its twice-daily version of danuglipron, as discontinuation rates reached more than 50%. And that's after axing another weight loss candidate, lotiglipron, earlier in the year.

Looking at individual dosing information from the danuglipron phase 2b trial, Pfizer noticed promising drug tolerability -- so the company is pursuing a once-daily oral formulation. The next step is dose optimization studies, set for later this year, and these should help the drug progress into phase 3 trials. Pfizer says it could be just behind Lilly in moving forward with an oral weight loss candidate in this drug class.

Meanwhile Lilly, while selling its current weight loss drugs, is ushering additional candidates through the pipeline. These include an oral candidate, orforglipron. This once-daily pill generated positive data in a phase 2 trial last year, and Lilly is now studying it in phase 3.

Eli Lilly's advantages

Now, let's get back to our question: Is Pfizer's decision to move forward with a once-daily weight loss drug bad news for Lilly? It's important to note that Lilly has a few advantages.

First, it's already reached commercialization with two drugs being prescribed for weight loss. So it's building a reputation among doctors and patients.

Second, Lilly remains ahead in the development of a once-daily pill. If that drug makes it to the finish line, its maker will have the first-to-market advantage.

Finally, not only is the weight loss drug market seeing high demand today, but it's also likely this momentum will continue. The market may increase "by more than 16 times," according to Goldman Sachs Research, to reach $100 billion by the end of the decade. This means there should be room for multiple companies to succeed.

Pfizer's candidate still has a lot to prove before it reaches the market, so Eli Lilly can continue to deliver Mounjaro and Zepbound to patients without worrying about it as a competitor. But if the Pfizer drug reaches commercialization a few years down the road, Eli Lilly and its investors shouldn't worry. Even if rivals multiply, Lilly's weight loss portfolio still could remain in the lead and continue to generate blockbuster revenue.

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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group and Pfizer. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.

Is This Decision by Pfizer Bad News for Eli Lilly? was originally published by The Motley Fool