The weight-loss drug Ozempic has caused a frenzy that has captured the national imagination in addition to that of Wall Street.

The financial potential for drugs that lead to significant weight loss is not very difficult to understand. If even a minuscule portion of the 40% of Americans who are obese use weight loss medications, the firms that manufacture them could be looking at massive payouts.

However, manufacturers must provide more than just weight-loss data in order to reach the millions of potential patients. Price, ease of use, and accessibility are also significant factors. Currently, only available as injections, the cost-prohibitive Ozempic, Wegovy from Novo Nordisk, as well as Mounjaro from Eli Lilly (which has been approved for diabetes but not yet for obesity), are all available.

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By making it simpler for doctors to prescribe medications and for patients to take them as prescribed, an effective pill could alter the situation. The cost may eventually decrease if the manufacturing process is made simpler, but that won't happen right away.

The stock prices of Novo and Eli Lilly have more than doubled over the last three years, making them the two largest pure-play pharmaceutical firms in the world. Eli Lilly trades at 44 times forward earnings right now, making it the only pure-play pharmaceutical firm with a market capitalization over $400 billion. Comparatively, the NYSE Arca Pharmaceutical Index has a multiple of 15. These exorbitant valuations are in part due to a wager that annual drug sales could one day reach $100 billion. According to some analysts, Lilly's Mounjaro could sell more than $50 billion worth of diabetes and obesity medications each year.

The studies for the oral medications have increased excitement on Wall Street, where investors believe that the advancement will lead to a wider adoption of obesity treatments at a lower cost.