Novo Nordisk(NYSE: NVO) is riding the Ozempic/Wegovy train straight to the bank. Eli Lilly(NYSE: LLY) is doing the same with Mounjaro and Zepbound. Both big drugmakers have multibillion-dollar obesity drug franchises that continue to grow rapidly. Shares of both Novo Nordisk and Lilly have skyrocketed.
However, the two market leaders could have significant competition on the way. Roche Holding(OTC: RHHBY) underscored this last week with a major clinical study update. Shares of Lilly and Novo Nordisk fell on the news, while Roche's shares jumped nearly 6%. Could Roche be the obesity drug stock to really watch?
A promising pill
On July 17, Roche announced positive top-line results from its phase 1 clinical trial evaluating CT-996 in treating type 2 diabetes and obesity. Like Novo Nordisk's blockbuster drugs Ozempic and Wegovy, CT-996 is a GLP-1 receptor agonist. But unlike those products (and Lilly's Mounjaro and Zepbound), Roche's experimental drug is a once-daily pill.
Patients receiving CT-996 experienced weight loss of 7.3% after four weeks of treatment. Roche stated this result was "clinically meaningful" compared to the 1.2% weight loss for patients receiving placebo.
Importantly, CT-996 was relatively well-tolerated. No patients discontinued treatment because of the drug. The adverse events that were experienced were mostly mild or moderate.
Even though these were early-stage results, Roche is already thinking about the commercial potential for CT-996. The company said it anticipates the drug not only might be used to help patients lose weight and control their glucose levels, but could also become a maintenance therapy for helping keep weight off after patients first receive an injection of another drug.
Roche's other obesity candidate
Roche picked up CT-996 with its $2.7 billion acquisition of Carmot Therapeutics in January 2024. The transaction also added another promising obesity drug to the Swiss drugmaker's pipeline, Carmot's lead candidate CT-388.
The company announced positive results from a phase 1 study of the experimental drug on May 16. Patients receiving a once-weekly injection of CT-388 experienced mean placebo-adjusted weight loss of 18.8% over 24 weeks of treatment.
Like Lilly's Mounjaro and Zepbound, CT-388 is a dual GLP-1/GIP receptor agonist administered via injection. Roche's chief medical officer, Levi Garraway, said the phase 1 results showed the potential for CT-388 "to become a best-in-class therapy," which hints he thinks it could be even better than Lilly's drugs.
Is Roche a better obesity drug stock than Lilly and Novo Nordisk?
Roche could be on track to claim a share of the obesity drug market down the road. Its forward price-to-earnings ratio of 15.6 is much lower than Eli Lilly's and Novo Nordisk's respective forward earnings multiples of 62.5 and 38.3. Is Roche a better obesity drug stock than the two current leaders? I wouldn't go that far yet.
It's still early for both CT-996 and CT-388. The phase 1 clinical trial for CT-996 is still ongoing. While Carmot wrote that CT-388 was "Phase-2 ready" at the close of its acquisition by Roche, the experimental drug hasn't advanced into phase 2 testing yet.
Lilly and Novo Nordisk also have their own oral obesity drugs in development. Both companies are farther along than Roche, with their oral therapies already in phase 3 studies.
Investors should keep their eyes on Roche; it could eventually be a formidable player in the obesity drug market. Its sales growth should improve, with no more negative COVID-19 year-over-year comparisons. However, I think Lilly and Novo Nordisk remain the better obesity drug stocks for now.
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Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk and Roche Ag. The Motley Fool has a disclosure policy.
