The pharmaceutical industry is witnessing something of a renaissance right now. Just a couple of years ago, drug companies banded together and created multiple vaccine treatments used to combat COVID-19.
While these breakthrough medications captivated the minds of investors, new growth opportunities have emerged in other areas. In particular, weight loss treatments used for diabetes and obesity now appear to be the hottest ticket in town among pharma companies.
Novo Nordisk is the brains behind popular glucagon-like peptide 1 (GLP-1) agonists including Ozempic, Wegovy, Rybelsus, and Saxenda. Eli Lilly has recently entered the weight loss space through its competing GLP-1 medications, Mounjaro and Zepbound.
Both companies are currently generating abnormally high growth as demand for their GLP-1s continues to soar. Unsurprisingly, investors have been cheering both Novo and Lilly on -- with each stock handily outperforming the S&P 500 over the last year. With both stocks trading near all-time highs, investors may be looking for some alternatives when it comes to opportunities in the weight loss space.
Let's take a look at four other pharmaceutical companies and explore how each could represent a lucrative investment opportunity as they look to catch up with incumbents Eli Lilly and Novo Nordisk.
1. Viking Therapeutics
Viking Therapeutics(NASDAQ: VKTX) is a clinical-stage drug company working on a couple of alternatives to current mainstream GLP-1 treatments.
Back in February, the company released encouraging data from a phase 2 clinical trial featuring its obesity candidate, VK2735. According to the study, up to 88% of the trial candidates realized at least a 10% reduction in weight -- compared to just 4% for those receiving a placebo.
Per the company's most recent update, VK2735 is moving toward phase 3 studies with the Food and Drug Administration (FDA) -- potentially signaling that a new obesity treatment could reach the market in the near future.
While that news is encouraging, Viking doesn't appear to be resting on its laurels. The company is also working on an oral form of VK2735, a staunch difference to GLP-1 medications today -- many of which take the form of an injection. Viking's oral tablet of VK2735 already reported positive results from its phase 1 trial, and phase 2 studies are set to commence sometime in the fourth quarter.
I see the development of an oral tablet for VK2735 as particularly intriguing because Novo Nordisk has also quietly been looking to manufacture a similar solution through its candidate Amycretin.
Image source: Getty Images.
2. Altimmune
Similar to Viking, Altimmune(NASDAQ: ALT) is a development-stage pharma company that's also looking to break into the weight loss space.
One of the primary functions of medications such as Ozempic and Mounjaro is to help patients lower A1C levels. A byproduct of doing so is losing weight, obviously a helpful solution for those living with diabetes or obesity.
However, one of the unintended consequences of weight reduction is losing muscle mass. This can be a serious issue, as muscle mass plays a vital role in energy levels, mobility, and can even impact your immune system.
Altimmune's Pemvidutide is seeking to combat the risks of shedding muscle mass while losing weight. According to its phase 2 Momentum study, roughly 22% of weight loss in trial patients was attributable to lean mass while 78% was related to fat.
Essentially, this means that nearly 4 out of 5 obesity patients taking Pemvidutide are maintaining muscle mass while also achieving weight loss.
3. Pfizer
One of the better-known pharma companies that consistently finds its name among potential disruptors in the weight loss space is Pfizer(NYSE: PFE).
Right now, Pfizer's leading candidate to enter the weight loss market is a drug called danuglipron. Originally, danuglipron was meant to taken twice daily. But underwhelming results for a phase 2b study back in December ultimately inspired Pfizer to discontinue that specific trial and go back to the drawing board.
In early July, Pfizer announced that it will be testing a new form of danuglipron that is meant to be administered once daily in studies that will commence in the back half of 2024. While this is encouraging, bear in mind that Pfizer has a lot of strategic initiatives right now. For starters, the company is currently going through a massive integration effort following its acquisition of oncology specialist Seagen.
Moreover, while I have my doubts that Pfizer could be interested in acquiring smaller pharma companies like Viking, it could be a better option considering danuglipron hasn't exactly been a winner in clinical trials thus far.
4. Roche
The last company I'll be exploring is Roche Holding (OTC: RHHBY). Roche currently has three leading candidates looking to enter the obesity care and diabetes space: CT-388, CT-996, and CT-868. Each of these treatments entered Roche's pipeline via its acquisition of Carmot Therapeutics earlier this year.
According to results of a phase 1 study released in late July, patients taking CT-996 achieved 7.3% reduction in weight compared to just 1.2% for those taking a placebo. What was particularly encouraging is that the trial did not have any discontinuations from patients taking CT-996, suggesting the drug is well tolerated among diabetes and obesity patients.
Following a successful phase 1 study, CT-996 joined its sibling treatments, CT-388 and CT-868, in phase 2 trials.
Some things to consider
The big takeaway from this analysis is that there are many companies looking to disrupt Eli Lilly and Novo Nordisk. Moreover, with Lilly and Novo stocks both soaring, investors may be tempted to build a position in competing pharmaceutical companies before they potentially reach commercialization in the GLP-1 space.
While I understand this logic, I'd caution against getting too starry-eyed over the competition. The main theme connecting Viking, Altimmune, Pfizer, and Roche is that all of the weight loss drugs are still in fairly early stages of development. Moreover, as each company continues spending large sums on research and development as well clinical trials, Lilly and Novo will likely continue gaining more momentum.
Both Lilly and Novo have each acquired manufacturing facilities this year in an effort to bolster production for Ozempic, Mounjaro, and their sibling medications as demand continues to outstrip supply.
Furthermore, Wegovy in particular has been on quite a successful run as of late, which further deepens Novo Nordisk's dominance among obesity drugs. Wegovy was just granted approval in China, and earlier this year the blockbuster drug was granted an expanded approval from the FDA to help treat obesity patients who are also at risk of stoke or other cardiovascular complications.
The last thing to note is that with exception of Altimmune, the stock prices of all the companies explored above have risen this year. Shares of Viking are up a whopping 250% so far in 2024 -- leading some to wonder whether some of its potential from weight loss drugs, should they be approved, is already baked into the stock.
Despite Altimmune's cratering stock price, I think its weight loss candidate has the most differentiating factors compared to Ozempic, Mounjaro, and other mainstream GLP-1 treatments. For that reason, I could see Altimmune being an acquisition candidate. However, I would not scoop up shares in Altimmune based on speculation of an acquisition.
I bring all of this up to point out that despite lofty valuations, Lilly and Novo are still likely the best options for investors looking for pharmaceutical growth stocks in the weight loss space right now.
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Adam Spatacco has positions in Eli Lilly and Novo Nordisk. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends Novo Nordisk and Roche Ag. The Motley Fool has a disclosure policy.
