Treating America’s weight problems epidemic is popping into large enterprise. Two pharmaceutical corporations, Eli Lilly (LLY) and Novo Nordisk (NVO), are main the weight-loss revolution with a brand new class of medicine often known as GLP-1 agonists.
Surging income and rising pleasure has led some analysts to match the success of GLP-1 medicine within the well being and wellness market to the factitious intelligence growth within the tech trade.
The rise of GLP-1 medicine
Medicine like Ozempic from Novo Nordisk and Zepbound from Eli Lilly have taken the market by storm, not just for their effectiveness in weight administration but additionally for the numerous enhance they’ve given to firm inventory costs.
The growth is fueled by a category of medicine often known as GLP-1 agonists. GLP-1 is a naturally occurring hormone within the physique that’s produced after you eat, serving to your physique handle blood sugar, regulate insulin and curb starvation whereas slowing down digestion. GLP-1 agonists bind to GLP-1 receptors within the physique, mimicking the results of the hormone.
The primary GLP-1 drug was Byetta (exenatide), accredited in 2005 for sort 2 diabetes. Virtually 5 years later, Novo Nordisk launched Victoza (liraglutide), one other diabetes drug based mostly on human GLP-1. In 2014, liraglutide grew to become the primary GLP-1 remedy accredited for weight administration within the U.S.
Nonetheless, the actual turning level happened two years in the past when Novo Nordisk’s semaglutide (marketed as Ozempic for diabetes and Wegovy for weight reduction) revolutionized the sphere. In contrast to its predecessors, semaglutide required solely weekly injections, as a substitute of every day or twice-daily dosing.
In contrast to many different weight-loss medicines, GLP-1s have proven constant optimistic leads to scientific trials. The dearth of available and efficient weight-loss alternate options makes GLP-1s a standout choice with thousands and thousands of potential prospects in the US alone.
The American Affiliation for the Development of Science named GLP-1 medicine because the scientific breakthrough of 2023, noting that these remedies “are reshaping drugs, fashionable tradition and even international inventory markets.”
GLP-1s spur income, drive up shares for drug corporations
The success of GLP-1 medicine has amplified investor curiosity in Large Pharma corporations.
As the primary firm to extensively market and distribute GLP-1 medicine, Novo Nordisk has seen its share value leap 137 % in simply two years, from $53 a share in Could 2022 to $126 in Could 2024. The corporate additionally reported gross sales development of 36 % in 2023.
Novo’s market worth is now higher than the gross home product of Denmark, its dwelling nation.
However Eli Lilly, the Indianapolis-based pharmaceutical firm and fellow diabetes drug maker, wasn’t far behind. Zepbound, its drug to deal with power weight problems, was accredited by the FDA in November 2023.
Income for Eli Lilly jumped 25 % in the course of the first quarter of 2024 in comparison with the identical time final 12 months. It’s now top-of-the-line performing shares within the S&P 500.
Eli Lilly raised its full-year steerage throughout its Could 1 earnings report, and expects full-year adjusted earnings of $13.50 to $14 per share, up from earlier steerage of $12.20 to $12.70 per share.
LLY shares went for about $776 on Could 8. The corporate’s 0.7 % dividend yield solely sweetened the deal for a lot of traders.
Neither firm exhibits indicators of slowing. In February, Novo Nordisk introduced plans to amass three manufacturing amenities to satisfy demand for its blockbuster medicine. Eli Lilly can be racing to extend provide, with seven manufacturing websites both ramping up or beneath building.
Different weight-loss drug firm shares to look at
As shares of Novo Nordisk and Eli Lilly climb, some traders are eyeing different pharmaceutical corporations with promising new weight reduction medicine within the works.
It’s shortly turning right into a crowded subject, as traders hope to seek out an undervalued gem with moonshot potential.
Listed below are different contenders within the increasing weight-loss drug market.
Amgen (AMGN)
Shares of biopharmaceutical large Amgen (AMGN) spiked on Could 3 after the corporate reported optimistic outcomes from mid-stage trials of its investigational weight problems drug, MariTide.
MariTide holds a possible edge over rivals in relation to consumer expertise: Sufferers would use a handheld auto-injector simply as soon as a month, or presumably even much less continuously. This could possibly be a game-changer in comparison with the weekly injections required by present market leaders, Wegovy (Novo Nordisk) and Zepbound (Eli Lilly).
Nonetheless, detailed information from that mid-stage trial isn’t anticipated till the tip of the 12 months, and it could take a number of years for the drug to come back to market.
On Could 8, shares of Amgen went for $305, up from $230 a share in Could 2023.
Viking Therapeutics, Inc. (VKTX)
Viking Therapeutics isn’t presently manufacturing a weight-loss drug, however their lead candidate, VK2809, is in section two trials.
Along with its experimental weight-loss injection drug, Viking additionally plans to begin a section two trial of a once-a-day oral weight-loss pill later this 12 months.
VKTX has seen vital development during the last two years. On Could 8, shares traded for about $79, up from round $22 two years in the past.
VKTX could possibly be a gorgeous purchase for traders searching for a high-risk, high-reward alternative. The long run development potential for Viking Therapeutics hinges on the success of VK2809. If accredited, it might develop into a significant participant within the weight administration market.
AstraZeneca (AZN)
AstraZeneca, a British pharmaceutical firm, first tried to develop its personal oral GLP-1 drug in-house. The corporate ultimately deserted the challenge in favor of licensing an experimental weight-loss capsule from a Chinese language firm known as Eccogene in November 2023.
This new drug, which remains to be in scientific trials,has the potential to trigger fewer unwanted effects than present injectable remedies.
AstraZeneca paid $185 million upfront to amass the drug license, and agreed to shell out as much as $1.8 billion extra to bankroll future scientific, regulatory and advertising milestones.
The corporate dropped two different developmental applications, together with stage two trials for a sickle cell remedy, with a view to release sources for its weight problems drug improvement.
Whereas AstraZeneca is betting large on its newly licensed drug, the product remains to be in early trials, placing the corporate at an obstacle to its rivals. Shares of AstraZeneca went for $76 on Could 8 and haven’t budged a lot in a 12 months.
Trying forward
Buyers are bullish about weight-loss medicine and the businesses that make them. Analysts see large development potential, too.
J.P. Morgan Analysis forecasts that the GLP-1 market will exceed $100 billion by 2030, and complete GLP-1 customers within the U.S. might quantity 30 million by the tip of the last decade — round 9 % of the general inhabitants.
In the meantime, Goldman Sachs predicted in February that these new weight-loss medicine might enhance the U.S. gross home product by 1 % within the coming years.
It’s not possible to foretell which corporations will develop the best and most secure GLP-1 medicine over time, which solely provides to investor uncertainty — and pleasure — about future earnings.
Editorial Disclaimer: All traders are suggested to conduct their very own unbiased analysis into funding methods earlier than investing choice. As well as, traders are suggested that previous funding product efficiency isn’t any assure of future value appreciation.
