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 medication generally 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 synthetic intelligence growth within the tech business.
The rise of GLP-1 medicine
Medication 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 medication generally 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 consequences of the hormone.
The primary GLP-1 drug was Byetta (exenatide), authorized in 2005 for sort 2 diabetes. Nearly 5 years later, Novo Nordisk launched Victoza (liraglutide), one other diabetes drug primarily based on human GLP-1. In 2014, liraglutide grew to become the primary GLP-1 remedy authorized for weight administration within the U.S.
Nevertheless, the true turning level took place two years in the past when Novo Nordisk’s semaglutide (marketed as Ozempic for diabetes and Wegovy for weight reduction) revolutionized the sector. In contrast to its predecessors, semaglutide required solely weekly injections, as a substitute of each day or twice-daily dosing.
In contrast to many different weight-loss drugs, GLP-1s have proven constant constructive leads to medical trials. The dearth of available and efficient weight-loss alternate options makes GLP-1s a standout possibility with hundreds of thousands of potential prospects in america 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, common tradition and even world 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 broadly market and distribute GLP-1 medicine, Novo Nordisk has seen its share worth leap 137 p.c in simply two years, from $53 a share in Could 2022 to $126 in Could 2024. The corporate additionally reported gross sales progress of 36 p.c in 2023.
Novo’s market worth is now better than the gross home product of Denmark, its house nation.
However Eli Lilly, the Indianapolis-based pharmaceutical firm and fellow diabetes drug maker, wasn’t far behind. Zepbound, its drug to deal with continual weight problems, was authorized by the FDA in November 2023.
Income for Eli Lilly jumped 25 p.c through the first quarter of 2024 in comparison with the identical time final 12 months. It’s now among the best performing shares within the S&P 500.
Eli Lilly raised its full-year steering throughout its Could 1 earnings report, and expects full-year adjusted earnings of $13.50 to $14 per share, up from earlier steering of $12.20 to $12.70 per share.
LLY shares went for about $776 on Could 8. The corporate’s 0.7 p.c dividend yield solely sweetened the deal for a lot of buyers.
Neither firm exhibits indicators of slowing. In February, Novo Nordisk introduced plans to accumulate three manufacturing services to fulfill demand for its blockbuster medicine. Eli Lilly can be racing to extend provide, with seven manufacturing websites both ramping up or underneath development.
Different weight-loss drug firm shares to observe
As shares of Novo Nordisk and Eli Lilly climb, some buyers are eyeing different pharmaceutical corporations with promising new weight reduction medicine within the works.
It’s shortly turning right into a crowded discipline, as buyers hope to seek out an undervalued gem with moonshot potential.
Listed here are different contenders within the increasing weight-loss drug market.
Amgen (AMGN)
Shares of biopharmaceutical big Amgen (AMGN) spiked on Could 3 after the corporate reported constructive outcomes from mid-stage trials of its investigational weight problems drug, MariTide.
MariTide holds a possible edge over rivals with regards to consumer expertise: Sufferers would use a handheld auto-injector simply as soon as a month, or probably even much less often. This might be a game-changer in comparison with the weekly injections required by present market leaders, Wegovy (Novo Nordisk) and Zepbound (Eli Lilly).
Nevertheless, detailed information from that mid-stage trial isn’t anticipated till the top of the 12 months, and it could take a number of years for the drug to return 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 at present 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 important progress over the past two years. On Could 8, shares traded for about $79, up from round $22 two years in the past.
VKTX might be a beautiful purchase for buyers in search of a high-risk, high-reward alternative. The long run progress potential for Viking Therapeutics hinges on the success of VK2809. If authorized, it might turn out to be 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 mission in favor of licensing an experimental weight-loss tablet from a Chinese language firm known as Eccogene in November 2023.
This new drug, which continues to be in medical trials,has the potential to trigger fewer unwanted effects than present injectable remedies.
AstraZeneca paid $185 million upfront to accumulate the drug license, and agreed to shell out as much as $1.8 billion extra to bankroll future medical, regulatory and advertising milestones.
The corporate dropped two different developmental packages, together with stage two trials for a sickle cell remedy, to be able to liberate assets for its weight problems drug improvement.
Whereas AstraZeneca is betting large on its newly licensed drug, the product continues 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.
Wanting forward
Traders are bullish about weight-loss medicine and the businesses that make them. Analysts see super progress potential, too.
J.P. Morgan Analysis forecasts that the GLP-1 market will exceed $100 billion by 2030, and whole GLP-1 customers within the U.S. might quantity 30 million by the top of the last decade — round 9 p.c 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 p.c within the coming years.
It’s unattainable 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 buyers are suggested to conduct their very own impartial analysis into funding methods earlier than investing resolution. As well as, buyers are suggested that previous funding product efficiency isn’t any assure of future worth appreciation.
