Novo Nordisk and Eli Lilly reign over the anti-obesity drug market, and don’t expect this duopoly to end soon, analysts say. But other companies — both big and small — are hoping to grab a piece of this lucrative market. In a research note, Piper Sandler analyst Yasmeen Rahimi said the firm is tracking more than 150 studies with 78 agents in development. Some are expected to provide market-moving updates before the year draws to a close. “As you span five or 10 years out, I do think there will be more companies in the space,” said Cantor Fitzgerald analyst Louise Chen, who covers Pfizer, one rival vying for a piece of the action. Meanwhile, Novo and Lilly are studying new formulations that include other gut hormones beyond GLP-1, hoping to boost efficacy. They also want to switch up delivery systems so patients could trade a weekly injection for a daily pill. All this goes on amid robust demand for Novo’s semaglutide, which is sold as Ozempic for type 2 diabetes and as Wegovy for weight loss, and Lilly’s tirzepatide, which hopes to receive regulatory approval for weight loss this year. (It’s marketed as Mounjaro for type 2 diabetes already.) Addressing unmet needs In order for a company to compete, it will have to address some of the unmet needs of the current products, according to Chen. An oral formulation would fit this criteria as it does two things, she explained. “It eases the manufacturing constraints because it’s easier to make, and it also lowers the price in general. Orals are cheaper than injectables,” she said. Price has been a huge issue for GLP-1 drugs. It can cost as much as $1,350 a month and doctors say patients will need to be on these medications long-term because once they stop, the weight is likely to come back unless they are able to make significant lifestyle changes. Kyle Rasbach, a senior research analyst and portfolio manager at Eventide, said it will be “a difficult value proposition” for a new GLP-1 drug to compete with Novo or Lilly. “We’ve seen over and over the difficulty that small biotech has competing with incremental innovations against very large, well-established pharmaceutical companies that happen to be leaders in the therapeutic areas,” he said. Rasbach said the real opportunity could be to develop products that are orthogonal or additive to GLP-1s. As an example, Rasbach cited emerging science that is aimed at reducing the loss of lean muscle mass that occurs when patients lose weight on GLP-1 drugs. Still, with a market estimated to be worth more than $100 billion a year by 2030 , companies will try because even a slice of it will be large enough to move the needle even for a large pharma company like Pfizer. “Take a look at Lilly, how much that stock has moved, and it just sort of defies gravity, the way that every time there’s an obesity headline, they go a little higher,” Chen said, noting the same has been true for Novo Nordisk. Here are five companies working in this area that could share updates by year’s end. Altimmune Altimmune shares ended the week up more than 6% after the company received fast-track status for pemvidutide, a GLP-1 receptor agonist, to treat a chronic liver condition known as NASH, or nonalcoholic steatohepatitis. But the stock is still down nearly 86% in 2023, putting its market value at a mere $121.7 million. “We believe stock has been under the radar as investors are awaiting this imminent data,” said Piper’s Rahimi, referring to data expected, possibly over the next few weeks, from its Momentum clinical trial for obesity. This data will show how much weight patients lost after taking the drug for 48 weeks, how well patients tolerated it, any adverse effects and other details. Rahimi said the NASH news “puts pemvidutide back on the map as a key agent for obesity.” She expects positive news from the Momentum trial would likely mean the company could “attract strategic interest at a low valuation.” Pfizer Pfizer is scheduled to report its third-quarter earnings on Tuesday, and some have speculated that the company could provide an update on its progress with a phase 2b trial of danuglipron in obesity. The drug is being tested as a pill patients take twice a day rather than a once-a-week shot. Expectations for the drug are modest, according to Cantor’s Chen. She anticipates that any positive developments for efficacy, tolerability and dosing will be well-received. “My sense is that from a risk-reward perspective, it’s going to be positive because basically people think it’s not going to work,” Chen said. She explained that previous data from patients with type 2 diabetes who took the drug did not show impressive levels of weight loss. However, this trial uses different dosing to treat patients with obesity who do not have diabetes and it will likely be more competitive with other anti-obesity medications. PFE YTD mountain Pfizer shares have fallen about 40% since the start of the year. Chen expects a weight loss of about 15% should be good enough to convince patients to switch from injectable GLP-1 medications, which can lead to a weight loss of as much as 20% or more, in the case of Eli Lilly’s Mounjaro. Analysts also have called out that Pfizer is still working to develop the drug with a time release mechanism, which would shift it to a once-a-day dosage, which consumers favor. That would be viewed by investors as a positive for the stock. Goldman Sachs analyst Chris Shibutani said his base case expectation calls for danuglipron to show a weight loss of 12% to 15%. If it hits that target, he said he would add potential sales of the GLP-1 drug to his model, and says it could add about $4 a share of additional net present value. “In a bull case scenario in which the efficacy profile is similar or superior to tirzepatide, we think peak sales could be closer to PFE’s $10bn guidance,” he wrote in a research note. “While we believe expectations are currently low for danuglipron, and we do not provide value for the asset in our model, in a bear case scenario we can see PFE trading lower based on sentiment.” Structure Therapeutics Structure Therapeutics shares have gained more than 88% over the past three months, peaking Thursday at $70.70, as hopes have risen for success with its oral GLP-1 receptor agonist, GSBR-1290. In September, Structure said GSBR-1290 showed significant weight loss at the 60 milligram and 90 milligram levels in a 28-day study. Following that report, Leerink Partners analyst David Risinger bumped up his price target to $97, which suggests there is still plenty of room for upside ahead. GPCR 3M mountain Structure shares over the past three months. Risinger rates the stock an outperform, citing both the potential for this drug’s success as well as the strength of the company’s management. “We note that global peak annual utilization of oral GLP-1s could easily exceed 15M people, assuming compelling commercial profiles,” Risinger wrote in a research note on Sept. 29. JMP analyst Jonathan Wolleben initiated coverage of Structure at a market outperform in mid-October. “Despite a crowded field, we expect an effective, once-daily oral GLP-1R agonist will be a compelling option for patients,” Wolleben said. “We recently surveyed 33 physicians who write > 1,500 monthly Wegovy prescriptions who said that a once-daily oral option would be preferred over a weekly subcutaneous injection.” He noted that Structure gained more than $500 million in market cap after its last report. He believes the data expected in the second half of November and in the first half of next year could move the stock even higher. “We think GSBR-1290 could surpass management’s target and orforglipron’s high water mark,” he said. Orforglipron is an oral drug Eli Lilly is developing. Right now, it seems to have the best profile for weight loss in a pill-form, but that could change as new drugs are studied. Terns Pharmaceuticals The value of this clinical stage biopharmaceutical company has been cut in half so far this year, but Mizuho Securities analysts Graig Suvannavejh has a buy rating on the stock. The company is set to start a phase 1 trial for TERN-601, an experimental oral GLP-1, for obesity, with top-line data expected in 2024. It has several other compounds in the pipeline, but Suvannavejh expects the weight loss drug to receive increased attention. According to FactSet 78% of analysts rate the stock a buy, with an average price target of $16.63 At a recent investor conference, management said its cash balance of $286 million as of the last quarter provides it with runway into 2026. Viking Therapeutics Viking Therapeutics shares are down less than 2% since the start of the year, but the stock fell more than 4% on Friday after the company announced earlier in the week a slight delay in the timing of data from VK2375, an oral dual agonist for obesity. Like Mounjaro, it combines two hormones: glucagon-like petide 1 (GLP-1) and gastric inhibitory polypeptide (GIP). Data on VK2375 will be released in the first quarter of 2024 as it took slightly longer than expected to enroll patients in its trial. Leerink Partners analyst Thomas Smith said investors are anticipating weight loss of 3% to 4% at the 28-week mark, with a clean safety record and solid tolerability. “This range would also be competitive with LLY’s orforglipron [an oral GLP-1 drug] weight loss at day 28,” Smith said. He noted that the stakes have been raised by data from Structure Therapeutics, which showed about 4.9% weight loss within that timeframe. Viking ended the quarter with $376 million in cash. Laidlaw & Co. analyst Yale Jen said that should last it into 2026. Jen said the obesity data won’t be the only catalyst for the stock in the first half of 2024, as data is expected from its other drug programs as well. He reiterated his buy rating with a $35 price target, which is nearly 280% above where it closed Friday.
