Anti-obesity drugmakers Novo Nordisk and Eli Lilly have an enormous lead on their competitors, however given the huge and helpful market, rivals are nonetheless keen to affix the race. Financial institution of America analyst Geoff Meacham has been very bullish concerning the alternative, which he calls “unprecedented” given the prevalence of weight problems and the massive curiosity traders have proven on this class up to now. Meacham was among the many first to foretell the class might hit $100 billion in peak gross sales, however now many analysts anticipate the market could possibly be even bigger . In response to the Facilities for Illness Management and Prevention, about 42% of U.S. adults have weight problems, a expensive situation that is related to different big selection of different medical situations, together with coronary heart illness, stroke and most cancers. Novo Nordisk, the maker of Ozempic and Wegovy, estimates almost 800 million folks worldwide have weight problems. Competitors is coming This week, each Zealand Pharma and Viking Therapeutics confirmed the competitors is coming as they reported encouraging progress from their experimental therapies on this broad class, which despatched their shares hovering on the information. Zealand shares popped 35% on Monday after upbeat outcomes for its liver illness therapy survodutide. The therapy, which has a fast-track designation from the Meals and Drug Administration, is also being studied for weight problems. VKTX YTD mountain Viking shares 12 months up to now Then, Viking shares greater than doubled in buying and selling on Tuesday, placing the inventory on tempo to report a greater than 300% year-to-date achieve, after the corporate mentioned its GLP-1/GIP receptor agonist VK2735 hit all its main targets in a part 2 scientific trial. Sufferers enrolled within the examine misplaced about 13% of their weight after 13 weeks, which could be very aggressive with different medication on this class. Maybe much more encouraging, there weren’t any indicators that weight reduction was plateauing, and the drug was well-tolerated with few sufferers discontinuing therapy. On the similar time, shares of each Novo and Lilly pulled again in buying and selling on Tuesday. The competitors is “not a problem for Eli Lilly or Novo Nordisk, but it certainly raises the bar for them both,” Yuri Khodjamirian, chief funding officer at Tema ETFs, mentioned in an interview. The Tema Cardiovascular and Metabolic ETF (HRTS) , which is up 12% 12 months up to now, owns Novo, Lilly and Viking. REGN YTD mountain Regeneron shares 12 months up to now Cardiovascular and metabolic illness is an space that was lengthy uncared for by the bigger pharmaceutical firms, however they’re being attentive to the brand new developments, that are “very exciting,” Khodjamirian mentioned. What’s extra, he would not assume that this will probably be a winner-take-all state of affairs, so Tema has investments in different early-stage firms working to develop weight reduction medication or taking different approaches to treating weight problems. These embody Biohaven , an organization engaged on medication to stop the muscle loss that may accompany use of GLP-1 medication, or Regeneron , which is trying right into a genetic strategy to treating weight problems. Combined success However growing medication on this house is not straightforward. “[T]hose new entrants have had mixed results as Pfizer’s two assets and some smaller players (e.g., Structure Therapeutics and Altimmune ) that underscore the clinical challenges of the space,” Meacham wrote in a latest analysis observe. “Regardless, we expect the number of entrants to continue to swell, especially [as] we see progress on access + reimbursement.” However each Construction and Altimmune had been buying and selling increased Tuesday on Viking’s information. Different firms working within the class and adjoining remedies embody Terns Prescription drugs and Scholar Rock . AstraZeneca and Roche have jumped into the house by making acquisitions . ALT 6M mountain Altimmune shares over the previous six months Jeff Jonas, portfolio supervisor at Gabelli Funds, sees different methods traders may gain advantage from growing curiosity in anti-obesity drugs. That features drug distributors like McKesson , who will profit from the rising quantity of gross sales, and gamers who take part within the provide chain like Becton Dickinson . He was an investor in contract drug producer Catalent , which will probably be purchased out by Novo Nordisk’s father or mother in a deal that’s aimed toward boosting Novo’s manufacturing capability. The portfolio supervisor expects Lilly and Novo have about two extra years to take pleasure in their duopoly within the class earlier than competitors intensifies and the present $1,000-plus a month listing costs for the GLP-1 medication “collapse.” Nonetheless early days Some analysts and traders admit it’s nonetheless very early days for weight problems therapy and lots of questions stay to be answered. For instance, sufferers who take these medication can see the load creep again on as soon as they cease taking the medication. However will these folks need to keep on these medication for all times? That is not clear. Particularly when one considers that the unwanted side effects — which might embody nausea, constipation and diarrhea — can pressure some sufferers to discontinue use. Subsequent-generation medication within the pipeline might search to alleviate a few of these signs — and can possible be rewarded by sufferers if they will. In the mean time, nonetheless, it hasn’t mattered a lot when sufferers halt therapy as a result of the medication are in such demand that the businesses are promoting all they will manufacture. BofA’s Meacham not too long ago shared IQVIA script knowledge for the week ended Feb. 16 with purchasers that confirmed sturdy progress in GLP-1 prescriptions, up 22% from a 12 months in the past. Meacham mentioned he expects GLP-1 medication accounted for a 31% share of the diabetes market within the first quarter, up from 25% within the first quarter of 2023. He estimated that 14% of the prescriptions for GLP-1 remedy are being written for weight problems, whereas 86% are for diabetes. “We continue to expect above consensus growth in the space, as we are bullish on adoption from payers and broader obesity uptake,” Meacham wrote. Zepbound, which was accredited by the FDA to deal with weight problems in late 2023, is gaining share rapidly, giving Lilly a 46% share of the general GLP-1 market, in line with Meacham. For weight problems solely, Lilly has already gained a 38% share, regardless of solely being available in the market for 13 weeks, he mentioned. And Lilly has the prospect to realize much more floor with it grabbing about 47% of all the brand new prescriptions being written. What’s subsequent for Viking As for Viking, a few of Tuesday’s huge inventory good points are being fueled by hypothesis that one other bigger pharmaceutical firm, like a Merck or a Pfizer will look to purchase it, in line with Tema’s Khodjamirian. That may usually be the playbook within the sector. Khodjamirian famous that manufacturing these medication is a tough course of, and Viking might want to construct a gross sales pressure as effectively to compete in opposition to the already established Novo and Lilly. However with the run-up within the inventory, it is turn out to be a extra expensive proposition. Gabelli’s Jonas mentioned he is skeptical of Pfizer’s curiosity on condition that they’re already busy integrating earlier acquisitions and have amassed a very good quantity of debt. However, he mentioned, the run-up in Viking’s inventory worth might permit it to fund its personal progress. Commenting on Viking’s inventory run-up, William Blair analyst Andy Hsieh mentioned, “… we are admittedly in uncharted territory regarding the commercial potential of the GLP-1 class, and the public’s robust awareness could drive access expansion (specifically, initiation of Medicare reimbursement or growth in company-sponsored healthcare plans).” Hsieh mentioned a competitor might problem Lilly and Novo by competing on worth. “We also emphasize that one of the idiosyncrasies of the U.S. healthcare system, which grants pharmacy benefit managers significant power to shape prescription patterns through the creation of formularies, could present an opportunity for non-first-in-class competitors.”
