Anti-obesity drug makers Novo Nordisk and Eli Lilly have a big lead over their competition, but given the vast and valuable market, rivals are still eager to join the race. Bank of America analyst Geoff Meacham has been very optimistic about the opportunity, which he calls “unprecedented” given the prevalence of obesity and the enormous interest investors have shown in this category so far. Meacham was one of the first to predict that the category could reach $100 billion in peak sales, but many analysts now anticipate the market could be even larger. According to the Centers for Disease Control and Prevention, about 42% of American adults have obesity, a costly condition that is associated with a wide range of other medical conditions, including heart disease, stroke and cancer. Novo Nordisk, maker of Ozempic and Wegovy, estimates that nearly 800 million people worldwide suffer from obesity. Competition is coming This week, both Zealand Pharma and Viking Therapeutics showed that competition is coming by reporting encouraging progress for their experimental therapies in this broad category, sending their shares soaring on the news. Zeeland shares rose 35% on Monday after upbeat results for its liver disease treatment survodutide. The treatment, which has a fast-track designation from the Food and Drug Administration, is also being studied for obesity. VKTX YTD mountain Viking stock so far this year Viking stock then more than doubled in trading on Tuesday, putting the stock on track to report a gain of more than 300% so far this year. year, after the company said its GLP-1/GIP receptor agonist VK2735 met all of its primary goals in a Phase 2 clinical trial. Patients enrolled in the study lost approximately 13% of their weight after 13 weeks , which is very competitive with other drugs in this class. Perhaps even more encouraging is that there were no signs that weight loss was plateauing and the drug was well tolerated with few patients discontinuing treatment. At the same time, shares of Novo and Lilly fell in trading on Tuesday. Competition “is not a problem for Eli Lilly or Novo Nordisk, but it certainly raises the bar for both,” Yuri Khodjamirian, chief investment officer at Tema ETF, said in an interview. The Tema Cardiovascular and Metabolic ETF (HRTS), which is up 12% so far this year, owns Novo, Lilly and Viking. REGN YTD mountain Regeneron shares year to date Cardiovascular and metabolic diseases are an area that was long neglected by larger pharmaceutical companies, but they are paying attention to new developments, which are “very interesting,” Khodjamirian said. What's more, he doesn't believe this is a winner-take-all situation, which is why Tema has investments in other early-stage companies working to develop weight-loss drugs or take other approaches to treating obesity. These include Biohaven, a company working on drugs to prevent muscle loss that can accompany the use of GLP-1 drugs, or Regeneron, which is investigating a genetic approach to treating obesity. Uneven success But developing drugs in this space is not easy. “[T]These new entrants have had mixed results, as Pfizer's two assets and some smaller players (e.g., Structure Therapeutics and Altimmune) underscore the clinical challenges of the space,” Meacham wrote in a recent research note. “Still, , we hope that the number of participants will continue to swell, especially [as] We see progress in access + reimbursement.” But both Structure and Altimmune were trading higher Tuesday on the Viking news. Other companies working in the category and adjacent treatments include Terns Pharmaceuticals and Scholar Rock. AstraZeneca and Roche have jumped into the space through acquisitions ALT 6 million shares of Altimmune over the past six months Jeff Jonas, portfolio manager at Gabelli Funds, sees other ways investors could benefit from growing interest in anti-obesity drugs, including drug distributors like McKesson, that will benefit from the growing sales volume and players involved in the supply chain such as Becton Dickinson, who was an investor in the drug maker Catalent, which will be bought by the parent of Novo Nordisk in a deal that aims to increase Novo's manufacturing capacity. The portfolio manager expects Lilly and Novo have about two more years to enjoy their duopoly in the category before competition intensifies and current list prices of more than $1,000 a month for GLP-1 drugs “crash.” for the treatment of obesity and many questions remain to be answered. For example, patients taking these medications may see weight gain again once they stop taking them. But will these people want to continue taking these medications for life? That's not clear. Especially considering that side effects, which can include nausea, constipation, and diarrhea, may force some patients to discontinue use. Next-generation drugs in development could try to alleviate some of these symptoms, and will likely be rewarded by patients if they can. For the moment, however, it hasn't mattered much when patients stop treatment because the drugs are so in demand that companies are selling all the ones they can make. BofA's Meacham recently shared IQVIA script data for the week ending February 16 with clients showing solid growth in GLP-1 prescriptions, up 22% from a year ago. Meacham said he expects GLP-1 drugs to account for a 31% share of the diabetes market in the first quarter, up from 25% in the first quarter of 2023. He estimated that 14% of GLP-1 drug prescriptions are being broadcast. due to obesity, while 86% are due to diabetes. “We continue to expect above-consensus growth in this space as we are optimistic about payer adoption and broader acceptance of obesity,” Meacham wrote. Zepbound, which was approved by the FDA to treat obesity in late 2023, is rapidly gaining share, giving Lilly a 46% share of the overall GLP-1 market, according to Meacham. In obesity alone, Lilly has already gained a 38% share, even though it has only been on the market for 13 weeks, he said. And Lilly has the opportunity to gain even more ground by capturing about 47% of all new prescriptions issued. What's next for Viking? As for Viking, some of Tuesday's huge stock gains are being driven by speculation that another, larger pharmaceutical company, such as Merck or Pfizer, will look to buy it, according to Tema's Khodjamirian. Often, that can be the industry manual. Khodjamirian noted that manufacturing these drugs is a difficult process and that Viking will also need to build a sales force to compete against established Novo and Lilly. But with stocks rising, it has become a more expensive proposition. Gabelli's Jonas said he is skeptical about Pfizer's interest given that they are already busy integrating previous acquisitions and have accumulated a fair amount of debt. But, he said, the rise in Viking's stock value could allow it to finance its own growth. Commenting on the rise in Viking shares, William Blair analyst Andy Hsieh said: “…it is true that we are in uncharted territory with respect to the commercial potential of the LPG-1 class, and the strong awareness of the public could drive expanded access (specifically, the start of Medicare Reimbursement or growth in company-sponsored health care plans). Hsieh said a competitor could challenge Lilly and Novo by competing on price. “We also emphasize that one of “The idiosyncrasies of the U.S. healthcare system, which gives pharmacy benefit managers significant power to shape prescribing patterns through formulary creation, could present an opportunity for competitors that are not first-in-class.” .
