7 Diabetes and Weight Loss Drug Stocks for 2024 | Investing

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The diabetes and weight loss prescription drug market shows no sign of thinning out anytime soon.

Tackling the obesity problem head-on has been tried before with fad diets and low-quality, low-price diet pills. But this trend is different.

The rise of GLP-1 receptor agonists, exemplified by high-end weight loss drugs like Wegovy, delivers significant weight loss outcomes to consumers, with weight loss levels of 10% to 15% commonplace these days.

Global obesity spending reached $24 billion in 2023 – seven times the level in 2021, according to the Iqvia Institute’s Global Use of Medicines 2024 report. From 2024 to 2028, the market’s compound annual growth rate should land between 24% and 27%, with an estimated value of up to $131 billion by 2028, the Iqvia report states.

“Competitors are innovating and seeking market share,” says Donny Kranson, portfolio manager at Vontobel in New York. “Novo Nordisk and Eli Lilly have invested billions in research and development for these drugs, but the market’s evolution depends on the development and scaling of more effective oral treatments.”

Kranson says it’s “impossible” to predict which companies will develop the most effective and safest drugs over the next several years, which only adds to investor uncertainty about earnings trajectory.

“Additionally, geography is key,” Kranson says. “While some Wall Street analysts estimate that GLP-1 drugs could reduce calorie intake by 2% to 3% in the U.S., Vontobel continues to invest in snack provider Nestlé.” He adds, “Geography matters because the obesity rates and the ability to pay differ by country. While the U.S. may decrease its salty snack intake, that’s not the case globally.”

While artificial intelligence stocks have been stealing headlines, the year-to-date returns of leading weight loss drug-producing pharmaceutical companies have been flying somewhat under the radar. So, which firms are delivering the most promising weight loss remedies, and how is that work impacting their stock market values?

Here’s a closer look at seven weight loss drug stocks and how they may fare over the rest of 2024:

Novo Nordisk A/S (ticker: NVO) 21.6% 2.5%
Eli Lilly & Co. (LLY) 30.1% 12.2%
Amgen Inc. (AMGN) -5.4% 18.4%
Pfizer Inc. (PFE) -5.6% 17.4%
Viking Therapeutics Inc. (VKTX) 291.3% 55.8%
Structure Therapeutics Inc. (GPCR) 2.6% 96.7%
Roche Holding AG (OTC: RHHBY) -11.8% 23.9%

*Based on a 12-month price target. Data from TipRanks, analyst reports.

Denmark-based Novo Nordisk has seen its stock slide over the past month, falling by 5.5%. But this company is resilient; in fact, it celebrated its 100th birthday in 2023. Year to date, NVO is still flying high with a 21.6% return as of April 9.

The share price pullback can be credited to heavy competition from established industry heavyweights and Eli Lilly, manufacturer of the weekly weight loss injection drug Zepbound. Novo also will face off against Amgen and newcomer Viking Therapeutics, which offer their own variations of GLP-1 (glucagon-like peptide 1) weight-loss drugs.

Novo made big news in early April with a report on the company’s Wegovy weight loss drug. According to a recent study published in the New England Journal of Medicine, the drug enhanced weight loss, reduced symptoms and eased physical limitations in patients with obesity-related heart failure and Type 2 diabetes.

With solid weight loss results and concrete evidence of health benefits tied to Wegovy, the brand name for semaglutide, more consumers are likely to start taking the medication, especially if their insurance covers it.

Novo is already cleaning up with its diabetes drug behemoth, Ozempic. In 2023, NVO’s obesity and diabetes drug revenues (including Ozempic and Wegovy) accounted for $31.2 billion in sales, or about 90% of overall sales. In 2024, Novo doesn’t appear to be slowing down, giving investors a chance to buy shares on the dip at its closing price of $124.86 per share as of April 9.

Indianapolis-based Eli Lilly continues to stack cash with its Type 2 diabetes drug Mounjaro. LLY shares are up 30.1% year to date as of April 9, showing the stock’s strong growth trajectory.

Eli Lilly does face some direct competition from Viking Therapeutics; both Lilly and Viking rely on hormone blocker GLP-1 to curb the speed at which the stomach empties when the drug is taken, which helps patients feel more full and eat less food.

What Lilly (and Novo, too) has going for it is its move beyond weekly injections into weight loss drugs in pill form. That could be an early knockout punch for the new weight loss drug companies, which are nowhere near releasing their own pills.

Also, like Novo, Lilly now has a stiff one-two punch: Its obesity-fighting drug Zepbound is flying off prescription drug shelves, while Mounjaro is expected to help boost revenue to between $40.4 billion and $41.6 billion in 2024, up from $34.1 billion in 2023.

Add a 0.7% forward dividend yield and the fact that Lilly has doubled its dividend payments since 2023, and it’s no wonder investors are giving LLY a closer look early in 2024.

With Eli Lilly and Novo Nordisk establishing a big lead in the weight loss drug market, relative latecomers like Amgen have some catching up to do. The $142 billion behemoth may have a long wait for the release of its promising MariTide (formerly AMG133) injectable obesity drug. In the meantime, investors can sit back and collect a hefty dividend payout of 3.3% and look at AMGN as a long-term play, as it has a solid shot at cracking Lilly and Novo Nordisk’s iron grip on the obesity drug market.

MariTide’s phase 1 testing showed an average 14.5% weight loss rate after three months of use. But the standout finding was that trial participants maintained weight loss of 11.2% at 150 days after their last dose, while weight regain has been an issue with some competitor drugs. Phase 2 trials are already running, with results rolling out later this year.

Closing at $270.36 per share on April 9, AMGN stock is drawing analysts’ attention. Thirty-one analysts have pegged an average price target for the next year at $320, noting total revenues rose 7% to $28.2 billion in 2023, with earnings per share rising 3%.

Amgen is adding muscle in the form of its $27.8 billion acquisition of Horizon Therapeutics, which was completed in October and should help the company expand into the profitable inflammatory disease treatment sector. It also clears the way for Amgen to access the 20 drugs in Horizon’s pipeline and a half-dozen drugs that have already been approved. Thyroid eye disease therapy Tepezza and gout treatment Krystexxa are particular standouts in that area.

New York-based Pfizer is trading at a paltry $26 per share in early April and is down 5.6% year to date.

Its days as an industry leader have waned since it was credited with creating the first COVID-19 vaccine with Germany-based BioNTech SE (BNTX).

The company’s foray into the weight loss drug market has fallen flat, as its twice-daily obesity-fighting pill danuglipron triggered nausea and other stomach issues in trials.

So, what’s the upside for PFE? For starters, Pfizer has some promising drugs in its research and development pipeline that will buy it some time while it recasts its weight loss drug program. Dependable Eliquis, the company’s blood-thinning drug, as well as heart drug Vyndaqel are still propping up sales, while Pfizer’s new B-cell lymphoma drug Adcetris tested remarkably well with patients, the company announced in March.

The $149 billion Pfizer is another large cap that pays a big dividend, offering investors a massive 6.3% payout while it beefs up its already diverse product pipeline. So, though it’s back to the drawing board with its weight loss drug campaign, Pfizer has given investors plenty to chew on in the meantime.

Viking Therapeutics Inc. (VKTX)

San Diego, California-based Viking Therapeutics is a tremendous success story out of the gate, with its share price up 291.3% year to date as of April 9.

Like some of its larger competitors, the company develops its own dual GLP-1 and glucose-dependent insulinotropic polypeptide (GIP) drug that targets blood sugar levels and reduces the urge to overeat.

So far, test results are encouraging. Viking recently reported upbeat data on its phase 1 trial for its VK2735 oral therapy for weight loss. The company noted a 3.3% placebo-adjusted weight loss average over a 28-day period for test patients absorbing a regular 40-milligram dose, with no reported side effects. The company also issued optimistic forecasts for its injectable version of VK2735, in which patients lost an average of 13.1 pounds after 13 weeks of taking the drug. That outcome contributed heavily to the company’s share price rise early in 2024.

The primary downside of VKTX now is that the stock’s price has risen so high and so fast that investors may wonder if they’re getting in too late, especially for a company with no track record of green-lit weight loss products.

Despite the encouraging results from its VK2735 weight loss drug trials, the clinical testing process can take years, and there’s no guarantee that the drug will get clearance from the U.S. Food and Drug Administration. Plus, even if it does, it will face off against industry heavyweights like Novo, which commands 60% of the weight loss drug market.

That’s a tall order for any new sector stock, and VKTX is not immune. A “wait and see” outlook on Viking could be the best move now for unsure investors, while its leading drug candidate moves toward FDA approval.

Structure Therapeutics Inc. (GPCR)

San Francisco-based Structure is another highflier in the weight-loss drug sector, as its share price has soared 68% over the past year as of April 9.

Similar to Wegovy in targeting GLP-1 receptors, its oral drug GSBR-1290 is yielding results in trials, though it fell short of market expectations in December. Still, GSBR-1290 led to an average placebo-adjusted weight loss of 4.7% in obese patients after eight weeks. Phase 2 testing for weight loss and diabetes will commence later this year.

While any commercial release of a Structure weight loss drug likely won’t happen until 2026, the company has about $467 million cash on hand, which should fund it through any similar drug release date.

Wall Street analysts agree, setting a consensus price target of $81.60 per share for the next year, according to TipRanks. Meanwhile, at least five sector analysts issued “strong buy” calls on GPCR in March.

Roche Holding AG (OTC: RHHBY)

While Basel, Switzerland-based Roche shouldn’t be considered a direct weight loss drug play, the company’s recent $2.7 billion-plus deal to purchase Carmot Therapeutics, a private life sciences company, should be on investors’ radar.

Carmot is developing a trio of clinical-stage incretin-based obesity and diabetes treatments, two of which are showing promising results in phase 2 testing. In a recent research note, Jefferies analyst Peter Welford said that trial results have been “competitive” early in the game.

Roche could give investors promising exposure to the weight loss drug market while offering a wide breadth of other established drug treatments that already add to the company’s bottom line. A 4.5% dividend yield adds to its appeal.

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