U.K.-based AstraZeneca (AZN 0.19%) is now gearing up for the second time to develop a challenger to Novo Nordisk's (NVO 0.84%) Ozempic, its absurdly successful treatment for type 2 diabetes. If AstraZeneca's bid succeeds, the company will mint yet another blockbuster drug yielding more than $1 billion in sales per year.

But it may be wise to hold off on making an investment until a few key issues are addressed. Let's go over why this attempt to dethrone Ozempic probably isn't a slam dunk.

This move could set up plenty of growth

On Nov. 9, AstraZeneca signed a licensing agreement with a Chinese biotech called Eccogene. AstraZeneca will gain the development and commercialization rights outside of China for Eccogene's phase 1 clinical asset for treating type 2 diabetes, ECC5004. The deal, sealed with an up-front payment of $185 million and a commitment to pay nearly $2 billion more in potential milestone payments, means that AstraZeneca is now aiming to escalate its participation in the global diabetes market. Management estimates that market is worth more than $125 billion today, so the stakes are significant.

If the ECC5004 program works as planned, it could one day be used to treat obesity too, just as Novo Nordisk's medicine Wegovy is essentially a copy of Ozempic intended for a different purpose. And that would drive even more revenue, assuming that AstraZeneca gains a foothold in the now-crowded market. On that front, the candidate has the advantage of being formulated as a once-per-day pill rather than an injection.

Assuming that its efficacy is proven to be the same or better than those of Ozempic and Wegovy, it's logical that many patients would prefer taking a pill to getting a shot once a week.

AstraZeneca's leaders think that phase 1 clinical data so far make the program a candidate for combining with other therapies for the same conditions in the future. They also believe that the early data point to ECC5004's efficacy as being differentiated in terms of its clinical impact. But investors will need to wait to actually see some of the data before judging whether that's true or not.

It's not good to start a marathon late

Unfortunately, that's where the good news for shareholders ends. There are quite a few barriers preventing AstraZeneca from succeeding with ECC5004, starting with the fact that it shares the same mechanism of action -- binding to the GLP-1 receptor -- with Novo Nordisk's entrants. That means it'll probably need to steal market share from competing medicines as there might not be much benefit in combining with them despite what management believes.

And a pill form, while a good idea, is already covered by Novo Nordisk's drug Rybelsus, which also shares the same mechanism of action. In other words, ECC5004 does not appear to be a differentiated product, and so it has little or no chance of becoming one with further clinical development, but differentiation is precisely what it will need to gain market share.

Then there's the complication of arriving to the market incredibly late. Novo Nordisk's drugs are on the market today, raking in billions of dollars in sales. AstraZeneca's candidate is not yet done with its phase 1 trials, and it will be years before it gets commercialized, if it ever does. By the time it has a shot at getting approved for sale, it will be at least one full generation of drug development behind.

Eli Lilly's medicines Zepbound and Mounjaro represent the current generation of drugs for obesity and type 2 diabetes. Those drugs are based on the same molecule, which has two mechanisms of action rather than just one. By the time AstraZeneca's entrant has a chance at being commercialized, it will be outclassed by even the products available today, never mind the more sophisticated ones likely to be launched between now and then. Given the information available now, the company's plan isn't going to work.

So don't rush to buy AstraZeneca stock in hopes of its shares going to the Moon after it takes a bite out of the two major cardiometabolic markets. And even if later clinical trials show that ECC5004 is a wonder drug, don't forget that the competition is still quite advanced with follow-up projects of their own.