Watch out, Novo Nordisk (NVO 0.84%) shareholders -- there's yet another new competitor on the scene that could one day unseat the likes of Ozempic and Wegovy as a leading treatment for type 2 diabetes and obesity. It's a next-gen weight loss pill being developed by a company you already know about: Novo Nordisk.
That's right, according to the Danish pharma giant's presentation on Thursday at the Capital Markets Day 2024 event, it has a candidate in early clinical trials that preliminarily appears to be even more effective than its blockbuster semaglutide drugs, which are selling so rapidly that it can't yet manufacture them quickly enough to meet demand. Here's what you need to know, about why this latest development constitutes yet another reason to be gobbling up shares of this stock.
A convenient route of administration and high efficacy
Novo Nordisk's latest weight loss candidate is called amycretin. It works by targeting the same receptor that's targeted by Wegovy and Ozempic (both of which use the same active ingredient, semaglutide), as well as one other receptor, amylin. That combination of targets overlaps with, but is also distinctive from, major competing treatments like Eli Lilly's Zepbound. That means if amycretin is uniquely effective, it will take a while for a rival to replicate that approach, giving Novo's treatment a window to attract market share.
Per the newly presented results of a phase 1 clinical trial lasting 12 weeks, obese patients who were treated with amycretin lost an average of 13.1% of their body weight, whereas those who received the placebo only lost 1.1%. For reference, a third-party clinical trial assessing the effectiveness of semaglutide found that patients lost only 10.9% of their mass after six months of weekly injections. So the newer candidate seems to work much more effectively.
Furthermore, the side-effect profile of amycretin is said to be broadly consistent with those of Wegovy and Ozempic, though the full data has not yet been published, so it is difficult to verify that conclusion in detail. But there's plenty of data about the combination's safety and efficacy from a similar program in phase 3 trials called CagriSema that has the same targets but that is formulated for once-weekly injections.
Amycretin will advance into a larger phase 2 trial before the end of the year. It's expected to wrap up in early 2026. So it's possible by mid-2027, Novo Nordisk will have another tremendously powerful weight loss drug on the market, this time in a convenient pill form that's likely to appeal to patients who aren't comfortable with getting frequent injections. The implication is that it will soon be ready to claim another giant slice of the obesity therapies market for itself.
Look at what happened over the last few years as it ramped up its efforts to compete in that market:
NVO Total Return Level data by YCharts.
Now, appreciate that if it can get a next-generation product approved for sale and out the door, the benefits to its finances have a real shot at being even greater. That's a key reason this stock is worth buying hand over fist today.
Its peers will eventually have an answer
Alas, while Novo Nordisk stock is certainly worth buying and holding for many years, it isn't an invincible investment by any measure.
Eli Lilly and competitors in biotech like Viking Therapeutics are not taking a break -- they'll continue to develop powerful weight-loss therapies of their own. As with Eli Lilly's Zepbound, those medicines could easily be better than the comparable products sold by Novo Nordisk. For now, with the market for obesity drugs expected to grow from $6 billion at the end of 2023 to as much as $100 billion by 2030, there is plenty of room for their rival treatments to co-exist.
Over the long term, that could change. It is probably not the case that one competitor will come out with a product that enables it to be dominant for a prolonged period, though it is possible. Likewise, it is faintly possible that the company will miss out on investing in research and development in other promising areas as a result of focusing on type 2 diabetes, obesity, and other common metabolic conditions.
But the potential negative impact of the company missing out on a major opportunity because it's focusing on even larger opportunities should probably not concern investors much. And while it's always possible that Novo Nordisk's candidates will experience setbacks in clinical trials, for now, the balance of risk and reward is heavily in favor of buying its stock.
