One of the hottest trends in the pharmaceutical industry is weight loss. Rising interest in diabetes and obesity treatments is fueling a new wave of growth for drug companies. Among those developing treatments for weight loss, one stands out from the pack.
Novo Nordisk (NVO +3.76%) is the developer of diabetes medications Ozempic and Rybelsus, and obesity treatments Wegovy and Saxenda. The company's deep expertise in these markets helped fuel record growth in 2023. Investors have cheered on the company, sending its shares 91% higher over the past year.
But amid all of the good news, investors may have missed the latest milestone for Novo Nordisk. The company could be on the verge of yet another blockbuster drug. Let's dive into the specifics and assess if now is a lucrative moment to scoop up some shares in Novo Nordisk.
NYSE: NVO
Key Data Points
The weight-loss market is red-hot, and...
Ozempic, Rybelsus, and Wegovy are tied together through its main ingredient: semaglutide. This is a molecule that has varying applications. Ozempic and Rybelsus are used in diabetes patients. On the other hand, Wegovy is approved by the Food and Drug Administration (FDA) for chronic weight management.
It's important to note, however, that even though Ozempic and Rybelsus are not FDA-approved for weight loss, losing weight is often a byproduct of taking those treatments. The bigger theme here is that demand for these medications is skyrocketing. In fact, demand is so high, that Novo Nordisk recently acquired drug subcontractor Catalent to help bolster manufacturing and production efforts.
While Novo Nordisk already has encouraging long-term prospects across both the diabetes and the obesity markets, the company just received some news that could imply its lead is extending.
Image source: Getty Images.
...Novo Nordisk could be extending its lead, but...
Earlier this month, Novo Nordisk published results from a phase 1 clinical trial for its drug amycretin. Amycretin is meant to bolster Novo Nordisk's existing platform in obesity care. But unlike Wegovy, the differentiating feature of amycretin is that it is an oral supplement as opposed to an injection.
According to Novo Nordisk's research, there are over 800 million people with obesity worldwide. However, only 2% of these patients are being treated. It's clear that the market for obesity care is fragmented. And with positive momentum fueling amycretin, Novo Nordisk looks well-positioned to augment its breakthrough with Wegovy.
...remember to think long term
While shares of Novo experienced a brief bump following the amycretin news, it's important to zoom out and think long term. Amycretin is scheduled to move on to phase II trials later this year. That means initial data likely won't be available until sometime next year or even 2026.
By zooming out, it becomes more clear that amycretin isn't going to be contributing to Novo Nordisk's growth anytime soon. Furthermore, it's important to keep in mind that important information will be uncovered through subsequent clinical trials -- positive or negative.
The progress with amycretin is encouraging, and I applaud Novo Nordisk for doubling down on research and development during such a groundbreaking period for the company. However, positive news from a phase I trial with no guarantee of FDA approval in the future is not a reason to buy a stock.
With shares trading near all-time highs, it's more prudent to assess the long-term narrative surrounding the weight-loss market and Novo Nordisk's performance to date. As a shareholder, I'm happy to continue using dollar-cost averaging as a strategy to build my position over time.
I'm encouraged by the results from amycretin and hopeful that it will be approved at some point later this decade. However, for now I'll continue monitoring the performance from Novo Nordisk's existing treatments and allow that to shape my investment thesis.
