Weight loss translates to investor profits. Just look at Eli Lilly and Novo Nordisk. Both stocks have skyrocketed thanks largely to their obesity drugs, with Lilly's share price more than quadrupling and Novo's shares more than tripling over the last three years.

Meanwhile, Pfizer's (PFE -0.97%) fortunes have taken a different path. The big pharma stock has plunged with sinking sales of its COVID-19 products. But can Pfizer possibly challenge Lilly and Novo Nordisk in the obesity market?

Murky outlook

Pfizer had high hopes for danuglipron, a GLP-1 agonist like Novo Nordisk's Ozempic and Wegovy. However, those hopes suffered a severe blow after the company announced the results from a phase 2 study of a twice-daily oral formulation of the drug. The side effects were so bad that Pfizer opted not to advance the twice-daily danuglipron into late-stage testing.

But Pfizer didn't throw in the towel on the program. The drugmaker still has a phase 1 study evaluating a once-daily formulation of danuglipron. It's fair to say that Wall Street is skeptical about the prospects for the drug, though. During Pfizer's recent first-quarter earnings call, an analyst set up a question by stating that the "outlook for danuglipron is not good."

As you'd expect, Pfizer's management didn't touch that statement with a 10-foot pole. CEO Albert Bourla noted that the company has three experimental obesity drugs in clinical testing. The only other program targeting obesity included in the pipeline on Pfizer's website, though, is early-stage candidate PF-07976016.

I'd say the outlook for danuglipron is murky at best. Pfizer expects to report results around midyear from a study evaluating a once-daily formulation of the drug. Bourla said in the Q1 call that the company "will make a decision for future plans" after seeing the data.

What about an acquisition?

Pfizer hasn't been shy about using its treasure chest built largely by its COVID-19 vaccine to gobble up other biopharmaceutical companies. It even projects around $25 billion in additional annual revenue by 2030 from business development deals. An obvious solution for Pfizer, therefore, would be to acquire another company with a promising obesity drug.

Viking Therapeutics appears to be a great candidate. The company reported overwhelmingly positive results from a phase 2 study of an injectable version of its experimental obesity drug VK2735 earlier this year. Viking also announced encouraging results from a phase 1 study of an oral version of the drug.

Altimmune is another possibility. In March, the small drugmaker reported positive results from a phase 2 study of its obesity drug pemvidutide.

However, Pfizer CFO Dave Denton stated in the Q1 call not to expect any bolt-on acquisitions in the near term. He said the company's top capital allocation priorities are supporting the dividend and paying down debt.

Weighing in

With all of this in mind, you might think Pfizer's chances of competing against Lilly's Mounjaro/Zepbound franchise and Novo Nordisk's Ozempic/Wegovy franchise anytime soon are slim to none. But I'm not so sure.

Bourla said in the Q1 call that Pfizer has historically been a big player in the metabolic market and "obesity is a very big part of it." He even proclaimed, "[T]his is an area that we have the right to win." That indicates to me that Pfizer does not intend to let the huge weight loss opportunity pass it by.

The analyst who said danuglipron's outlook wasn't good was probably right. We'll know more in the next few months after Pfizer reports the data from its phase 1 trial. If those results aren't promising, I think you can throw Denton's comments about not expecting any near-term acquisitions out the window.

My original question was: "Can Pfizer possibly challenge Lilly and Novo Nordisk in the obesity market?" The answer to this is a resounding "yes." Pfizer absolutely can challenge Lilly and Novo if it wants to do so. And I think it will be a player in this huge market -- even if it requires buying another company to make it happen.