With some promising clinical trial results in hand and more that could be on the way relatively soon, Amgen's (AMGN 1.51%) latest attempt to develop a therapy for obesity is looking like it could be a contender for the crown that's currently jointly held by the likes of Eli Lilly (LLY 1.81%) and Novo Nordisk (NVO 2.57%). Though it won't be competing with those two heavyweights directly until it finishes the clinical trials process, which could take years, smart investors know that getting in early, before a play is obvious, is where many of the greatest returns often lie.
But is this stock ready to purchase today, or does the opportunity need a bit more time to cook? Let's start to answer this question by evaluating what all the fuss is about.
NASDAQ: AMGN
Key Data Points
This candidate could give Eli Lilly and Novo Nordisk a run for their money
Amgen's entrant in the weight-loss drug gold rush is called MariTide, and it's currently in phase 2 clinical trials. Thanks to how favorable the preliminary phase 2 data is, management is already planning on a phase 3 trial that it claims will be extensive in scope, investigating the candidate's utility in treating obesity-adjacent cardiometabolic conditions like type 2 diabetes. That means the drug could one day compete for the market shares of Eli Lilly's marketed medicines Mounjaro and Zepbound, as well as for the shares held by Novo Nordisk's medicines Ozempic and Wegovy, not to mention potentially one-upping promising programs in development by biotechs like Viking Therapeutics.
MariTide's mechanism of action isn't entirely unique, but it is differentiated enough to potentially access market segments that the other big pharma companies in the space can't yet reach. Whereas Eli Lilly's Mounjaro and Zepbound work by activating two cellular receptors, GLP-1 and GIP-R, MariTide activates GLP-1 while inhibiting the activation of GIP-R. The full implications of that design choice are not clear yet, but the early indications suggest that it could be fruitful.
In the phase 1 clinical trial, patients treated with MariTide for 85 days experienced a 14.5% reduction in their body mass, while patients who got a placebo only experienced a decline of 1.5%. Confirmation of these data is expected later this year from the phase 2 trial. In contrast to MariTide, per a couple of other clinical investigations, with the benefit of a full year of treatment, patients who took either Zepbound or Wegovy lost between 15% and 21% of their mass.
So it appears to be the case that they took significantly longer to achieve roughly the same results.
Furthermore, Amgen's candidate is an antibody-drug conjugate (ADC) instead of merely a peptide like the competitors' medicines. While there is not concrete data on the topic yet, in theory the ADC format should additionally lead to the therapy breaking down more slowly once it's administered, thereby requiring less frequent dosing. But (potentially tremendously) higher manufacturing costs are to be expected, as ADCs are fairly complex to produce.
NYSE: NVO
Key Data Points
The balance of risk and reward is appealing at the moment
Per Fortune Business Insights, the global market for anti-obesity medicines will be worth as much as $37.9 billion by 2032, up from around $4.5 billion in 2023.
Therefore, even if Novo Nordisk and Eli Lilly continue with their full-bore efforts to capture large portions of that market with Wegovy and Zepbound, there will almost certainly be more demand waiting for another operator to serve. A biotech like Viking Therapeutics could succeed by capturing mere crumbs. But a massive pharma business like Amgen would need a hearty slice for its attempt to compete to be considered a success.
NYSE: LLY
Key Data Points
On the basis of the available information so far, it is probable that Amgen can secure an economically meaningful portion of the market. In Q1 alone, it spent more than $1.3 billion on research and development (R&D), and just over $1.8 billion on selling, general, and administrative (SG&A) expenses. In the same period, it reported $500 million in free cash flow (FCF).
In other words, it has plenty of resources to ensure MariTide is exhaustively investigated for its potential utility in treating different conditions, as well plenty of money to spend on marketing it, assuming it eventually gets approved. And it's just one program in Amgen's massive pipeline, which is packed with many other lucrative medicines.
It's still a bit early in MariTide's development process to say that Amgen's stock is worth buying today on the basis of its blockbuster drug potential. But, as a company, it isn't very risky thanks to its large collection of in-demand medicines as well as its other pipeline programs.
So if you're on the fence about buying this stock right now, consider the obesity candidate to be a tipping point in favor, and if you're looking for a blue chip stock that could have stellar growth potential, it's worth strongly thinking about making a purchase, too.
