It's hard to overstate just how successful weight-management treatments have been over the past couple of years. Sales of semaglutide, the drug that Novo Nordisk (NVO +0.28%) markets as Ozempic and Rybelsus for diabetes, and as Wegovy for weight management, have soared to an annualized $27.9 billion.
Semaglutide first earned approval from the Food and Drug Administration (FDA) back in 2017. A much younger treatment from Eli Lilly called tirzepatide earned its first FDA approval in 2022. Initially approved as Mounjaro for diabetes and later as Zepbound for weight management, tirzepatide is already generating an annualized $17.3 billion in sales.
Semaglutide and tirzepatide both reduce hunger by acting on glucagon-like peptide 1 (GLP-1) receptors in the pancreas. This class of treatment is expected to generate more than $100 billion in annual sales by 2030. Lilly's tirzepatide is gaining market share because it also acts on GIP receptors, and this dual action appears to make it more effective.
Before the end of 2024, Novo Nordisk and Amgen (AMGN +0.05%) are expected to announce clinical trial results for next-generation weight management treatments of their own. Positive results could cause these pharmaceutical stocks to soar, but clinical trials are famously unpredictable.
1. Novo Nordisk
Later this year, all eyes will be on Novo Nordisk and results from the Redefine-1 trial. It's testing a combination of a still-experimental amylin analog called cagrilintide plus semaglutide.
NYSE: NVO
Key Data Points
The Redefine-1 study randomized 3,400 nondiabetic patients with obesity to receive the combination therapy tentatively named CagriSema, cagrilintide plus a placebo, or semaglutide plus a placebo. The primary outcome measured will be patients' weight loss percentage after 68 weeks of treatment.
Novo Nordisk investors are optimistic about the Redefine-1 study because the combo therapy performed well in a phase 2 trial. After 32 weeks of treatment, the average patient randomized to receive CagriSema was 15.6% lighter, compared to an average weight loss of just 5.1% for folks given semaglutide alone.
Eli Lilly's tirzepatide set the bar for weight loss. In a study leading to Zepbound's approval, patients given the highest dosage of 15 mg per week were 20.9% lighter after 72 weeks. If CagriSema can top this result when Redefine-1 reads out later this year, Novo Nordisk stock could soar.
While there's a chance CagriSema data will push up Novo Nordisk later this year, expectations are already high. The stock has been trading at about 36 times forward-looking earnings expectations. This is a fair price for a company that grew earnings by 81% over the past three years, but only if we can expect earnings to continue soaring.
With tirzepatide pulling market share away from semaglutide, Novo Nordisk's rich valuation means the market is expecting a weight reduction above 21% from CagriSema. That is a long way from guaranteed. Anyone without a strong risk tolerance should probably avoid buying this stock.
2. Amgen
Amgen doesn't have any weight-management drugs at the moment, but that could change in a couple of years. The company is running a phase 2 study with an injectable treatment called maridebart cafraglutide, or MariTide.
NASDAQ: AMGN
Key Data Points
MariTide engages GLP-1 and GIP receptors, but it inhibits GIP receptors instead of activating them. The unique approach appears to work as a monthly injection. In phase 1, patients given the highest dose tested were 14.5% lighter on average after 85 days.
Patients regaining weight immediately after they stop taking Zepbound or Wegovy is an issue that MariTide might be able to remedy. Amgen observed body weight reductions for patients in the phase 1 study up to 150 days after their final MariTide injections.
Amgen is running a phase 2 trial with MariTide that completed an interim analysis this spring. The study is on track to read out 52-week results before the end of 2024. In May, Amgen said there haven't been any major safety concerns with MariTide's phase 2 study, but the company didn't provide any details.
Shares of Amgen have been trading at around 17.2 times forward-looking earnings estimates. That's not a bad price, even if we don't include MariTide's potential contribution. Amgen recently reported second-quarter product sales that soared 20% year over year. Eight blockbuster drugs in its product line grew second-quarter sales by a double-digit percentage.
With more blockbuster drugs gaining market share than losing it, Amgen could grow by leaps and bounds in the years ahead, regardless of what happens to MariTide. Adding some shares to a diversified portfolio now looks like a smart move.
