According to the Zhongtong Finance and Economics APP, since July, the trend of the U.S. weight loss drug sector has been differentiated. Market leaders Novo Nordisk (NVO.US) and Elly (LLY.US) have both seen their stock prices drop, while strong followers Roche (RHHBY.US), Pfizer (PFE.US), and Amgen (AMGN.US) have each accumulated gains of 13%, 7%, and 6% respectively in July. Perhaps the reason for this is that as more and more pharmaceutical manufacturers enter the lucrative weight loss market to get a share of the pie, the increasingly fierce competition has raised concerns among investors about the monopoly status of Novo Nordisk and Eli Lilly in the market. These two pharmaceutical giants will have to work hard to prove that their inflated valuations are justified.

1. The two weight loss drug giants are becoming less comparable.

1. Novo Nordisk

As the first pharmaceutical giant in the GLP-1 weight loss drug field to eat crab, many recent blows have caused Novo Nordisk's stock price in the U.S. to fall for four consecutive days last week, reaching the largest single-week decline since early August 2022 (cumulative decline of 7.42%); since July, the cumulative decline has reached nearly 8%. Intense competition in the weight loss drug sector is an important factor contributing to the decline in Novo Nordisk's stock price. Last Wednesday, Roche announced that its second candidate weight loss drug, CT-996, significantly reduced patients' weight. Roche stated that in Phase I clinical trials, after adjusting for the placebo effect, the daily oral weight loss drug CT-996 reduced the weight of overweight patients by an average of 6.1% in four weeks; the negative drug effect was similar to that of other weight loss drugs, mainly mild or moderate gastrointestinal side effects. Another advantage of this oral weight loss drug is that it can be taken at any time of day, not just on an empty stomach.

In the face of intensifying competition in the rapidly growing weight loss drug industry, Roche's oral weight loss drug is expected to provide another attractive option for patients who do not like injections. It is worth mentioning that Novo Nordisk is also developing the oral weight loss drug Amycretin, but its clinical trials have not shown weight loss effects as rapid as Roche's similar products. Data released by Novo Nordisk in March of this year showed that the weight loss of patients treated with the product decreased by 13.1% (vs. placebo group 1.1%) after 12 weeks of treatment in a small Phase I clinical trial. Amycretin will enter Phase II trials in the second half of this year. In addition, Novo Nordisk's combination therapy CagriSema-i.e. a composite preparation of Semaglutide peptide (the active ingredient of Ozempic and Wegovy) and Cagrilintide-has entered Phase III trials.

It has been pointed out that the valuation of Novo Nordisk's weight loss drug business is approximately $172 billion, but the valuation of Semaglutide peptide's contribution is only $57 billion, which means that most of the valuation of the company's weight loss drug business comes from unvalidated drugs. Therefore, any negative clinical trial factors, such as the ineffectiveness of Amycretin and CagriSema, may have a significant impact on Novo Nordisk's stock price. In addition, an analysis report of U.S. pharmacy statements earlier this month showed that only a quarter of U.S. patients taking Novo Nordisk's Semaglutide peptide were still taking these drugs after two years. The analysis also showed that the use of these drugs was declining steadily over time. This analysis result is not good news for the sales prospects of Novo Nordisk's Semaglutide peptide.

It is worth noting that Novo Nordisk's popular drug Wegovy (injectable weight loss drug) will lose its patent exclusivity in 2031, which means that cheaper generic drugs will enter the market to compete for Wegovy's market share. According to research platform Visible Alpha, Wegovy's sales will peak in 2030 and then decline rapidly.

The high price of Semaglutide peptide products has also drawn criticism from U.S. government officials. It is reported that if half of the obese adult population in the United States use these drugs, the cost of these drugs will reach $411 billion, $5 billion more than the amount spent by Americans on all prescription drugs in 2022. The Dutch government is also cautious about reimbursing the cost of Novo Nordisk's weight loss drugs, citing their high cost and uncertain long-term use.

2. Eli Lilly

Looking at the weight loss drug industry as a whole, the market is dominated by two giants, Novo Nordisk and Eli Lilly. However, analysts have pointed out that the two companies may also face great challenges in the future due to the influx of new competitors and the risk of patent expiration. After the patent on its bestselling drug Trulicity expires in the United States in September, Eli Lilly faces the possibility of losing $5 billion in sales annually. In addition, although Eli Lilly's rival Novo Nordisk is still developing its own oral weight loss drugs, Amycretin and CagriSema, Eli Lilly is not sitting idly by. The company is actively developing its own weight loss therapies. In December 2021, Eli Lilly announced that its oral weight loss drug tirzepatide had achieved positive results in Phase III clinical trials.

In terms of business performance, Eli Lilly's revenue from the weight loss drug business in the first quarter of 2022 was $254 million, up 89% year-on-year, surpassing market expectations. Compared with Novo Nordisk, Eli Lilly's weight loss drug business is still at a relatively early stage, but its promising development prospects and the challenges that Novo Nordisk may face in the future suggest that the competition between the two giants in this market is far from over.

Novo Nordisk will release its Q2 results on August 8th EST. The hot demand for weight loss drugs has driven the company's net income in Q1 to increase by 28% year-on-year, and the company has also raised its guidance on annual revenue and operational profit growth. The upcoming Q2 results may help restore confidence in Novo Nordisk's future in the market despite the recent bearish trend. Despite the recent negative performance, Wall Street analysts remain optimistic about Novo Nordisk, with an average rating of "buy" and an average target price of $150.72, meaning an increase of more than 14%.

2. Eli Lilly and Co.

Compared to Novo Nordisk, Lilly, which was not affected by as much negative news, only fell 5.29% in July, performing slightly better. One reason for Lilly's slightly better stock price performance may be the better weight loss effect of its weight-loss drugs, Tezepelumab (the active ingredient of Zepbound and Mounjaro), compared to Novo Nordisk's Semaglutide. It is reported that earlier this month, Truveta, a medical and health data company, published a paper in the Journal of the American Medical Association, which found that after analyzing the electronic health records of 18,386 and obese patients in more than 30 health system databases in the United States, researchers found that the weight loss of patients using Tezepelumab decreased by 10.1% after six months of treatment, while the weight loss of patients treated with Semaglutide decreased by 5.8%. These numbers were 15.3% and 8.3%, respectively, after 12 months of treatment. The fact that Tezepelumab has better weight loss effects than Semaglutide may affect the drug choices and market dynamics of future patients. Lilly's average rating from Wall Street analysts is also "buy", with an average target price of $909.94, meaning an increase of about 6%.

In addition to Roche mentioned above, pharmaceutical companies seeking to catch up with Novo Nordisk, Lilly, and gain market share in the weight loss drug market include Pfizer, Amgen, Altimmune, and Viking Therapeutics.

Pfizer

The increasingly fierce competition may threaten the duopoly of Novo Nordisk and Lilly in the weight loss drug market. According to medical consulting firm Iqvia, there are currently 123 drugs for the treatment of obesity in development, and many competitors are looking to take a share of the market.

Jefferies analysts estimate that the annual sales of the weight loss drug market may reach $100 billion by 2031. Considering the huge burden it may put on public finances, governments have sufficient reason to ensure the provision of more drugs and lower prices, which means that the leading positions of Novo Nordisk and Lilly in this market may be eroded.

Amgen

Apart from Roche mentioned above, pharmaceutical companies seeking to catch up with Novo Nordisk, Lilly, and gain market share in the weight loss drug market include Pfizer, Amgen, Altimmune, and Viking Therapeutics.

1. Jefferies Financial Group

Struggling with declining performance in the post-pandemic era, the US pharmaceutical giant Pfizer also has its sights set on this piece of cake. Pfizer expects the weight loss drug market to grow to about $130 billion in the next decade, and oral weight loss drugs are expected to account for about one-third of the market. Therefore, Pfizer hopes to compete against Novo Nordisk and Lilly by developing a new oral weight loss drug called Danuglipron.

Pfizer has made little progress in treating obesity. Last December, Pfizer discontinued the development of Danuglipron because many patients dropped out due to side effects of nausea and vomiting in a mid-term study involving about 1,400 people. A few months ago, Pfizer also abandoned another oral weight loss drug because it was found to have adverse effects on the liver in trials.

However, Pfizer, which is envious of the lucrative profits in the weight loss drug market, has not given up its efforts. Earlier this month, Pfizer released a small study on 20 subjects, testing four different formulas to reduce the frequency of drug administration from twice daily to once daily to determine which one is potentially the most effective. Although Pfizer did not disclose which formula performed the best and only stated that one formula showed "the most promising profile," Mikael Dolsten, the outgoing chief scientific officer, said that several versions of the drug have shown "inspiring" results and believe that the once-daily formula has competition potential in the weight loss drug market. Pfizer plans to advance this drug to the mid-term study stage later this year. Some analysts believe that to narrow the gap with Novo Nordisk and Lilly, Pfizer may skip this step and directly enter the late-stage research phase to seek regulatory approval as soon as possible. Pfizer also said that the next trial will focus on finding the ideal dose of the drug, and if successful, the drug will enter the final development stage.

Altimmune and Viking Therapeutics

In the first quarter of this year, Pfizer's sales fell by 20%, mainly due to a significant reduction in demand for COVID-19 vaccines and drugs in the market, resulting in Pfizer's financial estimates for this year being lower than Wall Street's expectations. Therefore, weight loss drugs have become an important direction for Pfizer's performance recovery. Pfizer will release its financial report later this month. At that time, analysts will have the opportunity to further explore the company's previously released research results and its future in weight loss drugs.

Another American pharmaceutical giant, Amgen, is testing a weight loss drug called MariTide. A small-scale early clinical trial showed that patients receiving the highest dose of MariTide treatment, 420 mg, lost an average of 14.5% of their weight in 12 weeks. In comparison with currently marketed weight loss drugs, MariTide seems to help patients maintain weight loss results for a longer period after stopping usage. Additionally, MariTide's dosing frequency may be lower than existing drugs; Novo Nordisk's Wegovy and Eli Lilly's Zepbound require a weekly injection, while MariTide can be injected once a month or even longer. A lower dosing frequency may be a major selling point of MariTide, as many patients do not wish to receive frequent injections. However, whether patients ultimately choose MariTide depends on whether its weight loss efficacy and side effects can be comparable to existing products. Amgen will release the phase 2 clinical trial data for MariTide later this year, and the public will have a better understanding of MariTide's competitive prospects in the obesity drug market.

Altimmune, a relatively unknown pharmaceutical company, had good news in late June. The latest clinical trial data showed that its GLP-1/GCG receptor dual agonist, pemvidutide, achieved best-in-class results in promoting weight loss while maintaining lean body mass (muscle mass). According to the trial results, only 21.9% of weight loss in the patients receiving pemvidutide treatment at week 48 is attributed to lean body mass, while 78.1% is attributed to fat. Prior to this, GLP-1 agonists for weight loss had a prominent weight loss effect but always had a problem, which was that lean body mass was also lost. For example, in the 68th week of treatment, about 40% of the weight lost by semaglutide was lean body mass. Therefore, the positive data disclosed by Altimmune may help it gain an advantage in the weight loss drug market in the future.

Viking Therapeutics, another small pharmaceutical company, has attracted considerable market attention for its weight loss drug VK2735. In late February of this year, the company announced that patients receiving VK2735 dose treatment per week had a significant weight loss of 14.7% compared to the baseline after 13 weeks. Compared with the placebo group, the average weight of patients treated with VK2735 also had a statistically significant decrease, reaching 13.1%. In addition, up to 88% of patients in the VK2735 treatment group achieved a weight loss of ≥10%, while the placebo group was only 4%. The positive trial results of VK2735 have pushed Viking Therapeutics' stock price to a historical high of $99.41 and made many people believe that this unassuming small pharmaceutical company will become a target for acquisition by other pharmaceutical giants. However, the stock price has since fallen nearly 50% from its historical high. For this stock, the latest trial data or news of being acquired by other pharmaceutical giants may become a positive catalyst for its stock price. PwC had previously stated this month that many large pharmaceutical companies are facing an imminent patent cliff that may stimulate them to engage in more mergers and acquisitions with small and medium-sized biotechnology companies to offset revenue losses.

However, the ultimate decision of whether patients choose MariTide also depends on its weight-loss efficacy and whether the side effects are comparable to existing products. Amgen will release the ongoing Phase 2 MariTide clinical trial data later this year, and the public will have a clearer understanding of MariTide's competitive prospects in the obesity drug market at that time.

Other

Another American pharmaceutical company, Altimmune, had good news in late June. The latest clinical trial data showed that its GLP-1/GCG receptor dual agonist, pemvidutide, achieved best-in-class results in promoting weight loss while maintaining lean body mass (muscle mass).

The trial results showed that only 21.9% of weight loss in the patients receiving pemvidutide treatment at week 48 was attributed to lean body mass, while 78.1% was attributed to fat. Prior to this, GLP-1 agonists for weight loss had a prominent weight loss effect but always had a problem, which was that lean body mass was also lost. For example, in the 68th week of treatment, about 40% of the weight lost by semaglutide was lean body mass. Therefore, the positive data disclosed by Altimmune may help it gain an advantage in the weight loss drug market in the future.

Viking Therapeutics, another small pharmaceutical company, has attracted considerable market attention for its weight loss drug VK2735. In late February of this year, the company announced that patients receiving VK2735 dose treatment per week had a significant weight loss of 14.7% compared to the baseline after 13 weeks. Compared with the placebo group, the average weight of patients treated with VK2735 also had a statistically significant decrease, reaching 13.1%. In addition, up to 88% of patients in the VK2735 treatment group achieved a weight loss of ≥10%, while the placebo group was only 4%. The positive trial results of VK2735 have pushed Viking Therapeutics' stock price to a historical high of $99.41 and made many people believe that this unassuming small pharmaceutical company will become a target for acquisition by other pharmaceutical giants. However, the stock price has since fallen nearly 50% from its historical high. For this stock, the latest trial data or news of being acquired by other pharmaceutical giants may become a positive catalyst for its stock price.

VK2735's positive trial results have pushed Viking Therapeutics' stock price to a historical high of $99.41 and made many people believe that this unassuming small pharmaceutical company will become a target for acquisition by other pharmaceutical giants. However, the stock price has since fallen nearly 50% from its historical high. For this stock, the latest trial data or news of being acquired by other pharmaceutical giants may become a positive catalyst for its stock price.