With a number of promising clinical trial results available and more on the way, relatively soon, Amgen‘S (NASDAQ: AMGN) The latest attempt to develop a therapy for obesity looks like it could be a contender for the crown currently jointly held by the likes of Eli Lilly (NYSE: LLY) And Novo Nordisk (NYSE: NVO). While it won’t compete head-to-head with these two heavyweights until the clinical trial process is complete, which could take years, smart investors know that acting early, before an obvious play, often yields the biggest profits.
But is this stock ready to buy today, or does the opportunity take a little more time to cook? Let’s start answering this question by evaluating what it’s all about.
This candidate could give Eli Lilly and Novo Nordisk a run for their money
Amgen’s newcomer to the weight loss gold rush is called MariTide and is currently in Phase 2 clinical trials. Thanks to how favorable the preliminary Phase 2 data is, management is already planning a Phase 3 trial that it claims will be expansive in scope, exploring the candidate’s usefulness in treating obesity-related cardiometabolic conditions such as diabetes type 2. That means the drug could one day compete for market shares of Eli Lilly, Mounjaro and Zepbound’s marketed drugs, and for shares of Novo Nordisk’s Ozempic and Wegovy drugs, not to mention silent on potentially promising programs under development by biotech companies such as Viking therapies.
MariTide’s mechanism of action is not entirely unique, but it is differentiated enough to potentially access market segments that the other major pharmaceutical companies in the space cannot yet reach. While 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 yet clear, but early indications suggest it could be fruitful.
In the Phase 1 clinical trial, patients treated with MariTide for 85 days experienced a 14.5% reduction in body weight, while patients receiving a placebo experienced only a 1.5% reduction. Confirmation of these data is expected from the Phase 2 study later this year. In contrast to MariTide, patients taking Zepbound or Wegovy, with the benefit of a full year of treatment, lost between 15% and 21% of their mass, according to a number of other clinical studies.
So it seems they took significantly longer to achieve roughly the same results.
Furthermore, Amgen’s candidate is an antibody-drug conjugate (ADC) rather than merely a peptide like its competitors’ drugs. Additionally, while there are no concrete data on this topic yet, the ADC format should theoretically result in the therapy breaking down more slowly once administered, thus requiring less frequent dosing. But (potentially vastly) higher production costs are to be expected, as ADCs are quite complex to produce.
The balance between risk and reward is attractive at the moment
According to Fortune Business Insights, the global market for obesity drugs will be worth as much as $37.9 billion by 2032, up from about $4.5 billion in 2023.
Even if Novo Nordisk and Eli Lilly continue their efforts to capture large parts of that market with Wegovy and Zepbound, there will almost certainly be more demand waiting for another operator. A biotech like Viking Therapeutics could succeed by just catching crumbs. But a major pharmaceutical company like Amgen would need a solid share to consider its attempt to compete a success.
Based on the information available to date, it is likely that Amgen can capture an economically meaningful share of the market. In the first quarter alone, the company 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. During the same period, the company reported $500 million in free cash flow (FCF).
In other words, it has enough resources to ensure that MariTide is extensively researched for its potential usefulness in treating various conditions, as well as enough money to spend on its marketing, assuming it is ultimately approved. And it’s just one program in Amgen’s massive pipeline, which is packed with other lucrative drugs.
It’s still a bit early in MariTide’s development process to say that Amgen shares are worth buying today based on their blockbuster drug potential. But as a company, it’s not very risky thanks to its large collection of high-demand drugs and its other pipeline programs.
So if you’re on the fence about buying this stock right now, consider the obesity candidate as an inflection point in the direction of your choice, and if you’re looking for a blue chip stock that could have great growth potential, it’s worth thinking about it carefully. also make a purchase.
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Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool recommends Amgen and Novo Nordisk. The Motley Fool has a disclosure policy.
Amgen overtakes Novo Nordisk and Eli Lilly. Should you buy it? was originally published by The Motley Fool
