The pharmaceutical drug-based weight-reduction market is in full expansion mode in 2023.
The global anti-obesity drug market is projected to grow from $4.5 billion in 2023 to $22.9 billion by 2030, Fortune Business Insights reports. That’s a compound annual growth rate of 26.1%.
The market is thriving at a time when more U.S. adults than ever are suffering from obesity and diabetes. According to a 2021 projection by the Centers for Disease Control and Prevention (CDC), there are more than 650,000 cases of obesity-related cancers annually in the U.S. Meanwhile, the World Health Organization reports that the global count of obese individuals is more than 1 billion.
According to the latest CDC National Diabetes Statistics Report, more than 37 million people have diabetes in the U.S., which is 11.3% of the population. Even more mind-blowing, 96 million people 18 or older have prediabetes, or 38% of U.S. adults.
That dour scenario has raised the profile of an obesity epidemic worldwide, and multiple drug companies are racing in with new weight-reduction drugs to help people potentially reclaim their lives. Some have been approved to treat type 2 diabetes but are waiting to get the nod for obesity treatment as well.
“Social media activity documenting transformative weight loss, together with the establishment of affordable insurance coverage more quickly than anticipated, has helped drive demand for obesity medicines beyond our expectations,” says Mark Purcell, Morgan Stanley European biopharmaceuticals analyst, in a recent research report.
Morgan Stanley predicts that the weight loss prescription drug market will go even higher in the next half-decade, all the way to $77 billion in 2030, up from the company’s previous estimate of $54 billion.
While artificial intelligence stocks have been stealing headlines, the year-to-date returns of leading weight loss drug-producing pharmaceutical companies have been flying somewhat under the radar. So which firms are delivering the most promising weight loss remedies, and how is that work impacting their stock market fortunes?
Here’s a closer look at seven weight loss drug stocks and how they may fare in the second half of 2023:
|Stock||YTD return||Implied upside as of Sept. 25|
|Novo Nordisk A/S (ticker: NVO)||38.2%||110.5%|
|Eli Lilly & Co. (LLY)||52.2%||14.6%|
|Amgen Inc. (AMGN)||4.3%||-2.3%|
|Pfizer Inc. (PFE)||-33.6%||33.3%|
|Viking Therapeutics Inc. (VKTX)||24%||174.4%|
|Structure Therapeutics Inc. (GPCR)||27.9%||74.4%|
|Herbalife Ltd. (HLF)||-3.5%||44.2%|
Novo made big news in August with a report on the company’s Wegovy trial that linked the drug to a 20% lower risk of heart attack or stroke in obese and overweight patients, surpassing expectations. That news could spur major insurance companies and Medicare to begin coverage of the weight loss drug, which is already approved by the Food and Drug Administration (FDA) to treat obesity. Concrete evidence of health benefits tied to Wegovy, the brand name for semaglutide, would likely lead more consumers to start taking the medication, especially if their insurance covers it.
Currently, Wegovy costs about $1,349 per month, and any expansive insurance coverage should cut that price dramatically, leading to even more profits for Denmark-based Novo Nordisk. Also boosted by the success of its diabetes drug Ozempic, NVO stock is already up 38.2% on a year-to-date basis as of Sept. 25.
The average analyst price target is $191.84, with a high of $235, according to Wall Street Journal data. That’s an implied upside of 110.5% from NVO’s Sept. 25 closing price of $91.13.
Thanks to robust earnings and a highly optimistic outlook for its new diabetes drug Mounjaro, Eli Lilly should be a dominant player in the weight loss drug market going forward. The FDA approved Mounjaro in May 2022 for the treatment of type 2 diabetes, but analysts see huge promise for the drug in the anti-obesity market as well.
In a recent research report, BMO Capital Markets says there is “unprecedented potential” for the company’s A-list menu of drugs, including oral orforglipron, injectable tirzepatide (Mounjaro) and next-generation retatutide. BMO holds an “outperform” call on LLY, with a one-year forward stock price projection of $633 per share, adjusted from $565. The stock closed at $552.29 on Sept. 25.
Other industry analysts are all-in on Eli Lilly as well, with a consensus top-line compound annual growth rate, or CAGR, of about 24% through 2028. The company’s late-stage weight loss trial success with Mounjaro is driving shares upward, as many analysts expect it to get FDA approval as a weight loss drug, perhaps later this year.
As the buzz on Mounjaro intensifies, some analysts are pegging top-end annual revenue at $25 billion. LLY stock has soared 52.2% in 2023 as of Sept. 25, as more investors expect Lilly to be a major player in the weight loss drug market for the next decade and likely even longer.
With Eli Lilly and Novo Nordisk establishing a big lead in the weight loss drug market, relative latecomers like Amgen have some catching up to do. The release date for Amgen’s promising AMG133 injectable obesity drug is not expected until 2026.
Even so, it’s worth it to look at AMGN as a long-term play, as it has a solid shot at cracking Lilly and Novo Nordisk’s iron grip on the obesity drug market. Amgen’s AMG133 phase 1 testing showed a 14.5% weight loss rate after three months of use. Phase 2 trials are already running, with results rolling out in 2024.
For the current fiscal year, a consensus earnings estimate of $18.35 would be a 3.7% increase over the prior year, according to Zacks Equity Research. The consensus is that Amgen looks ready to outperform in the current and next fiscal years, with sales estimates of $27 billion and $31 billion, respectively. Those are increases of 3.6% and 13.8% over prior-year results.
Amgen is also shoring up its drug pipeline with a deal to purchase Horizon Therapeutics PLC (HZNP) for $28 billion. On Sept. 1, the U.S. Federal Trade Commission said a proposed consent order with Amgen addressed its antitrust concerns about the merger, clearing the way for Amgen to access the 20 drugs in Horizon’s pipeline and a half-dozen drugs that have already been approved.
In addition to its robust forward dividend yield of 3.2%, there are multiple reasons to get on board with AMGN aside from its upcoming weight loss drug. Wall Street Journal data shows an average analyst target price of $260.83, in line with its share price of $266.86 on Sept. 25.
If you’re looking for a biotech growth play in late 2023 that pays a strong dividend, Pfizer could be the answer, as it currently offers a solid forward yield of 5%.
Drug companies like Pfizer are shifting from a COVID-19-dominated gene therapy drug strategy to other therapies, including weight loss drugs, though it’s going to have to play catch-up.
That doesn’t mean Pfizer is so late to the party that it’s not worth a look. Pfizer is currently testing a type 2 diabetes and a weight loss drug called danuglipron, a twice-daily obesity pill that has already shown promising results in early testing. PFE won’t have any new information out on the results until later this fall.
Company insiders are bullish on danuglipron, with company CEO Albert Bourla saying earlier this year that a Pfizer obesity drug could eventually rake in $10 billion annually.
Plus, analysts’ average price target is $43.96 for PFE stock, a 33% upside to its closing price of $32.98 on Sept. 25.
Viking Therapeutics Inc. (VKTX)
San Diego, California-based Viking Therapeutics is also developing its own GLP-1 (glucagon-like peptide 1) obesity diabetes and weight loss drug that targets blood sugar levels and reduces the urge to overeat.
Company officials are expected to release phase 1 testing results of its VK2735 injectable therapy in October, and results from its oral version of the drug are expected out in December.
Industry analysts apparently like what they already see in VKTX, with Truist issuing a $32 price target, an implied upside of 174.4% over its $11.66 price at the market close on Sept. 25.
Truist is hardly alone. Earlier in September, Oppenheimer issued a “buy” rating on VKTX with a $40 price target. The same week, H.C. Wainwright confirmed a “buy” rating of its own, with a $33 target.
Structure Therapeutics Inc. (GPCR)
Structure’s GSBR-1290 oral GLP-1 drug is in early-stage trials, with a new phase 2b trial set for 2024 if those earlier trials show promise. The company says it has enough cash on hand (about $224 million) to fund clinical trials and company operations through 2025.
“We have continued our momentum and are on track to report top-line data from our fully enrolled phase 2a study of GSBR-1290 in individuals living with type 2 diabetes or obesity toward the end of the year,” said CEO Raymond Stevens in a recent statement.
While any commercial release of a Structure weight loss drug likely won’t happen until 2029 or so, industry analysts are on board. Yasmeen Rahimi, a Piper Sandler analyst, held a “buy” rating on GPCR shares and has issued a $58 price target on the stock. GPCR closed at $33.25 per share on Sept. 25.
While Los Angeles-based Herbalife isn’t a drug manufacturer, it is an influential health and wellness firm with a market capitalization of $1.3 billion.
The company specializes in weight management goods, particularly in the nutrition, energy, sports and fitness markets. Weight loss management is by far Herbalife’s biggest market component, responsible for 57% of annual revenues.
With weight loss spending up among consumers, Herbalife expects solid growth going forward, with a three-year growth estimate of 14.9% and five-year growth pegged at 15.4%, outperforming 74% and 84% of companies in the same industry, respectively, GuruFocus reports. The company saw a 27% gain in share price from May 31 to Aug. 31, mainly due to higher projected sales in the weight management market.
The average analyst price target for HLF shares is $20.70, up to a high of $33. That represents a 44.2% upside, on average, over HLF’s $14.36 closing price on Sept. 25.