Amgen (AMGN 0.22%) is well on its way to producing a medicine for obesity that could one day rival the blockbuster weight-loss drugs like Wegovy and Zepbound made by the segment's monarchs, Novo Nordisk (NVO 0.84%) and Eli Lilly (LLY 1.19%). If it succeeds, it'll be showing up to the market late, and it'll need to clear the high bar of proving that its product is worth using instead of the mainstays.
Is its stock worth buying on what appears to be its long shot at accessing a market that's already white-hot? The answer might surprise you.
The weight-loss market is calling
While there's no guarantee that making a better medicine than the existing set of weight-loss drugs will succeed, there are a few pieces of information that suggest, even at this early stage, that Amgen's entrant might be a winner. Its anti-obesity candidate is called MariTide, and it's currently in phase 2 clinical trials. What makes MariTide special is that it uses an overlapping but slightly different, and possibly more favorable, mechanism of action than Wegovy and Zepbound do.
Much like those two medicines, MariTide targets the glucagon-like peptide 1 receptor (GLP-1R) on the cells of the pancreas. But while Eli Lilly's Zepbound activates another cellular feature called the glucose-dependent insulinotropic peptide receptor (GIP-R), Amgen's program takes the opposite approach, aiming to block GIP-R so its activity is curbed rather than accelerated.
You are probably rightfully wondering how two opposite approaches could lead to the same physiological result: the patient experiencing weight loss. Such questions have not yet been answered although they're under active investigation by researchers. But these biopharmas aren't just taking shots in the dark; there's evidence from both humans and animal models that Amgen's method is capable of driving robust weight loss.
Per early clinical-stage data the company published on Feb. 5 in the prestigious journal Nature Metabolism, study participants who received multiple doses of MariTide over the course of three months lost an an average of 14.5% of their body weight by the 85th day. Critically, those patients appeared to keep the majority of the lost weight off after dosing was stopped although longer-term data is needed to confirm this finding, and work on that front is ongoing.
The implication is that the drug could have an edge over Zepbound and Wegovy, as patients using those drugs typically start to regain the weight they lost as soon as they stop receiving doses.
In the fourth quarter, Amgen will report results of the phase 2 study, which should clear the issue up somewhat. It'll also be moving another candidate for weight loss into its first clinical trials. Much as with Zepbound and Wegovy's sibling medicines that are indicated for treating type 2 diabetes -- Mounjaro and Ozempic -- management is eager to investigate any opportunities to target additional indications with its candidate once it enters late-stage trials.
Needless to say, getting approval to sell the medicine for any indications beyond obesity would mean massively expanding its addressable market. So if the phase 2 data look favorable, this stock could go on a bull run.
A ripe opportunity for investors?
Now let's move on to the question of whether Amgen's attempt to one-up Eli Lilly and Novo Nordisk makes it worth investing in, starting with a look at the financial stakes involved.
In Q4 alone, Novo Nordisk sold nearly $1.4 billion worth of Wegovy doses, and demand is expected to remain stronger than the company can meet, given its manufacturing capacity, at least through 2024. According to financial analysts at Morgan Stanley, by 2030 weight-loss drugs could be a market that's as large as $77 billion annually, up from $2.4 billion in 2022. So there's almost certainly more than enough room for another competitor to take a slice of that market, both today and in the future.
In 2023, Amgen brought in $28.1 billion in revenue. If it eventually commercializes MariTide a couple of years from now, which is not at all guaranteed, it would only need to capture a sliver of the market to make billions more. Even matching Wegovy's sales today would be a meaningful amount of additional revenue, and would be hugely positive for the stock.
Furthermore, Amgen's valuation is much more reasonable today than those of either Novo Nordisk or Eli Lilly. Whereas its price to earnings (P/E) ratio is 23, Novo Nordisk's is 44, and Lilly's is a sky-high 130. In other words, the company is ripe for a bet because it could experience major growth, but it isn't yet priced accordingly.
In short, if you're looking for exposure to the weight-loss market, or even if you're just looking for a stalwart stock to be a reliable compounder for your portfolio, Amgen looks like a great choice right now. It doesn't need to decisively win the upcoming competitive fight in order to win for its shareholders. And even if it fails with MariTide, it has so many products and so many other programs in its pipeline that it could still be a strong performer.
