Structure Therapeutics (GPCR 0.33%) and Novo Nordisk (NVO -1.21%) have one big thing in common: the desire to compete in the bustling market for obesity therapies. While the pre-revenue biotech is still a fledgling in the midst of its attempt to develop its first approved medicine, some recently released data suggests that Novo Nordisk might want to keep an eye out.
But the possibility of developing one decent drug is a far cry from becoming one of the world's largest and most powerful pharmaceutical businesses, like Novo Nordisk is. Is it even remotely possible for Structure Therapeutics to be as good of an investment as Novo Nordisk, never mind filling a similarly sized pair of shoes? Let's investigate.
This market won't be winner-take-all
If Structure Therapeutics is going to become the next Novo Nordisk, it'll need to win on Novo's home turf, cardiometabolic medicines, especially those indicated for treating diabetes and obesity. Then, it'll need to replicate similar wins at a larger scale at least a couple of times to build out a full product lineup, as well as a vastly larger pipeline than the two clinical-stage programs it currently has.
That's a tall order, as Novo's trailing-12-month revenue is $35.5 billion, and the cardiometabolic segment is its fastest-growing. Nonetheless, as the challenger, with no revenue to speak of, Structure has the benefit of having win conditions for the matchup with Novo that are very lax, as capturing even a small portion of the market for obesity medicines would result in massive growth in proportion to its current standing.
And as of right now, there's reason to believe that it has a good shot at capturing the slice it needs. According to the phase 2a clinical trial of Structure's GS-1290 program seeking to treat obesity, the biotech's candidate might be more effective than Novo Nordisk's drug Wegovy, the market leader.
Whereas Wegovy helped people to lose 12.4% of their weight after 68 weeks of weekly treatment, GS-1290 was able to help patients in the phase 2a study to lose 6.2% of their weight within just 12 weeks. Aside from causing weight loss to occur more rapidly, GS-1290 is also formulated as a daily tablet rather than as an injection, so patients can take their medicine from the comfort of their home rather than going into a clinic for a shot.
So in a direct competition with Wegovy, which would only happen if the company's next sets of late-stage clinical trials convince regulators that GS-1290 is worth approving for sale, Structure could well come out on top. If that sequence of events happens, it'll send the stock flying skyward multiple times within the next couple of years.
Then, once it's selling GS-1290 profitably, Structure will need to reinvest its earnings heavily into research and development (R&D) to avoid getting one-upped by whatever Novo produces to fill the role of Wegovy 2.0.
The path to becoming a juggernaut won't be short
So on the basis of where the company is today, Structure Therapeutics could indeed become the next Novo Nordisk. The catch is that Structure is still toward the beginning of its life as a biotech.
It hasn't yet navigated a single approval with regulators at the Food and Drug Administration (FDA) or any other regulatory body. Nor has it had enough time to prove its competency in any market segment. And the management team, while commendable, has not yet been in the position of running the business with an eye toward maintaining profitability while growing.
Many biotechs fail to make the transition into what would be popularly considered as pharma companies, even after they have multiple medicines on the market and billions in revenue. There's simply no data suggesting that this biotech has a better or worse chance on that front. Even if it succeeds, the path to becoming a business with a market cap of $635 billion simply cannot happen overnight, and it would probably take more than a decade at the fastest.
All of this is to say you should not buy Structure Therapeutics stock with the idea that it's about to explode such that it tops Novo Nordisk anytime soon. In the long run, however, there isn't anything that makes the task inherently impossible, and its clinical data from GS-1290 so far suggest that competition will not be a deal-breaker for it in the near term.
