Watch out, Novo Nordisk and Eli Lilly. Per some new clinical-trial data it published on July 17, the massive Swiss pharmaceutical company Roche Holding (RHHBY 0.42%) might have a winning weight-loss pill on its hands. But is it reasonable to expect the stock to perform well enough to warrant buying? Let's investigate.
OTC: RHHBY
Key Data Points
This pill has the makings of a sizzler
First things first. Appreciate that Roche's weight-loss pill program is currently in phase 1 clinical trials. The first two parts of the three-part trial are done, and the third hasn't started yet. It will need plenty more research and development (R&D) work before it's ready to submit to regulators for approval, assuming it ever is. Any early results may or may not be substantiated by subsequent clinical investigations.
With that being said, Roche's data snapshot from late in phase 1 makes its candidate, CT-996, look like a winner. Over a span of just four weeks, patients in the trial who were treated with CT-996 experienced an average weight loss of 6.1% of their body mass beyond what was experienced by patients given a placebo. Zero patients discontinued treatment due to the side effects. The icing on the cake was that the concentration of the molecule in patients' blood did not seem to be significantly impacted by the patients having a meal or not right before taking their pill.
There's a lot of favorable news to unpack here. One thing to immediately note is that the weight-shedding effects of CT-996 ramped up very quickly. Most of the clinical trials for similar medicines track patients for between 30 and 52 weeks, and, at least so far, those medicines tend to lead to weight loss on the order of 10% to 17% in that period. Thus, there is a preliminary but fairly convincing piece of evidence that this candidate is dramatically more effective than the products on the market, as well as some of the ones in late-stage clinical development.
Another metric that jumps out is that there were no treatment discontinuations related to treatment. For the sake of comparison, one of the biggest problems with the anti-obesity medicines in development and on the market is relatively high discontinuation rates upwards of 10%. Those medications are unpleasant to use, and patients do not prefer to continue taking them once they have accomplished their weight-loss goals -- and some people can't tolerate them for even that long.
Therefore, Roche's candidate could probably be taken for longer periods, thereby potentially leading to larger amounts of weight loss. Or, as management pointed out, CT-996 might find a home as a long-term maintenance therapy after people have taken other weight-loss drugs. That's likely to be a tremendously profitable niche as -- at least so far -- most of the scientific literature indicates that people typically regain the weight they lost after discontinuing treatment.
Finally, Roche's molecule does not appear to be constrained much by whether patients take their medicine with or without a meal. It's unclear how much this capability could ultimately matter financially. But if it turns out that competitors' weight-loss pills are finicky in terms of when patients are supposed to take them for maximum effect and minimum discomfort -- and that would be par for the course given how those medicines work -- it could lead Roche to securing a larger market share.
A lot can change in a year or two
As you may have gathered, the case for CT-996 being a very lucrative product appears to be very strong, even at this early stage of development. The final portion of the phase 1 study will initiate sometime in the fourth quarter of this year. If the next phases of trials are as concise as the first, and they might be, Roche could be filing for approval as soon as toward the end of next year.
At stake will be the weight-loss drugs market, which could become as large as $100 billion or more by the end of the decade. Roche's trailing-12-month revenue is $67.7 billion. While it won't be the first player to commercialize a weight-loss pill, if its candidate continues to perform as it has so far, the company won't have any problem capturing a meaningful share of the market relative to its top line. And that'll remain true even as more competitors arrive on the scene and likely release more advanced therapies too.
All of this is to say that yes, Roche stock could be worth buying on the basis of CT-996 alone. But a little more information is needed to confirm that the business actually has a winner on its hands. If you're the adventurous type, a small investment today could be fine, but for most investors, wait until its interim update during phase 2 trials before committing. By that time, most of the serious safety risks will be in the rearview mirror, and the efficacy data will be more fleshed out as well.
