According to the Wise Finance APP, since July, the performance of the weight-loss drug sector in the U.S. stock market has diverged. Market leaders Novo Nordisk (NVO.US) and Eli Lilly (LLY.US) have seen their stock prices decline, while strong followers Roche (RHHBY.US), Pfizer (PFE.US), and Amgen (AMGN.US) have accumulated gains of 13%, 7%, and 6% respectively in July. The reason may lie in the increasing number of pharmaceutical companies entering the lucrative weight-loss drug market to get a piece of the pie. The intensifying competition is making investors worried about the monopoly position of Novo Nordisk and Eli Lilly in this market, forcing these two pharmaceutical giants to prove that their inflated valuations are justified.
<h2>I. Weight-loss Drugs: From &#34;Two Giants&#34; to &#34;Difficult Brothers&#34;</h2>
1. Novo Nordisk
As the first pharmaceutical giant to &#34;eat the crab&#34; in the GLP-1 class weight-loss drug field, Novo Nordisk's U.S. stock price has experienced multiple negative impacts recently, with a continuous four-day decline last week, marking the largest weekly drop since early August 2022 (a cumulative decline of 7.42%), and a total decline of nearly 8% since July.
Intense competition in the weight-loss drug sector is an important factor leading to the decline in Novo Nordisk's stock price. Roche announced last Wednesday that its second candidate weight-loss drug, CT-996, significantly reduced patients' weight. Roche stated that in Phase I clinical trials, after adjusting for the placebo effect, the once-daily oral weight-loss drug CT-996 led to an average weight loss of 6.1% in obese patients within four weeks; the drug's negative effects are similar to other weight-loss drugs, mainly mild to moderate gastrointestinal side effects. Another benefit of this oral weight-loss drug is that it can be taken at any time of the day, not just on an empty stomach.
Amidst the intensifying competition in the rapidly growing weight-loss drug industry, Roche's oral weight-loss drug is expected to provide another attractive option for patients who do not prefer injections. It is worth mentioning that Novo Nordisk is also developing the oral weight-loss drug Amycretin, but its clinical studies have shown that the weight loss effects are not as rapid as Roche's similar product. Data released by Novo Nordisk in March this year showed that in a small Phase I clinical study, patients treated with the product for 12 weeks experienced a weight loss of 13.1% (vs. 1.1% in the placebo group).
Amycretin will enter Phase II trials in the second half of this year. In addition, Novo Nordisk's combination therapy CagriSema— a compound formulation of semaglutide (the active ingredient in Ozempic and Wegovy) and cagrilintide— has entered Phase III trials.
Some analysts point out that the valuation of Novo Nordisk's weight-loss drug business is approximately $172 billion, but the valuation contributed by semaglutide is only $57 billion, indicating that a large part of the valuation of the company's weight-loss drug business comes from unverified drugs. Therefore, any adverse factors in clinical trials, such as the effects of Amycretin and CagriSema falling short of expectations, could have a significant impact on Novo Nordisk's stock price
In addition, an analysis report on statements from American pharmacies earlier this month showed that only one-fourth of American patients taking Novo Nordisk's semaglutide were still taking these drugs after 2 years. The analysis also indicated that the usage of these drugs has been steadily declining over time. This analysis result is not good news for the sales prospects of Novo Nordisk's semaglutide.
It is worth noting that Novo Nordisk's popular weight-loss injection drug Wegovy will lose its patent exclusivity in 2031, which means cheaper generic drugs will enter the market and compete for Wegovy's market share. According to research platform Visible Alpha's estimation, Wegovy's sales will peak in 2030 and then rapidly decline.
The high price of semaglutide products has also drawn criticism from US government officials. It is reported that if half of American adults with obesity use these drugs, the spending on these drugs would reach $411 billion, which is $5 billion more than what Americans spent on all prescription drugs in 2022. The Dutch government is also cautious about reimbursing the cost of Novo Nordisk's weight-loss drugs due to their high cost and uncertainties about long-term use.
Novo Nordisk will announce its second-quarter results on August 8th Eastern Time. The strong demand for weight-loss drugs has driven Novo Nordisk's first-quarter net profit to increase by 28% year-on-year, and the company has also raised its full-year revenue and operating profit growth guidance. The upcoming second-quarter results may help restore market confidence in Novo Nordisk's prospects. Despite recent negative news, Wall Street analysts remain optimistic about Novo Nordisk, with an average rating of &#34;Buy&#34; and an average target price of $150.72, implying over 14% upside potential.
<img src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20240722/1721645228558776.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="NVO1.png" original-src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20240722/1721645228558776.png"/>
<img src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20240722/1721645233385924.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="NVO2.png" original-src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20240722/1721645233385924.png"/>
2. Eli Lilly
In contrast, Eli Lilly, which has not been as heavily impacted by positive news about Roche's oral weight-loss drug, saw a cumulative decline of 5.29% in July, slightly outperforming Novo Nordisk.
One of the reasons for Eli Lilly's slightly better performance than Novo Nordisk may be that its weight-loss drug Tirzepatide (active ingredients in Zepbound and Mounjaro) has better weight-loss effects than Novo Nordisk's semaglutide. Earlier this month, medical data company Truveta published a paper in the &#34;Journal of the American Medical Association Internal Medicine&#34; analyzing electronic health record information of 18,386 obese patients from over 30 health system databases in the United States
Researchers found that after 6 months of treatment, patients using Tesofensine lost 10.1% of their body weight, while patients treated with Semaglutide lost 5.8% of their body weight; after 12 months of treatment, these numbers were 15.3% and 8.3%, respectively.
The superior weight loss effect of Tesofensine over Semaglutide may impact future drug choices and market dynamics for patients. Despite Novo Nordisk's Semaglutide leading significantly in global sales over Eli Lilly's Tesofensine due to its first-mover advantage, some analysts point out that due to lower prices, Tesofensine's sales growth may outpace Semaglutide. Wall Street analysts also have an average &#34;buy&#34; rating for Eli Lilly with an average target price of $909.94, implying about a 6% upside potential.
<h2>2. The Eager Pursuers</h2>
The increasingly fierce competition may threaten the duopoly of Novo Nordisk and Eli Lilly in the field of weight loss drugs. According to the medical consulting firm Iqvia, there are currently 123 drugs for obesity in development, and many competitors are seeking a share of the market.
Jefferies analysts estimate that by 2031, the annual sales of the weight loss drug market could reach $100 billion. Considering the potential burden on public finances, governments have ample reason to ensure the provision of more drugs and lower prices, which means that the leading positions of Novo Nordisk and Eli Lilly in this market may be eroded.
In addition to the aforementioned Roche, pharmaceutical companies seeking to catch up with Novo Nordisk and Eli Lilly in the weight loss drug market and gain market share include Pfizer, Johnson &amp; Johnson, Altimmune, Viking Therapeutics, and others.
1. Pfizer
The U.S. pharmaceutical giant Pfizer, which is suffering from a decline in performance in the late stages of the epidemic, has also set its sights on the weight loss drug market. Pfizer expects the weight loss drug market to grow to around $130 billion over the next decade, with oral weight loss drugs expected to account for about one-third of the market. Therefore, Pfizer hopes to compete with Novo Nordisk and Eli Lilly by developing an oral weight loss drug called Danuglipron.
Pfizer has made little progress in the treatment of obesity. Last December, Pfizer halted the development of Danuglipron because in a mid-term study involving about 1400 people, many patients dropped out due to the side effects of nausea and vomiting. A few months ago, Pfizer also abandoned another oral weight loss drug because it was found to have adverse effects on the liver during testing
However, Pfizer, which is eyeing the lucrative weight loss drug market, has not given up its efforts. Earlier this month, Pfizer announced a small study involving 20 participants, testing four different formulations by reducing the drug's dosing frequency from twice a day to once a day to determine which one may be most effective. Although Pfizer did not disclose which formulation showed the best results, only stating that one formulation exhibited the &#34;most favorable profile,&#34; outgoing Chief Scientific Officer Mikael Dolsten indicated that several versions of the drug showed &#34;encouraging&#34; results, believing that the &#34;once-daily formulation has competitive potential in the weight loss drug market.&#34;
Pfizer plans to advance this drug to mid-stage research later this year. Some analysts believe that in order to narrow the gap with Novo Nordisk, Eli Lilly, Pfizer may skip this step and directly enter the late-stage research phase to seek regulatory approval as soon as possible. Pfizer also stated that the next trial will aim to find the ideal dose of the drug, and if successful, the drug will enter the final development stage.
In the first quarter of this year, Pfizer's sales declined by 20%, mainly due to a significant decrease in demand for COVID-19 vaccines and drugs, leading Pfizer's financial forecast for this year to fall below Wall Street's expectations. Therefore, weight loss drugs have become an important direction for Pfizer to achieve performance recovery. Pfizer will release its financial report later this month. Analysts will have the opportunity to further discuss the company's previously released research results and its future in weight loss drugs.
2. Johnson &amp; Johnson
Another American pharmaceutical giant, Johnson &amp; Johnson, is testing a weight loss drug called MariTide. A small-scale early clinical trial showed that patients treated with the highest dose of MariTide, 420 mg, lost an average of 14.5% of their weight in 12 weeks. In comparison to currently available weight loss drugs, MariTide seems to help patients maintain weight loss for a longer period after discontinuation.
Additionally, MariTide's dosing frequency may be lower than existing drugs - Novo Nordisk's Wegovy and Eli Lilly's Zepbound require weekly injections, while MariTide may only need to be injected once a month or even longer. A lower dosing frequency could be a major selling point for MariTide, as many patients prefer not to inject frequently.
However, whether patients ultimately choose MariTide will also depend on whether its weight loss efficacy and side effects can be comparable to existing products. Johnson &amp; Johnson will release the data from the ongoing Phase 2 clinical trial of MariTide later this year, providing the public with a clearer understanding of MariTide's competitive prospects in the obesity drug market.
3. Others
Less well-known pharmaceutical company Altimmune (ALT.US) also had good news at the end of June. The latest clinical trial data showed that their GLP-1/GCG receptor dual agonist pemvidutide achieved best-in-class results in promoting weight loss while maintaining lean body mass (muscle quality)
According to reports, the trial results show that only 21.9% of the weight lost by patients receiving pemvidutide treatment at week 48 is attributed to lean body mass, while 78.1% is attributed to fat. Previously, GLP-1 class weight loss drugs, although having outstanding weight loss effects, have always had an issue where weight loss includes not only fat but also lean body mass - for example, about 40% of the weight lost by semaglutide at week 68 is lean body mass. Therefore, the positive data announced by Altimmune may help it gain an advantage in the weight loss drug market in the future.
Another small pharmaceutical company, Viking Therapeutics (VKTX.US), has also attracted market attention with the progress of its weight loss drug VK2735. At the end of February this year, the company announced that patients receiving weekly doses of VK2735 showed a significant average weight loss after 13 weeks, with a decrease of 14.7% compared to baseline. Compared to the placebo, patients receiving VK2735 treatment also had a statistically significant average weight loss, with a reduction of up to 13.1%. In addition, as high as 88% of patients in the VK2735 treatment group achieved a weight loss of ≥10%, while the placebo group was only 4%.
The positive trial results of VK2735 pushed Viking Therapeutics' stock price to a historical high of $99.41 at one point, leading many to believe that this unassuming small pharmaceutical company would become an acquisition target for other pharmaceutical giants. However, the stock price has since fallen by nearly 50% from its historical high. For this stock, a recent set of trial data or news of being acquired by other pharmaceutical giants may serve as a positive catalyst for its stock price. PwC has previously stated this month that many large pharmaceutical companies are facing an upcoming patent cliff that will impact key drug sales, which may stimulate them to engage in more mergers and acquisitions with small to medium-sized biotechnology companies to offset revenue losses

The competition in the US stock weight loss drug sector is fierce, and the dual monopoly position of Novo Nordisk and Eli Lilly is facing challenges. Followers Roche, Pfizer, and Amgen have seen their stock prices rise, while Novo Nordisk's stock price has fallen due to multiple negative factors. Roche announced that its candidate weight loss drug CT-996 has shown significant effects in clinical trials, becoming a potential competitor. Novo Nordisk is also developing oral weight loss drugs, but the effects are not as good as Roche's product. With intensified industry competition, investors are concerned about the sustainability of the dual monopoly position

The trend of the US stock weight loss drug sector is diverging, challenging the dual monopoly of Novo Nordisk and Eli Lilly