In This Article:
Key Points
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The market for weight loss drugs is white-hot, and competition is heating up fast.
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This Danish company is already facing a powerful rival in this growing segment.
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And there could be plenty of other competitors to face down the road.
For years, Denmark-based Novo Nordisk (NYSE: NVO) was a fairly traditional develop-and-market pharmaceutical company that escaped notice by many investors. Though listed on American stock exchanges, it didn't distinguish itself much in the vast sea that is the domestic biotech and pharmaceutical sectors.
This changed dramatically in 2021 when the company's Wegovy won U.S. Food and Drug Administration (FDA) approval for weight loss. Obesity is a problem in the United States and elsewhere, and Wegovy offers a solution. But popularity breeds competition, and the drug isn't the only weight-loss player in the game now.
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So, should you still consider buying shares of this drugmaker?
Here comes the competition
Wegovy enjoyed being the ruler of the obesity market until November 2023, when Eli Lilly's (NYSE: LLY) Zepbound -- essentially a repackaged version of Lilly's successful Mounjaro diabetes treatment, much as Wegovy was a rebranding of Ozempic -- was approved for obesity by the FDA.
Since then, boosted by Zepbound, Eli Lilly's stock has zoomed 43% higher, eclipsing the 27% rise in the S&P 500 index. Unfortunately for Novo Nordisk investors, shares of the Danish pharmaceutical have dived by 36% across that stretch of time.
We can't only blame Lilly for this. Given the massive demand for relatively simple weight-loss treatments -- an easier means of slimming than an intensive routine of diet and exercise -- numerous companies have been hard at work pushing such medications through their pipeline.
To single out one that has a better-than-average chance: Clinical-stage biotech Viking Therapeutics (NASDAQ: VKTX) has a GLP-1-based candidate, VK2735, that outperformed in a phase 2 clinical trial and should soon graduate to a wider phase 3 study. The drug is sure to be a contender if it does well and wins approval, not least because it could end up being a monthly injection instead of a weekly one like Wegovy and Zepbound.
On top of that, Viking is developing an oral form of the medication. That would give it an additional leg up on the currently approved drugs, as both are administered by injection.
Anticipating a monster rise
In these early stages, it's tough to guess which company or companies will lead the pack in weight loss down the road. It's easy to imagine Novo Nordisk losing share against the very well-capitalized and prominent Eli Lilly. We can also envision it taking a punch or two from an approved oral version of Viking's VK2735; it's far easier for patients to swallow a pill once a month than jab themselves weekly.