Anti-obesity drug makers Novo Nordisk and Eli Lilly have a huge lead on the competition, but given the large and valuable market, rivals are still eager to join the race. Bank of America analyst Geoff Meacham was very optimistic about this opportunity, which he calls “unprecedented” given the prevalence of obesity and the enormous interest investors have shown in this category so far. Meacham was among the first to predict that the category could reach peak sales of $100 billion, but now many analysts predict the market could be even bigger. According to the Centers for Disease Control and Prevention, about 42 percent of U.S. adults suffer from obesity, a costly condition associated with a wide range of other medical conditions, including heart disease, stroke and cancer. Novo Nordisk, the maker of Ozempic and Wegovy, estimates that nearly 800 million people worldwide suffer from obesity. Competition is Coming This week, both Zealand Pharma and Viking Therapeutics showed that competition is coming by reporting encouraging progress from their investigational therapies in this broad category, which sent their stocks soaring on the news. Zeeland shares jumped 35% on Monday after upbeat results for survodutide, the treatment for liver disease. The treatment, which has an expedited designation from the Food and Drug Administration, is also being studied for obesity. Viking shares more than doubled in VKTX YTD mountain Viking trading on Tuesday, reporting a gain of more than 300% year to date, after the company said its GLP-1/GIP receptor agonist VK2735 has reached all its primary objectives in a phase 2 clinical trial. Patients enrolled in the study lost approximately 13% of their weight after 13 weeks, a result very competitive with other drugs in this class. Perhaps even more encouraging, there were no signs that weight loss was reaching a plateau, and the drug was well tolerated with few patients discontinuing treatment. At the same time, shares of Novo and Lilly retreated from trading on Tuesday. Competition is “not a problem for Eli Lilly or Novo Nordisk, but it certainly raises the bar for both,” Yuri Khodjamirian, chief investment officer at Tema ETFs, said in an interview. The Cardiovascular and Metabolic Theme ETF (HRTS), which is up 12% year to date, owns Novo, Lilly and Viking. REGN YTD mountain Regeneron shares year-to-date Cardiovascular and metabolic diseases are an area that has long been neglected by larger pharmaceutical companies, but they are paying attention to new developments, which are “very exciting,” Khodjamirian said . He also doesn’t think this will be a winner-takes-all situation, so Tema has investments in other early-stage companies working to develop weight-loss drugs or taking other approaches to treating obesity. These include Biohaven, a company working on drugs to prevent the muscle loss that can accompany the use of GLP-1 drugs, or Regeneron, which is examining a genetic approach to treating obesity. Mixed successes But developing drugs in this area is not easy. “[T]These new entrants have had mixed results as Pfizer’s two assets and some smaller players (e.g., Structure Therapeutics and Altimmune) underline the industry’s clinical challenges,” Meacham wrote in a recent research note. “Regardless of this, we expect the number of competitors to continue to swell, above all [as] we see progress on access + reimbursement.” But both Structure and Altimmune posted higher results Tuesday according to Viking News. Other companies working in the category and adjacent treatments include Terns Pharmaceuticals and Scholar Rock. AstraZeneca and Roche have jumped into the space making acquisitions. ALT 6 million Altimmune shares in the last six months Jeff Jonas, portfolio manager at Gabelli Funds, sees other ways investors could benefit from the growing interest in anti-obesity drugs, including drug distributors like McKesson, who will benefit from growing sales volume, and players participating in the supply chain such as Becton Dickinson, which was an investor in contract drug maker Catalent, which will be bought by Novo Nordisk’s parent company in a deal aimed at boosting manufacturing capacity of Novo. The portfolio manager expects that Lilly and Novo still have about two years to enjoy its duopoly in the category before competition intensifies and current list prices of more than $1,000 per month for GLP-1 drugs.” collapse.” for the treatment of obesity and many questions remain unanswered. For example, patients taking these medications may see their weight increase again once they stop taking the medications. But will these people want to continue taking these drugs for their entire lives? It is not clear. Especially considering that side effects – which can include nausea, constipation and diarrhea – may force some patients to discontinue use. Next-generation drugs in the pipeline may seek to alleviate some of these symptoms, and if they can, they will likely be rewarded by patients. At the moment, however, it doesn’t really matter when patients stop treatment because the drugs are in such demand that companies are selling everything they can produce. BofA’s Meacham recently shared data on IQVIA scripts for the week ending February 16 with customers showing strong growth in GLP-1 prescriptions, up 22% from a year ago. Meacham said he expects GLP-1 drugs to account for a 31% share of the diabetes market in the first quarter, up from 25% in the first quarter of 2023. He estimated that 14% of prescriptions for GLP-1 drugs are being filled. written for obesity, while 86% are for diabetes. “We continue to expect above-consensus growth in this area, as we are optimistic about taxpayer adoption and broader obesity prevalence,” Meacham wrote. Zepbound, which was approved by the FDA for the treatment of obesity in late 2023, is rapidly gaining share, giving Lilly a 46% share of the overall GLP-1 market, according to Meacham. For obesity alone, Lilly has already gained a 38% share, despite only being on the market for 13 weeks, he said. And Lilly has a chance to gain even more ground, capturing about 47% of all new prescriptions written. What’s next for Viking As for Viking, some of Tuesday’s huge stock gains were fueled by speculation that another, larger pharmaceutical company, such as Merck or Pfizer will try to buy it, according to Tema’s Khodjamirian. This can often be the industry playbook. Khodjamirian noted that manufacturing these drugs is a difficult process and that Viking will also need to build a sales force to compete with the already established Novo and Lilly. But as the stock has risen, it has become a more expensive proposition. Gabelli’s Jonas says he is skeptical about Pfizer’s interest given that it is already busy integrating previous acquisitions and has accumulated a good amount of debt. But, he said, the rising value of Viking’s stock could allow it to finance its growth. Commenting on the rise in Viking shares, William Blair analyst Andy Hsieh said: “…we are certainly in uncharted territory regarding the commercial potential of the GLP-1 class, and robust public awareness could drive expanding access (specifically, the initiation of Medicare Reimbursement or growth of company-sponsored health plans).” Hsieh said a competitor could challenge Lilly and Novo by competing on price. “We also highlight that one of the idiosyncrasies of the U.S. healthcare system, which grants pharmacy benefit managers significant power to shape prescribing patterns through formulary creation, could present an opportunity for less than blue-chip competitors.”