Forget Wegovy: Novo Nordisk May Have a New Billion-Dollar Weight Loss Drug On Its Hands

Drugmakers have poured small fortunes into the development of weight loss medicines in the past few years in attempts to lead this lucrative and fast-growing market. However, Novo Nordisk (NYSE: NVO), a pioneer in the field, remains one of the leaders. That likely won't change anytime soon, since the Denmark-based pharmaceutical giant has an excellent pipeline.

In fact, Novo Nordisk recently reported positive results for one of its anti-obesity candidates that puts its current best-selling drug in this area, Wegovy, to shame. Let's look deeper into these results and what they could mean for investors.

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Early, encouraging data

Novo Nordisk's weight loss candidate in question is called amycretin. The company is developing an oral and a subcutaneous version of this medicine. Amycretin is a GLP-1 agonist, but it also mimics the action of another hormone, amylin, that regulates blood sugar and satiety. Dual agonists are proving to be especially promising candidates, and many pharmaceutical companies have created some versions.

Novo Nordisk recently reported data from a phase 1b/2a clinical trial for the subcutaneous formulation of amycretin. The study enrolled 125 overweight or obese patients, with some receiving different doses of the drug, and others getting a placebo. Patients taking the highest dose of amycretin experienced a mean weight loss of 22% after 36 weeks. By contrast, those taking a placebo experienced weight gain of up to 2.3%.

Amycretin's safety profile, according to Novo Nordisk, was consistent with that of medicines of the same type, with the majority of adverse reactions being mild to moderate.

Comparing how different medicines performed across separate clinical has severe limitations, but it can be informative. And based on the data so far, amycretin looks even more impressive than Wegovy and Eli Lilly's Zepbound, the two top-selling weight loss drugs. In a 72-week study, Zepbound's mean weight loss was 20.2%, while Wegovy's was 13.7%. Amycretin did better in half the time.

Multiple reasons to invest

Novo Nordisk faces at least two issues in the anti-obesity space.

First, while this market is growing fast, it isn't expanding as quickly as many anticipated. Novo Nordisk's eternal rival, Eli Lilly, recently decreased its full-year 2024 guidance again for this reason. According to Eli Lilly's management, this market grew by 45% in the fourth quarter compared to the same period of the previous fiscal year, slower than they had hoped.

Second, the medicine everyone thought would take over the industry, Novo Nordisk's CagriSema, did not perform as well as expected in a phase 3 study. CagriSema could still be a commercial success, though, and amycretin's recent results highlight the fact that Novo Nordisk's weight loss pipeline is deep.

And regarding the slower-than-expected sales in the industry, Novo Nordisk's work goes beyond diabetes and obesity, which are currently its core areas. The drugmaker has been looking to diversify its lineup for years. For one, semaglutide, the active ingredient in Wegovy, is being investigated in other areas with high unmet needs. Perhaps the best example here is Alzheimer's disease, a worsening problem considering the world's aging population, but one where there are few approved medicines.

Further, Novo Nordisk has other pipeline candidates across many therapeutic areas. So, while it should remain a leader in diabetes and obesity, Novo Nordisk will also succeed in decreasing its exposure to those markets in the next five years.

NVO Operating Revenue (Quarterly YoY Growth) data by YCharts

In the meantime, the company continues to record excellent financial results, growing its revenue at percentages well above industry averages over the past two years. Top-line growth in the high-single-digit or low-double-digit percentages is considered strong for a drugmaker that size.

Lastly, the pharmaceutical giant has a solid dividend program, making it a good target for income-seeking investors. In short, Novo Nordisk is a solid long-term pick.

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Prosper Junior Bakiny has positions in Eli Lilly and Novo Nordisk. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.