Eli Lilly and Novo Nordisk are, for now, the undisputed champions of the market for weight-loss medicines. Thanks to the outrageous popularity of Lilly's drug Zepbound and Novo's product Wegovy, the biggest contest of the moment will go to whoever can ramp up their manufacturing capacity the fastest, such that they can serve the market's overflowing demand.
But the market for weight-loss therapies could be as large as $100 billion by 2030, according to many estimates, so there's no way that these two juggernauts will be the only players making money for much longer. Lesser-known biotechs like Altimmune (ALT -4.12%) and Terns Pharmaceuticals (TERN -1.87%) could well make for great investments, and they don't even need to capture a very big market share to grow by a large proportion relative to where they are today.
With that in mind, let's analyze both companies to see if they might have what it takes to beat the leaders in the future.
This biotech could have what it takes
Altimmune has something that neither Novo Nordisk nor Eli Lilly can claim within the weight-loss drug space. Per the data from its recently concluded phase 2 clinical trial of its lead candidate, ALT-801, the company has a program that is capable of causing significant weight loss without also causing a large amount of muscle mass loss at the same time.
One problem of using medicines like Wegovy or Zepbound is that losing a lot of muscle mass leads to functional impairments in older individuals, and also in people who have mobility issues. So if treatment with ALT-801 leads to less muscle mass loss, and comparatively more fat mass loss, it would be a no-brainer to use it in certain demographics rather than the current set of leading medicines. In other words, this biotech's main program preliminarily looks like it has what it takes to directly steal market share from Novo Nordisk and Eli Lilly.
In terms of financial resources, Altimmune has just over $182 million in cash and equivalents on hand, as of the close of the first quarter. Its trailing-12-month operating expenses are $89 million, so in theory it has enough money for another 24 months. But if the data from its lead program are favorable after phase 3 wraps up, it'll probably opt to raise more capital to fund its commercialization plans while it awaits a response from regulators about a possible approval.
Right now, Altimmune plans to meet with regulators sometime in Q3 to discuss the parameters of its upcoming phase 3 trial. While there's a lot riding on its phase 3 results, the biotech looks to have the resources it needs to make it to the next catalyst, and soon it will likely have the go-ahead from regulators that it needs to proceed. That means it's plausible for it to compete with Eli Lilly and Novo Nordisk someday soon, and its muscle mass-saving candidate could credibly beat them in certain market segments, too.
The road to success may be rocky for Terns
Terns Pharmaceuticals is a bit earlier in the research and development (R&D) process than Altimmune. TERN-601 is Terns' only clinical-stage antiobesity program, and it's in phase 1 trials right now.
That program will report its data in the second half of this year. Thus far, the most that the company has disclosed is that the safety signals in the trial have been benign, as expected. So in terms of data about the candidate's special characteristics or efficacy, there's simply not any information to go on yet.
Other than TERN-601, the company also has a preclinical program intended for treating obesity, as well as a candidate in an even earlier stage of development. Typically, programs that haven't yet made it to clinical trials in humans aren't worth discussing, but in this case, Terns' preclinical-stage candidate could be interesting because it uses a mechanism of action that's distinct from its other programs, and which is also distinct from the therapies on the market right now.
It's a combination agent which targets the thyroid beta receptor. Don't worry about what that means at this early stage. Keep an eye out for more data over the coming quarters to see if that distinction could actually become something interesting from an investment standpoint.
On its balance sheet, as of Q1, it had $241 million in cash, cash equivalents, and marketable securities. Management thinks that should be sufficient to last it into 2026, which makes sense, given that its trailing-12-month operating expenses were close to $104 million.
At this juncture, there's not much reason to believe that Terns can beat Eli Lilly or Novo Nordisk. Nor is there reason yet to be confident that it will actually manage to commercialize a medicine at all. The odds are against its early-stage candidates solely by virtue of the cruel math of drug development in which most programs fail to ever be approved for sale even if they make it to their first set of clinical trials.
If it can deliver some good data over the next 12 months and beyond, it'll be worth revisiting this stock, but for now, don't bet on it.
