The diabetes and obesity care markets are under disruption. Glucagon-like peptide-1 (GLP-1) receptor agonists such as Ozempic, Wegovy, Mounjaro, and Zepbound have catapulted in popularity.
The thing is that all of those treatments are manufactured by just two pharmaceutical companies, Novo Nordisk (NVO -0.32%) and Eli Lilly (LLY -1.38%). Yet despite limited competition at the moment, a number of companies of all sizes are looking to get involved. One of these companies is Switzerland-based Roche Holdings (RHHBY 0.20%).
Interestingly, Roche has gotten very little coverage when it comes to emerging opportunities in the weight loss space. I think that's going to change very soon.
Here's why I think Roche might be the best candidate to disrupt Novo Nordisk and Eli Lilly and why its stock looks like a compelling opportunity.
How is Roche involved in the weight loss market?
When companies seek to enter new markets, management teams often need to ask themselves whether it's better to build new products in-house or if an acquisition is the superior strategy.
In the pharmaceutical industry, building in-house generally means investing heavily in research and development (R&D). Considering how careful companies need to be when exploring new medications, this R&D process could take years.
And there's a very real risk that companies will spend a lot of time and money trying to develop a breakthrough drug but ultimately end up failing. The opportunity cost in a situation like this is that the company could have been focusing its efforts elsewhere, and has now fallen behind the competition.
While companies such as Pfizer (PFE 0.23%) and Viking Therapeutics have opted to compete with Novo Nordisk and Lilly by developing their own weight loss drugs in-house, Roche broke from the pack via a savvy acquisition.
Back in January, Roche closed on its acquisition of Carmot Therapeutics -- adding three candidates for weight loss treatments to its pipeline. The experimental medications are known as CT-388, CT-996, and CT-868.
Image source: Getty Images.
Why Roche may be the true disrupter
Another important point about acquisitions is that they often work best when the asset being bought is differentiated from existing products on the market.
At the moment, Novo Nordisk's and Eli Lilly's diabetes and obesity treatments are administered via injection. Despite the popularity of these blockbuster drugs, I'd wager that some patients aren't comfortable injecting themselves on a frequent basis and would prefer an alternative.
While CT-388 and CT-868 are also injectables, Roche's CT-996 separates itself from mainstream GLP-1 receptor agonists because it's an oral solution as opposed to an injectable.
According to results from a phase 1 study released in July, patients taking the CT-996 pill experienced mean weight loss of 7.3%, compared to just 1.2% in the placebo cohort. I see these positive results as validation that oral GLP-1 solutions may be just as high-performing as standard injections on the market today.
Some things to consider
Although Roche's GLP-1 pill might look like a checkmate move, you should always consider the full picture.
Despite Novo Nordisk's and Lilly's existing injected weight loss treatments, both companies are conducting clinical trials for oral solutions as well. Novo's amycretin is currently in phase 1 trials; Lilly's orforglipron "has a comprehensive phase 3 program underway in diabetes and obesity," according to the company's CEO, David Ricks.
I see these studies as a good thing as opposed to a threat for Roche. Should amycretin or orforglipron be approved by the U.S. Food and Drug Administration and commercialized before CT-996, the traction these oral solutions could experience should serve as a proxy for what Roche might expect.
Moreover, I'm not exactly holding my breadth when it comes to other competitors. Pfizer has faced a number of setbacks with its leading weight loss candidate, danuglipron. And while Viking Therapeutics and Altimmune have both shown some promising data from their respective weight loss solutions, both are development-stage companies and lack the financial resources needed to make a significant counter to Novo Nordisk or Eli Lilly.
With three candidates in clinical trials spanning both injectables and oral GLP-1 treatments, I think Roche has the best chance to emerge as a legitimate competitor to Novo Nordisk or Eli Lilly, and find itself owning a respectable portion of the weight loss realm in the long run.
