Under Consideration: Investment Opportunity with AstraZeneca in the Realm of Weight Loss Solutions
Under Consideration: Investment Opportunity with AstraZeneca in the Realm of Weight Loss Solutions
The most popular medications for handling diabetes and obesity are the talk of the healthcare industry right now. Companies like Novo Nordisk with Ozempic and Wegovy, and Eli Lilly with Mounjaro and Zepbound have created blockbuster drugs, and their success doesn't seem to be slowing down.
But even though Novo Nordisk and Lilly lead the pack in weight management, other pharmaceutical companies are eager to enter the market. Recently, AstraZeneca revealed promising data on their obesity drug candidates.
Let's examine this situation at AstraZeneca, and consider if investing in the company is a good move as they strive for a role in healthcare's next major breakthrough.
AstraZeneca has some intriguing developments...
AstraZeneca is currently researching three methods geared towards managing diabetes and obesity. At the ObesityWeek conference, management provided insights into the three weight loss medications in development: AZD5004, AZD6234, and the combination of AZD6234 with AZD9550.
Unfortunately, current treatments from Novo Nordisk and Lilly need injection use. While Ozempic, Mounjaro, and their alternatives have been successful, many patients may not utilize them due to injection and needle aversion.
AstraZeneca's AZD5004 is particularly intriguing because it's an oral glucagon-like peptide-1 (GLP-1) medication -- a major departure from the present mainstream solutions. Based on results from a phase 1 trial, patients who took a 50mg dosage of AZD5004 witnessed an average weight loss of 5.8%.
Though AstraZeneca's weight loss candidates seem to be advancing in clinical trials, potential investors should stay informed.
...but they shouldn't skip ahead
At first sight, AstraZeneca may appear ready to leapfrog Eli Lilly and Novo Nordisk, thanks to its innovative oral GLP-1 medication and strategy for combining different candidates. While this outlook is exciting, wise investors recognize the importance of gathering more information.
Firstly, AstraZeneca faces fierce competition as other companies aim to challenge Lilly and Novo Nordisk. Large pharmaceutical companies, such as Pfizer and Amgen, in addition to clinical-stage operations like Altimmune and Viking Therapeutics, seek their own pieces of the weight loss market.
Both Roche and Viking, like AstraZeneca, are developing oral formulations of their respective weight loss medications, aiming to differentiate themselves from currently available solutions. However, it's important to note that Lilly and Novo Nordisk also have oral weight loss medications undergoing clinical trials. Novo Nordisk's amycretin is being assessed in phase 1 and 2 trials, while Lilly's orforglipron is being investigated in phase 3 studies.
Should investors consider buying AstraZeneca stock?
The chart below compares the forward price to earnings (P/E) ratio of AstraZeneca with the ratios of a group of leading pharmaceutical companies that are also targeting the weight loss market. Eli Lilly and Novo Nordisk are the clear frontrunners, each with higher trading valuations than the rest of the cohort.
I think this dynamic suggests that investors have a positive outlook on the established players, and perhaps a more cautious outlook on companies yet to make a significant impact in the diabetes or chronic weight management sectors.
While AstraZeneca may appear less expensive than Lilly or Novo Nordisk stock, its discounted valuation is justified. For now, AstraZeneca's progress with its weight loss medications is commendable, but not groundbreaking -- it still has a considerable amount of research and development to complete before the Food and Drug Administration (FDA) approves AZD5004 or any of its counterparts.
I would say that investing in AstraZeneca stock is not an ideal opportunity right now, despite intriguing news about its weight loss aspirations. At the moment, monitoring further trials of AZD5004 and AstraZeneca's other candidates may be the wisest choice. As time progresses, it should become clearer whether AstraZeneca has a realistic chance of dethroning incumbents like Novo Nordisk and Eli Lilly.
Given AstraZeneca's promising progress in developing oral GLP-1 medications for managing diabetes and obesity, some investors may consider diversifying their finance portfolio by investing in the company. However, it's crucial to remember that while AstraZeneca's stock might seem more affordable than that of established players like Novo Nordisk and Eli Lilly, it still requires substantial investment in research and development before the Food and Drug Administration (FDA) approves its weight loss drugs.