Viking Therapeutics and Roche Holdings Surge Today, While Novo Nordisk Stock Falls
In the recent financial whirl, while the broader stock market is crumbling, an under-the-radar uprising has been ignited in the GLP-1 weight-loss drug market. The contenders duking it out, Viking Therapeutics (VKTX: up 9.99%) and Roche Holdings (RHHBY: up 4.21%), have surged ahead, leaving Novo Nordisk (NVO: down 3.87%) in the dust.
Breaking ground for Viking
First, let's set the stage. Presently, four patented GLP-1 weight-loss drugs reign supreme on the market, with Novo Nordisk controlling two of them: Ozempic and Wegovy, and Eli Lilly owning the other pair: Mounjaro and Zepbound. However, Viking and Roche are not content to play second fiddle.
Yesterday, Viking inked a mammoth manufacturing agreement with CordenPharma, securing a yearly supply of up to:
- 100 million autoinjectors
- 100 million vials and syringes for injections
- Over 1 billion oral tablets, pending FDA approval for over-the-counter sales of VK2735.
Viking assures investors this agreement ensures "sufficient long-term supply" for a potential "multibillion-dollar annual product opportunity." Essentially, this means billions of dollars currently flowing to Novo Nordisk and Eli Lilly could soon be diverted elsewhere.
Roche stepping up its game
Meanwhile, Roche announced this morning its partnership with Denmark's Zealand Pharma to launch petrelintide, a promising GLP-1 rival. Similarly to Novo Nordisk's semaglutide and Eli Lilly's tirzepatide, petrelintide stimulates the body's natural hunger-suppressing hormone, to help patients eat less and shed weight.
Other keys to note:- Petrelintide and CT-388, Roche's incretin drug, will be developed and marketed together.- Both drugs are still in clinical trials.
Novo Nordisk's tougher road ahead
This alliance between Roche and Zealand Pharma signifies Roche's persistence to crack into this market and vie with Novo and Lilly for dominance. Indeed, just yesterday, Roche created a new "head for cardiovascular, renal, and metabolism" role and lured Novo's Morten Lammert, corporate vice president for obesity strategy and projects, to fill it.
These events likely underlie Viking and Roche's stock gains and Novo's falls.
Which GLP-1 pharmaceutical stock is worth your investment?
So, to wrap up, should you buy into the up-and-coming GLP-1 weight-loss drug stocks? Yet, it's vital to be aware that neither Viking's nor Roche's drugs have hit the market, and they'll have to claw their way past incumbents like Novo and Lilly that hold significant market shares and mind shares. Unless these challengers prove significantly more effective, user-friendly, or cost-effective, they might struggle to garner outsized profits.
Rocher's valuation remains high, costing nearly 29 times earnings, despite offering a decent 3.3% dividend yield. However, such growth just isn't swift enough to warrant a 29x P/E ratio.
Viking represents a dicey investment proposition, as it's yet to turn a profit and may not do so before 2029 at the earliest. Furthermore, the company's manufacturing partnership suggestions that it's not actively seeking to be acquired by a larger pharmaceutical firm. Consequently, an immediate windfall for investors through a mergers-and-acquisitions (M&A) deal appears unlikely.
This leaves investors with two alternatives for GLP-1 drug stocks: Lilly, demanding a lofty 70x earnings and offering a meager 0.7% dividend, or Novo Nordisk, trading at 24x earnings and bestowing a substantial 2.1% dividend yield. Of the two, I'd put my money on Novo Nordisk every time.
What's your call?
- The manufacturing agreement secured by Viking with CordenPharma could potentially divert billions of dollars currently flowing to Novo Nordisk and Eli Lilly.
- Roche's partnership with Zealand Pharma signifies its persistence to compete with Novo Nordisk and Eli Lilly in the GLP-1 weight-loss drug market, creating a tougher road for Novo Nordisk.
- The likelihood of outsized profits for Viking and Roche's GLP-1 drugs depends on them proving significantly more effective, user-friendly, or cost-effective than incumbents like Novo Nordisk and Eli Lilly.
- In the case of GLP-1 drug stocks, considering the risks involved, I'd put my money on Novo Nordisk, given its substantial 2.1% dividend yield compared to other contenders.
