Therapeutics – Earlybirds Invest

Unexpected benefits

Not only are obesity drugs effective in reducing body weight, it seems they have knock-on effects on certain health conditions, too — which is one of the major reasons investors have been hot on companies selling or developing them.

Medical professional weighing a patient.

Image source: Getty Images.

Thursday morning, a report published on Fox News’s website detailed a new study indicating that GLP-1 agonists (substances that mimic a hormone that produces a feeling of satiety after eating) can have a positive effect on a particularly bothersome skin condition. This is hidradenitis suppurativa, which is characterized by small lumps that develop under the skin.

Citing research conducted by a group of French doctors and published in the JAMA Dermatology medical journal, the media outlet wrote that GLP-1 agonists appear to have general anti-inflammatory properties. At the very least it seems they might help in the treatment of hidradenitis suppurativa; the researchers found that administration of GLP-1s were “beneficial” to the condition.

Double barreled

Viking’s VK2735 is actually a dual agonist, as it targets not only the GLP-1 receptor but also a receptor known as glucose-dependent insulinotropic polypeptide (GIP).

Regardless, since it’s partially a GLP-1 agonist, it’s likely, if this research is accurate, to benefit those with hidradenitis suppurativa. That would add significantly to its value if Viking manages to fully develop and ultimately commercialize the very promising drug.

An analyst finds his inner bull with the biotech

That professional was Guggenheim’s Debjit Chattopadhyay, who initiated his Edgewise Therapeutics coverage with a buy recommendation, and price target of $41 per share. That’s well more than double the biotech stock’s most recent closing price, just shy of $17.

Two people in white lab coats looking at a computer display.

Image source: Getty Images.

According to reports, Chattopadhyay wrote in his inaugural research note on Edgewise that with its attractive enterprise value (EV), combined with quite a promising pipeline, the company’s stock has significant upside potential.

That EV currently stands at over $1 billion, the analyst pointed out, and it has not one but two promising development programs. The first is EDG-7500, a treatment targeting obstructive and nonobstructive hypertrophic cardiomyopathy, a heart disorder, and the second is Duchenne muscular dystrophy drug sevasemten. Clinical trial results should come in for both within the next year.

A word of caution

Given all that, Edgewise is in a better position than many other biotechs to succeed. We should always bear in mind with such companies, however, that much depends on their pipelines. If experimental drugs do well in the lab and ultimately win regulatory approval, the developer could be quite the winner on the stock market. However, the opposite is usually true if a pipeline drug flops.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

It’s Thursday morning, 11:50 a.m. ET — and Eli Lilly (LLY 14.56%) stock is off to the races!

This morning, the Indianapolis-based pharmaceutical giant announced that its new GLP-1 weight loss pill, orforglipron, has “demonstrated statistically significant efficacy results and a safety profile consistent with injectable GLP-1 medicines in successful [ACHIEVE-1] Phase 3 trial.”

Lilly shares are up 14.2% in response to the news, while shares of its rivals in the GLP-1 weight loss market, Novo Nordisk (NVO -7.78%) and Viking Therapeutics (VKTX 1.00%), are falling 7.1% and 1.7%, respectively.

Eli Lilly’s new GLP-1 wonder drug

Earlier this week, as you may recall, Pfizer (PFE 0.43%) admitted defeat in its own effort to develop a GLP-1 weight loss pill, halting research on its danuglipron once-a-day oral drug after a patient in its study experienced a “potential drug-induced liver injury.” Lilly’s new drug, on the other hand, seems to have no such side effects and plenty of good effects.

As Lilly described in its press release, orforglipron is “the first oral small molecule glucagon-like peptide-1 (GLP-1) receptor agonist, taken without food and water restrictions, to successfully complete a Phase 3 trial.” Clinical data from this 40-week trial show that orforglipron helped reduce A1C blood sugar levels in patients “by an average of 1.3% to 1.6%.” At the same time, the once-daily oral pill helped reduce patients’ weights by an average of 7.9% over the course of the trial.

What’s more, Lilly points out: “Given that participants had not yet reached a weight plateau at the time the study ended, it appears that full weight reduction was not yet attained.” So, orforglipron has the potential to deliver even greater weight loss when given more time to work.

This all suggests that orforglipron is useful for both treating diabetes and weight loss — and with no needles required.

Image source: Getty Images.

What this means for Lilly

Lilly notes that the ACHIEVE-1 study was only the first of seven planned Phase 3 clinical studies it will conduct to prove the GLP-1 drug’s safety and effectiveness for treating both diabetes and obesity, with no need for injections. The company is therefore still a ways away from commercializing the drug.

That said, completing the six remaining trials should give Lilly plenty of time to ramp up production capacity, such that it will be able “to launch orforglipron worldwide without supply constraints” — and be first in line to do so with an oral, once-a-day GLP-1 pill.

What this means for Novo Nordisk and Viking Therapeutics

Suffice it to say this would be a huge accomplishment for Lilly, expanding the addressable market for GLP-1 drugs (through ease of delivery, with no needles required) while promising that Lilly would have this market entirely to itself — at least at first.

Unfortunately, what’s good news for Eli Lilly is probably bad news for investors in Novo Nordisk and Viking Therapeutics, both of which lag Lilly in the race to develop their own easy-to-take GLP-1 diet pills. (Both Novo and Viking are developing such pills; they’re just not as far progressed in their work as Lilly. Currently, Novo has only injectable GLP-1 drugs on the market — Ozempic and Wegovy — and Viking has neither.)

Lilly’s insistence on its intention to permit no supply deficit with the new wonder drug also indicates the company doesn’t intend to give an opening to Hims & Hers Health (HIMS 1.09%) to horn in on the business with a copycat oral GLP-1 pill, as the smaller pharmaceutical company successfully did when filling a gap in supply of Lilly’s Mounjaro and Zepbound injectable GLP-1 drugs.

Is Eli Lilly stock a buy?

Long story short, investors in Eli Lilly stock are right to be excited today. I can’t say I’m enthusiastic about the stock’s sky-high 60-plus price-to-earnings valuation. Then again, for the time being at least, Eli Lilly is running away with the GLP-1 market and leaving Novo Nordisk, Viking Therapeutics, and even Hims & Hers in the dust.