It’s hard to steer clear of the Ozempic chatter these days as consumers look for ways to curb their appetite and grocery bills in the process. Undoubtedly, the pharmaceutical firms behind Ozempic (and other weight-loss drugs) are intriguing ways to play the trend. And if your portfolio is overexposed to the many food stocks that have been feeling the obesity-drug pinch, the trio of obesity-drug plays in this piece — NVO, LLY, and AZN — may make for a terrific hedge.
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Therefore, let’s have a look at three weight-loss drug plays using TipRanks’ Comparison Tool
Novo Nordisk (NYSE:NVO)
Novo Nordisk, the Denmark-based firm behind Ozempic and Wegovy, is the obvious first stock to look to if you’re looking to profit from the obesity drug trend. Indeed, a lot of the potential already seems baked in, especially after enjoying a sharp 12% bounce since its October low. Plus, over the past year, shares are up a scorching 89%.
Despite the hot run, though, Wall Street remains incredibly upbeat. And I’m inclined to side with the bulls who think more good days could be ahead.
Indeed, Novo Nordisk seems to have single-handedly pushed the food and beverage stocks off a cliff. Ozempic and Wegovy are experiencing their moment in the spotlight, and the demand could continue to stay strong as consumers look to shed more than just a few easy pounds. Though diet and exercise are enough to lose weight, it’s clear many consumers are looking for a quick and easy way.
The company sees its fat-cutting drugs leading to fatter revenue growth (32-38%, up from the original 27-33% forecast) for 2023. Beyond weight loss, Ozempic recently showed promise in one of its trials focused on kidney failure in diabetics. At this juncture, Ozempic seems like more than just a blockbuster hit. It seems to be the “magic pill” (or should I say magic shot) to obesity and a profound disruptor to the seemingly untouchable consumer staple food stocks.
Can Ozempic’s success translate to even more gains from here? I think it can as more people look to go on the drug for an extended period of time. Further, I think there’s room for price increases, even as rivals approach, looking for a piece of the weight-loss-drug pie. Just think of all the money that those on Ozempic will save at the grocery store.
At writing, shares go for 46.5 times trailing price-to-earnings, well above the 34.2 times multiple of the biotech industry average. Arguably, the original obesity drug maker deserves an even fatter premium to the peer group, given its disruptive potential. The only question that remains is whether Novo Nordisk can fend off potential competitors that are hungry for the slice of economic profits to be had.
What is the Price Target of NVO Stock?
Novo Nordisk is a Strong Buy, according to analysts, with three unanimous Buy ratings assigned in the past three months. The average NVO stock price target of $108.50 entails 11.1% upside potential.
Eli Lilly (NYSE:LLY)
Eli Lilly is perhaps the number-two stock to play the obesity drug trend. The company behind Mounjaro seems like a top candidate to take share away from the likes of Ozempic and Wegovy. Recently, the firm reported phase-three data for Mounjaro, more than a year after the drug was approved in the U.S. In short, the results were pretty good. People on the drug didn’t just lose weight; they experienced “longer-lasting weight reduction than those taking the placebo,” according to Dr. Jeff Emmick, Lilly’s SVP of product development.
Things seem to be looking up for Lilly’s weight-loss drug hopes, and the stock has really heated up this year, with shares up over 66% year-to-date and over 81% in the past year.
In a bull-case scenario, I think the stock could have room to run, especially if Mounjaro can take a bit of the magic from the likes of Ozempic. Further, a recent survey conducted by Accolade noted that employee coverage of GLP-1 weight-loss drugs could double. That could be a major spark that brings weight-loss drug demand to the next level.
And if Mounjaro doesn’t quite live up to the hype? Well, Lilly has plenty else to look forward to. A week ago, the company progressed with its phase-three trial for its ulcerative colitis trial. In short, Lilly is a $560 billion behemoth with a lot of promise in its pipeline that extends well beyond Mounjaro.
At 82.4 times trailing price-to-earnings, LLY stock is pricier than Ozempic-maker Novo Nordisk and the biotech industry average. Though I’m bullish on the stock, I would prefer waiting for a near-term pullback before initiating a sizeable position.
What is the Price Target of LLY Stock?
Lilly stock has a Strong Buy consensus rating, with 17 Buys and one Hold. The average LLY stock price target of $614.71 entails 4.1% upside potential.
AstraZeneca (NYSE:AZN)
Finally, we have AstraZeneca, a firm that was on the COVID-19 vaccine bandwagon and is also poised to hop aboard the weight-loss-drug one. Additionally, AstraZeneca’s oncology assets are also prized and possibly being ignored by the market, according to bullish Jefferies analyst Peter Welford.
Mr. Welford, who has a $80.00 price target on the stock (that’s 24.2% upside from here), likes several candidates (volrustomig, rilvegostomig, and saruparib) in the phase-two oncology pipeline in particular. Like all but one analyst covering AZN stock, I am bullish.
Combined with the wild card of an obesity drug candidate that could last well after the treatment period, I’d argue AZN stock is looking like a relative value play with the most upside of the trio of stocks outlined in this piece. At just 33.1 times trailing price-to-earnings, AZN stock is certainly cheaper than Novo Nordisk and Eli Lilly.
Only time will tell if AstraZeneca (and its partner Regeneron (NASDAQ:REGN)) can deliver the obesity drug to rule them all. Either way, the stock doesn’t seem to be priced with such a bullish scenario in mind, and that makes it my favorite play of the trio.
What is the Price Target of AZN Stock?
AstraZeneca is a Strong Buy on TipRanks, with three Buys and one Hold rating assigned in the past three months. The average AZN stock price target of $83.67 implies 29.9% upside from here.
The Takeaway
At this moment, it’s unclear just how deep Ozempic, Wegovy, Rybelsus, Mounjaro, and other similar products will cut into the revenues of restaurants and consumer-packaged goods companies. It’s hard to tell how much of the Ozempic hype is warranted and how much is just hype. Either way, the weight-loss-drug makers are worth a second look as shareholders of food stocks hit the panic button.
Of the trio, analysts see the most upside (about 30%) in AZN stock. Shares have fallen notably in the past couple of days.
