New, effective obesity treatments seem to be taking the world by storm. After constantly struggling with a growing obesity problem, suddenly Ozempic, Wegovy and Mounjaro have burst upon the scene. The media is filled with stories of celebrities losing thirty, forty pounds or even more. But regular people are struggling to afford these medications, and, as their usage grows, many are pointing out that the treatments still leave much to be desired.
These shortcomings may leave space for other biotech contenders to enter the market. Among the players who want to enter the game are Regeneron and AstraZeneca, who are partnering to attack obesity from a whole new angle. Given that the market for the medical management of obesity just keeps growing, should investors take Regeneron’s new approach seriously?
By Joshua Mazher, Securities Analyst
Let’s face it – regarding America’s health concerns, obesity has been one of the main focal points of 21st-century medical care. Despite the groundbreaking developments in some significant health categories such as cardiovascular and vaccine-preventable diseases, obesity rates have consistently climbed over the last several decades. It doesn’t take a genius to know that if these trends continue, our society will face a tsunami of health and economic challenges. That said, some of the world’s leading biopharmaceutical companies have begun to take the bull by the horns and facilitate research into the oftentimes taboo subject of weight gain.
Regeneron is one such company that has begun to shift its sights toward furthering obesity research, down to the genetic level. Known for its development of “REGN-COV 2”, a monoclonal antibody cocktail created to cure COVID-19, as well as a long history of creating medicine to help with various autoimmune diseases and cancer, Regeneron has been making steady process in the development of a cure for obesity. Of course the term “cure” must be used with a grain of salt because obesity is a multi-faceted medical condition with no singular cause. However, the research has made significant strides in identifying certain areas within a genome that trigger obesity (we will touch on a specific example later on). The results have yet to materialize into the magical cure to eradicate obesity once and for all – however, the trajectory of the entire operation points strongly in favor of those willing to invest.
The Regeneron Genetic Center, one of the world’s most renowned pharmaceutical research institutes, has been studying a specific mutation of the GPR75 gene. Why should anyone reading this without an extensive background in biology care? Well, in simple terms: those who have an inactive copy of this gene weighed, on average, 12 lbs less than those without it while additionally being 54% less likely to develop obesity throughout their life. Now those numbers are certainly more eye-popping to people without a Ph.D. in molecular biology. However, what’s considered to be the biggest breakthrough isn’t necessarily the drug product itself, but the selling point. Currently, Regeneron may have an advantage over other obesity market giants like Eli Lilly and Novo Nordisk because of a very unique feature— short-term usage. Right now, patients taking Ozempic, Wegovy or Mounjaro must commit to taking the costly medication every month, for life. Regeneron’s new drug candidates work with a different method of action than anything else available currently. Regeneron seeks to attack obesity at the genetic level; seeking to fix the cause, rather than just the symptoms. This leaves the company with a much broader arsenal against the bad genetics that cause excessive weight gain. “Discovery of protective mutations – many of which have been made by the Regeneron Genetics Center in its eight-year history – will allow us to unlock the full potential of genetic medicine by instructing on where to deploy cutting-edge approaches like gene-editing, gene-silencing and viral vector technologies” said George D Yancopoulos, MD, PhD, President and Chief Scientific Officer, Regeneron.
Obesity: A Big, Fat, Market Opportunity
As any experienced biotech investor will say, research initiatives on a major health concern will have their ups and downs, especially on the financial side of things. A breakthrough discovery can be revolutionary just as much as it can be shortlived. The process of FDA approval is a tough one, and one man’s trash can easily become another man’s treasure, and vice versa. However, positive long-term trends are the pot of gold for anyone with an appetite for ownership of the biotech world. Looking at day-to-day or even month-to-month trends will be futile, as increases of up to 400% can turn into losses of 200% the very next cycle. Thus, when analyzing any breakthrough discovery, it’s important to wait and look at the trends. Fortunately for us and unfortunately for obesity, the trends of obesity-related medicine production all point towards greater revenue and significantly more attention in the years to come.
In 2021, the total obesity market was valued at $14.02 billion. A sizable market, but the real statistic to pay special attention to is the CAGR. CAGR, or compound annual growth rate, is a special way to calculate the growth of a company over a specified time frame. In our case, the financial trends show a CAGR of approximately 10.1% through 2030. The trend shows that approximately every seven years, the market will double. But some analysts expect the market for obesity drugs to grow at an even more accelerated rate, reaching $200 billion within the next ten years.
On a more pragmatic note, biopharmaceutical concerns such as Regeneron have certainly put their foot in the door, however, the path to massive obesity reductions has still not materialized. Ultimately, obesity is a tried and tested field, with many clinical setbacks along the way. Medicine might provide glorious results, but at a cost of constant usage throughout the course of one’s life once a person commits to a certain medication. Nevertheless, the partnership between Regeneron and AstraZeneca is one example of several potential partnerships between major biopharma companies and the heavyweight Big Pharma brands. As the aforementioned CAGR of 10% suggests, obesity is quickly climbing the ranks of the most sought-after treatments and only time will tell just how much gold lies in the following decades.
Competitors and Valuations
Perhaps the most recognizable success story in the obesity market is Novo Nordisk’s Ozempic. It, alongside its sister drug Wegovy , has begun to really flourish this past year. In 2022 alone, Novo Nordisk’s obesity drugs brought in 2.5 billion dollars in sales , double its sales from 2021. Such numbers prove that the rise in obesity rates across all demographics in America has begun to take effect on potential clients. This entails deeper pockets for motivated biopharmaceuticals to capitalize on making the next breakthrough in obesity, churning out improved products over the years. With this in mind, let’s look at some valuations.
Currently, the two biggest companies invested in the obesity market are Eli Lilly and Novo Nordisk. In fact, experts are claiming that by 2030, each competitor could capture 40% of the entire obesity market. It’s clear that these juggernauts won’t be overtaken anytime soon, however, their respective Price to Earnings ratio is steep for newcomer investors. As of June 6th 2023, Eli Lilly’s P/E ratio is 64.01 while Novo Nordisk’s P/E ratio is 41.54. This means that just one share of Novo Nordisk currently sells for 64 years worth of expected profits! Meanwhile, Regeneron’s P/E ratio is a low 19.11. Chances are if you are reading this article now and haven’t already invested in either Lily or Novo, it might be too late to gather up any major profit opportunities. However, Regeneron’s miracle drug breakthrough could be the future, and the chance to capitalize on major profits is now.
Still not convinced? Well, the additional benefits speak for themselves. One study has shown that those who have taken obesity medication have reduced the risk of heart attacks, strokes, and cardiovascular deaths by 17% or more. Profits and revenues aside, the human value of the obesity market is incomparable. Ultimately, being heavily overweight will cause several health problems for anyone, with diabetes and cholesterol being only the beginning. For the average American, these increasing annual rates should be frightening, however for the keen investor, it is a window of golden opportunity that will quickly close unless action is taken. With obesity showing no signs of slowing down, there will only be more and more demand for patients who want drugs that are effective, efficient, and ultimately worth the purchase. AstraZeneca’s partnership with Regeneron is only the beginning. Once Regeneron’s drug starts to gain traction, profitable opportunities could multiply for the company, given it’s unique clinical approach.
So where does this put the willing investor? Luckily for anyone reading this right here and now, the next few years will serve as the foundation for significant long-term profits off of research-based biopharmaceutical companies like Regeneron that have begun to develop novel, gene based drugs to combat obesity. Profit margins will only continue to rise from here, and the world will quickly take notice. Don’t wait before it’s too late. Obesity is fast becoming a global health priority, and Regeneron’s discovery and research of lasting medical care is a clear indicator of the future of biopharma. It should be at the forefront for eager investors searching for an opportunity to take advantage of the ever-increasing obesity market.