Weight Loss Stocks Could Become Alzheimer's Drugs Stocks. Here's Why That's Bullish for Novo Nordisk
As if billions of dollars in sales of weight loss drugs weren't enough, Novo Nordisk (NYSE: NVO) and its peers developing those medicines have a new opportunity that just might pad their wallets further. There's now reason to believe that the nascent market for Alzheimer's disease therapies could be reachable with many of the same products.
Let's explore how this new possibility is being revealed, and what it might mean for share prices.
This crossover opportunity could be big
Per the results of a phase 2 clinical trial published on July 30, one of Novo Nordisk's molecules, liraglutide, can significantly slow the rate of cognitive decline in people with Alzheimer's disease. Though the treatment wasn't curative, it appeared to reduce the loss of brain volume over the course of a year by as much as 50%. Right now, liraglutide is sold under the trade names Saxenda, which is indicated for weight loss, and Victoza, which is intended to treat type 2 diabetes.
For the uninitiated, liraglutide is an older member of the class of medicines known as GLP-1 receptor agonists. A newer GLP-1 receptor agonist, semaglutide, is the active ingredient in the company's smash-hit diabetes drug Ozempic, as well as its drug for weight loss, Wegovy. And Novo Nordisk is currently running a phase 3 clinical trial investigating whether semaglutide might be helpful in treating Alzheimer's disease.
You probably already see where this is going. With some solid clinical evidence in hand, there's a path to potentially expanding semaglutide into treating Alzheimer's. That would help Novo Nordisk, and possibly some of its peers like Eli Lilly, seamlessly pivot from being leading weight loss stocks into also being leading anti-Alzheimer's stocks. And that, to say the least, would support higher stock prices.
The question of how exactly GLP-1-targeted medicines might be helpful for treating Alzheimer's is still open. While researchers agree that there are several plausible mechanisms, there's disagreement in the scientific literature about how meaningful the effects are in improving cognitive functioning, as well as other key metrics. But with some positive results in hand, there is no way that Novo Nordisk or other drug developers will stop investigating.
The economic potential of using some of today's weight loss medicines to treat Alzheimer's could be significant. Per a report by GlobalData, by 2030 the market for Alzheimer's drugs could be as large as $13.7 billion annually.
But that likely understates the earnings impact. Novo Nordisk and its peers are spending hugely on scaling up their manufacturing facilities to produce more doses already; imagine if that same production infrastructure could be used for an even larger market than before. It wouldn't need to spend much to reap even more revenue.
Don't count the eggs before they hatch
There's a lot of research and development (R&D) work left to be done before any of today's weight-loss stocks can actually have a claim to being an Alzheimer's drug stock. Novo Nordisk is the furthest ahead on that front, and it's likely to cross the finish line first, assuming any company does. Under ideal conditions, semaglutide could pick up an additional indication to treat the illness within a couple of years.
Given what's known today, it's unlikely that GLP-1 medicines will be a panacea for Alzheimer's. No studies have proven that they can address the root cause, nor is there firm evidence that they're capable of mitigating key problems like impaired glucose metabolism in the brain.
Nonetheless, at this point there isn't much to suggest that there are major risks associated with using these medicines in patients with Alzheimer's. That means regulators will likely be more willing to accept a middling degree of efficacy when companies apply for an expanded indication, assuming no cure for the disease is developed between now and then. After all, the therapies on the market right now are far from perfect, so any new medicine that's a step in the right direction will be welcomed.
In a nutshell, the investment thesis for Novo Nordisk just got even stronger, thanks to its ongoing development efforts with semaglutide. And this isn't the first time that's happened -- nor is it the second, nor the third. That's yet another reason to buy the stock.
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Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
