FA Alpha Daily

The new gold mine of pharma

The obesity drug market is on the brink of explosive growth, driven by rising obesity rates and increasing demand for more effective treatments. Amgen (AMGN), a global biopharmaceutical leader, is poised to capture a significant share of this burgeoning market with its innovative drug, MariTide, which has shown great promise in early-stage clinical trials. In today’s FA Alpha Daily, we delve into Amgen’s potential to revolutionize obesity management and transform its financial outlook.

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The obesity drug market is on the verge of unprecedented growth as pharmaceutical companies race to address the worsening worldwide obesity epidemic.

Valued at over $24 billion in 2023, the market is projected to balloon to $130 billion or more by 2030 according to Goldman Sachs.

This reflects both rising obesity rates, with over 1 billion adults classified as obese globally according to the World Health Organization (WHO), as well as increasing demand from patients and physicians for more effective long-term treatment options.

Obesity drugs represent one of the largest opportunities for pharmaceutical innovation and new product development over the coming decade. The first generation of anti-obesity medications like orlistat provided underwhelming efficacy and tolerability.

However, new classes of therapies like GLP-1 receptor agonists have demonstrated up to 20% weight loss maintenance in clinical trials when used alongside lifestyle modification.

As physicians and patients gain more experience with these novel mechanisms, obesity drug prescriptions, and the overall market are set to explode.

Amgen (AMGN) is now well-positioned to enter this booming market and capture a major share with its experimental therapy MariTide.

Amgen is one of the largest biopharmaceutical companies in the world with a market capitalization of over $163 billion.

While the company has achieved great success with drugs like Neulasta and Enbrel, its growth has slowed in recent years.

However, Amgen now has a tremendous opportunity to reignite growth by entering the weight loss drug market with its MariTide.

First-mover Novo Nordisk currently dominates the market with its blockbuster GLP-1 based drug Wegovy. However, the market is still in its early stages with much room for multiple players to carve out sizable shares.

Amgen believes it has developed a novel approach with MariTide that could revolutionize obesity management.

In early-stage clinical trials, MariTide appears to induce weight loss similarly to Wegovy but also helps patients maintain their weight reduction even after discontinuing treatment.

This durable effect could provide a major advantage over existing therapies and increase patient compliance with the prescribed regimen.

If late-stage trials confirm MariTide’s efficacy and safety profile, Amgen will be well-positioned to quickly gain regulatory approvals and launch.

Given its extensive sales infrastructure and relationships with payors, Amgen has the means to scale MariTide into a multibillion-dollar blockbuster.

Capturing even a modest 10% market share of the $130 billion obesity drug market by 2030 would generate over $13 billion in annual revenues.

Our EEA shows the market seems skeptical Amgen can achieve significant growth and has priced the company to maintain historical Uniform return on assets ‘ROA’ and not benefit from any of the weight-loss drug investments.

However, a successful MariTide launch has the potential to completely transform Amgen’s financial profile.

Revenues and profits could surge far above the market’s estimates, with ROA expanding well above historical levels.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Strategist &
Director of Research
at Valens Research

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