A survey last year found that one in eight U.S. adults (12%) admits to using glucagon-like peptide-1 (GLP-1) drugs.

GLP-1 drugs, which include popular medications like Ozempic and Wegovy, are prescribed to treat diabetes and help with weight loss.

The survey, conducted by the Kaiser Family Foundation (KFF), suggests public awareness and adoption of GLP-1 drugs has notably increased in recent years.

Survey shows that while about 6% of adults have admitted they are currently under GLP-1s, the percentage of those who have ever taken these drugs rises to 43% among adults who have been diagnosed with diabetes.

GLP-1 drugs work by mimicking the effects of a naturally occurring hormone called glucagon-like peptide-1, which is released after eating and signals feelings of fullness.

Specifically, these drugs slow the movement of food from the stomach into the small intestine, making people feel full faster and for longer durations so that they end up eating less.

This appetite-reducing and calorie-cutting effect is revolutionary for human physiology and will likely be one of the most desirable drugs in the coming years.

Pfizer (PFE) is making a significant push into the anti-obesity drug market, a space currently dominated by Eli Lilly (LLY) and Novo Nordisk (NVO).

The company has appointed James List, a former Johnson & Johnson (JNJ) executive, as its new chief internal medicine officer to lead this effort.

List, who has extensive experience in cardiovascular and metabolic research, will oversee Pfizer’s development of obesity, cardiovascular, metabolic, and hematologic medicines.

The anti-obesity drug market has become one of the most lucrative areas for pharmaceutical companies, with Eli Lilly and Novo Nordisk leading the charge.

Both companies have seen substantial improvements in their financial performance, driven by the success of their weight-loss medications.

Pfizer is looking for a comeback after its COVID-19 vaccine sales dropped off. In 2021 and 2022, the company hit record profits thanks to the pandemic, but that success didn’t last.

The Uniform return on assets ”ROA” declined to 6% in 2023 after reaching all-time highs in 2022 with 33%.

Pfizer now sees anti-obesity drugs as a key area to revitalize its growth and regain market share.

The company has already hit some roadblocks. In 2023, Pfizer scrapped a twice-daily version of its obesity drug, danuglipron, because of side effects..

Now, it’s focusing on a once-daily version, which is moving toward late-stage trials. Pfizer expects to share test results in early 2025.

Beyond obesity drugs, Pfizer is working on treatments for heart, metabolic, and blood disorders.

The company has been trying to expand its pipeline to make up for falling COVID-related sales. In 2024, it secured 12 drug approvals and launched several late-stage trials.

However, the market is pessimistic about Pfizer’s entry into the anti-obesity space and expects Eli Lilly and Novo Nordisk to keep control of the market through 2030, making it tough for the company to compete.

We can see what the market thinks through our Embedded Expectations Analysis (“EEA”) framework.

The EEA starts by looking at a company’s current stock price. From there, we can calculate what the market expects from the company’s future cash flows. We then compare that with our own cash-flow projections.

In short, it tells us how well a company has to perform in the future to be worth what the market is paying for it today

At the current stock price, the market expects the company’s ROA to only improve to around 9%, much lower than pre-COVID levels.

Pfizer believes a once-daily pill could give it an edge over existing weight-loss injections, offering a more convenient option for patients.

Additionally, the company’s revenue has normalized following the volatility of recent years, and its growth prospects are on a steady upward trend.

Pfizer reported revenue of $63 billion, marking a 6.7% year-over-year increase, with non-COVID sales growing by 12% for the current year.

Furthermore, the company boasts a solid balance sheet, with reduced net debt and impressive cash reserves, which help secure its attractive 6.5% forward dividend yield, a perfect combination for a defensive stock in a volatile market.

Pfizer remains a key player in the pharmaceutical industry, with the potential to make significant gains in the fight against obesity.

Best regards,

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

Today’s analysis highlights the same insights we share with our FA Alpha Members. If you want to an get in-depth analysis of market trends and uncover undervalued stocks, become an FA Alpha Member today.