The Fat's In The Fire

Well, well, well, look who's decided to crash the obesity-drug party. Roche (RHHBY), the Swiss pharmaceutical giant, has just unveiled some pretty impressive early-stage results for its weight-loss drug, CT-388. And let me tell you, this could be the start of something big.

Now, I know what you're thinking: "Another weight-loss drug? Yawn." But trust me, this is no ordinary contender.

In a small trial, patients who received CT-388 saw an average placebo-adjusted weight loss of 18.8% after just 24 weeks. That's right, 18.8%.

While it's hard to compare trials, experts are saying these numbers might even give Eli Lilly's (LLY) Zepbound, the current king of the market, a run for its money.

Let's take a step back and look at the bigger picture. The obesity drug market has been on fire lately, with everyone going gaga over these miracle pills.

Lilly and Novo Nordisk (NVO) have been dominating the scene with their drugs, Zepbound and Wegovy, but that hasn't stopped a whole host of other companies from trying to get a piece of the pie.

Merck (MRK), Sanofi (SNY), Abbott Labs (ABT), and Eisai have all tried their hand at weight-loss drugs and ultimately thrown in the towel.

More recently, Pfizer's (PFE) daily oral pill, danuglipron, has faced hurdles due to side effects. Amgen's (AMGN) drug, MariTide, is in Phase 2 studies and showing promise. And let's not forget Viking Therapeutics' (VKTX) VK2735, which has earned the nickname "twincretin" for its dual targeting of GLP-1 and GIP receptors.

So, what makes Roche's CT-388 so special?

Well, for starters, it's a GLP-1/GIP receptor agonist, which is similar to Lilly's Zepbound. In the Phase 1 trial, all participants achieved more than 5% weight loss, with 85% losing more than 10%, 70% shedding more than 15%, and a whopping 45% dropping more than 20% of their body weight. That's some serious weight loss.

Of course, there were some side effects, mainly mild to moderate gastrointestinal issues, but hey, that's the price you pay for looking fabulous, right? Roche is also testing CT-388 in patients with Type 2 diabetes, so stay tuned for updates on that front.

Now, I know you're all dying to know how CT-388 stacks up against the competition.

Notably, the drug's data looks strong compared to earlier studies of Zepbound. In fact, CT-388's efficacy results appeared "numerically higher" than Zepbound's.

But let's not get ahead of ourselves. Lilly still has a multi-year lead on Roche, so CT-388 isn't an immediate threat. However, it does suggest that the future of this rapidly growing market is up for grabs.

Now, let's talk about Roche. It’s the world's seventh-largest pharma company by market cap, sitting at around $205 billion. They pulled in $65 billion in revenue in 2023, second only to Johnson & Johnson (JNJ).

But here's the kicker—they've been struggling with growth, and their share price has taken a hit, down more than 25% over the past three years.

Contrast that with Eli Lilly and Novo Nordisk. Lilly's share price shot up 290% in three years, and Novo's climbed 226%.

Even though their revenues were less than half of Roche's in 2023, their market caps are sky-high. Why? Because of their blockbuster GLP-1 agonist drugs, Zepbound and Wegovy, which have shown jaw-dropping weight-loss results.

But could CT-388 be the underdog story Roche needs?

With the obesity market estimated to reach a staggering $100 billion by 2030, and over 1 billion people worldwide suffering from obesity, the potential is enormous.

Of course, there's still a long way to go for CT-388. Cross-trial comparisons can be tricky, and Roche's Phase 1 trial was much smaller than Lilly's pivotal study of Zepbound.

Plus, we don't have all the juicy details on patient characteristics, dose titration, and long-term weight loss just yet.

But here's the thing: Roche has scale and infrastructure on its side. It could potentially outmuscle smaller players like Viking and Boehringer Ingelheim.

And if CT-388 can match or even surpass the performance of current and future GLP-1 agonists? Well, let's just say those peak revenue forecasts might be in for a surprise.

So, is Roche the dark horse you should bet on in the obesity-drug race? If you're looking to get in on the action without paying the premium commanded by Lilly and Novo, or taking on the higher risk of smaller players, Roche might just be the ticket.

With promising mid-single-digit revenue growth on the horizon and a strong position in other areas like oncology and autoimmune disorders, Roche could be a smart play for anyone keen on the obesity drug market.

As for me? Well, you know I love an underdog story. And CT-388 might just be the Cinderella story of the year. I suggest you buy the dip.