Amgen is years behind rivals Novo Nordisk and Eli Lilly in developing an obesity treatment, but the company says its experimental drug could prove superior. And investors seem to agree, as news of the drug helped Amgen stock go on a tear recently.
Shares of Amgen now are taking a breather after a run-up in late October and early November. Last week, the biotech giant unveiled another batch of official data, showing that its drug requires less-frequent injections and leads to faster weight loss.
Over three months, patients who received three high-dose shots of Amgen's drug lost 14.5% of their body weight. That beat out the 8% weight loss for Lilly's weekly injection over the same time period, according to one analyst.
Now, the question is how durable the weight loss will be for recipients of Amgen's AMG 133.
Amgen Stock: Room For Multiple Players?
After 210 days, the percentage of weight loss for the high-dose group dropped to 11.2%. That was after receiving just the initial three shots. Amgen is planning to start a longer, midstage study early next year. The company says it's also exploring a longer interval between doses.
Amgen stock investors likely must wait for those results until 2024. In the meantime, Novo hopes to sort out the supply issues facing its approved obesity treatment, Wegovy, and Lilly could win Food and Drug Administration approval for its experimental drug, tirzepatide.
But Narimon Honarpour, Amgen's vice president of general medicines, says there's room for multiple medications in the obesity treatment market. More than 600 million people have obesity, including 40% of the U.S. population. Not all patients respond well to one drug, he said.
"Unraveling which patient segment benefits the most from which therapy, having a consistent response to therapy from patients is very important," he told Investor's Business Daily. "What I think we can conclude — though I can't give you a firm number on what the market size and opportunity would be — is that it's going to be, and is currently, a very large market."
Amgen Stock: Differing From Novo, Lilly
Amgen's experimental obesity treatment differs from Novo's and Lilly's in two key ways: its structure and how it engages its targets.
Novo's Wegovy stimulates one hormone to help reduce weight. The experimental drugs from Amgen and Lilly also do this. But they add in another component targeting a second hormone. Lilly's tirzepatide stimulates that hormone, while Amgen's AMG 133 blocks it.
"We have a molecule that, by design, is pumping the breaks on one pathway, the GIP receptor, while pressing the accelerator for the other, the GLP receptor," Amgen's Honarpour said.
The next is a bullish point for Amgen stock. Wegovy and tirzepatide are peptides. This class of drugs has a short half-life — they don't linger for long in the body. Amgen linked its peptides to an antibody, so its drug can stay in the body for 18-25 days. So, patients can receive less frequent doses.
To this point, Wegovy and tirzepatide are weekly shots. A single shot of Amgen's obesity treatment led to 7.2% weight loss after three months. Other patients received monthly injections and lost 14.5% of their weight, at the highest dose.
"Such extended half-life explains AMG 133's every four weeks dosage vs. (tirzepatide's) once weekly, and could potentially represent a competitive convenience advantage," Mizuho Securities analyst Salim Syed said in a recent note to clients. The counter-argument, says Syed, is that patients experiencing gastrointestinal side-effects might not want a drug to persist in their systems for four weeks
Obesity Treatment Appears Durable
Amgen stock initially slid last week as its obesity treatment data was released.
The drugs from Novo and Lilly resulted in higher percentages of weight loss, but over longer periods of time. Over 72 weeks, tirzepatide recipients lost, on average, 16% to 22.5% of their weight, depending on the dosage. In Novo's 68-week study, patients who received Wegovy lost an average 17% of body weight.
All three drugs carry gastrointestinal side effects like nausea and vomiting.
Amgen hopes a longer Phase 2 study will help it determine the potential of AMG 133 over a year. That's now the biggest question facing Amgen stock, Mizuho's Syed said.
Amgen's Honarpour says the company is most excited that the weight loss appears durable.
"We have this durable effect on weight reduction that persists for months after administration," he said. "We have been encouraged by the degree of reduction, we have been encouraged by the timing and we've been encouraged by the durability."
But Mizuho's Syed questioned the long-term potential for Amgen's obesity treatment. Patients who received three shots of the high dose didn't experience additional weight loss after day 85. The weight loss began to reverse by day 125, though patients hadn't returned to their previous weight after 210 days.
"The question here then is if additional (high-dose) administrations would result in higher effects or, if to enhance this, we should move to a higher dose," he said. Syed has a neutral rating on Amgen stock.
Investors Are Paying Attention
There are various estimates on the market size for obesity treatments.
Market researchers with Reports and Data estimate the market was worth $8.39 billion in 2020 and will grow to $28.1 billion by 2028. Grand View Research expects the market to hit $15.6 billion by 2024. Yet another analysis group, Research and Markets, pegs the obesity treatment market at $25.3 billion by 2027.
Investors are taking notice, RBC Capital Markets analyst Gregory Renza said in a recent note to clients.
"As the therapeutic landscape for treatment of obesity grows with multiple options now in market, development-stage compounds are also gaining interest as investors and patients seek differentiation for this advancing market," he said.
Renza rates Amgen stock with a sector perform and 255 price target. Amgen will have to outperform its rivals in obesity treatment as it trails by years, he said in a recent report.
"We note that AMG 133 is in early stages of development and has a long road ahead to prove utility in the market," he said. "However, we view the novel mechanism and late-mover strategy as a potential benefit to Amgen as well, as they are able to differentiate and fine tune the molecule to achieve outcomes that may not be currently available in the market."
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
