Stocks to Watch: 3 Companies Working on Next-Gen Weight Loss Drugs

Stocks to buy

Everyone knows that America has a major obesity problem. Because of this, new anti-obesity drugs are going to generate a great deal of revenue and profits their companies. What people don’t realize is that those weight-loss drugs come with high valuations and equities that reflect most of the profits they will generate. Consequently, investing in firms with lower valuations that are focused on improving or developing superior weight-loss treatments is a better way to go. Here are three weight-loss drug stocks that are in the latter category.

Biohaven Therapeutics (BHVN)

Brown glass pill bottle on its side showing white pills inside, with other pill bottles behind it representing MACK stock.

Source: shutterstock.com/Champhei

The popular weight-loss treatments, known as GLP-1 drugs, have an important, very negative side effect: they “strip away muscle in addition to fat,” Investor’s Business Daily explained. That’s a major reason why people who take the drugs find it difficult to keep the weight off once they stop taking the medicine. Also noteworthy is that, because of the muscle loss, these drugs tend to come with higher mortality rate.

Biohaven Therapeutics (NYSE:BHVN) is developing a drug that blocks myostatin in order to reduce fat while building up lean tissue, which includes muscle. Myostatyin is a protein that prevents muscle growth. In studies of animals, BHVN’s drug increased lean tissue and promoted weight loss.

Meanwhile, the drug, known as Taldefgrobep alfa, is undergoing Phase 3 testing for use as a treatment for an unusual disease called spinal muscular atrophy.

What’s more, Taldefgrobep alfa, can conceivably be approved in the medium term as a treatment for spinal muscular atrophy and then be prescribed “off label” by doctors as a treatment for obesity. In that case, BHVN stock would soar tremendously, and the company could become a takeover target. The company’s huge potential makes BHVN one of the best weight-loss drug stocks.

Altimmune (ALT)

Various graphical representations of medical imagery are shown in front of a doctor using a tablet computer. DNA stock

Source: Shutterstock / PopTika

In a Phase 2 study, a 2.4 milligram dose of Altimmune’s (NASDAQ:ALT) GLP 1 drug, pemvidutide, lowered participants’ weight by an average of 15.6% — 13.4 percentage points more than those taking a placebo. That compares very favorably with the results of a study of Eli Lilly’s (NYSE:LLY) popular GLP-1 drug, in which those taking the medicine lost an average of 7.1% more weight than those taking a placebo.

Also noteworthy is that pemvidutide’s tolerability was reportedly better than that of other GLP 1 treatments. Finally, the drug’s reduced LDL cholesterol more than two other popular GLP 1 drugs, semaglutide and tirzepatide.

Given these points, the $538 million market capitalization of ALT stock far undervalues the shares, while the company could easily become a takeover target.

Amgen (AMGN)

the Amgen (AMGN) logo on a building during daylight. weight-loss drug stocks

Source: Michael Vi / Shutterstock.com

Canadian bank BMO Capital is bullish on Amgen’s (NASDAQ:AMGN) two anti-obesity drugs, AMG 133 and AMG 786. The bank thinks that the drug maker could report upbeat data on the treatments later this year.

Moreover, AMG 786 is an oral drug, giving it an important advantage over most of the other GLP 1 drugs which are injected.

Additionally, AMG-133 may only have to be taken once a month, unlike its competitors on the market which have to be taken daily or weekly.

On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been SMCI, INTC, and MGM. You can reach him on Stocktwits at @larryramer.

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