We recently published a list of 10 Best Weight Loss Drug Stocks to Buy According to Analysts. In this article, we are going to take a look at where Perrigo Company plc (NYSE:PRGO) stands against other best weight loss drug stocks to buy according to analysts.
Global Surge in Obesity Medication Market Driven by GLP-1 Drugs
Most people have tried to include fitness and weight loss into their everyday routines. Due to the immediate physical and psychological benefits of increasing one’s fitness, the weight loss and fitness sector is rather large globally. The WHO estimates that over one billion individuals worldwide—650 million adults, 340 million adolescents, and 39 million children—are obese. A brand-new class of weight-loss drugs that don’t require rigorous diets or exercise routines appears to be ground-breaking. These innovative drugs can help people who are overweight or obese shed 15% to 20% of their body weight. According to Andy Acker, portfolio manager at Janus Henderson Investors, “This may be the largest opportunity we’ve ever seen in the pharmaceutical industry.” Medication for weight loss is very popular. Investors are comparing the US top in weight-loss medications with the leading in artificial intelligence chips.
Morgan Stanley Research has increased its prediction for the global market for obesity medications from $77 billion to $105 billion by 2030 in light of this demand increase. In 2023, brand-name obesity drugs brought in almost $6 billion.
According to Forbes, Semaglutide, a market leader for obesity drugs and the generic version of Ozempic, Wegovy, and Rybelsus, was the most prescribed Glucagon-Like Peptide-1 GLP-1 agonist in 2023. Nearly 88% of all new prescriptions were for it. Tirzepatide, Liraglutide, and Semaglutide are the only three GLP-1 weight-control drugs currently approved by the FDA.
According to JP Morgan Research, obesity and diabetes will drive the GLP-1 market’s growth to $100 billion by 2030. By that year, there may be 30 million GLP-1 users in the US or around 9% of the total population. Increased demand for obesity medications will benefit some industries, such as biotech, while posing problems for others, such as the food and beverage sector.
Chris Schott, a Senior Analyst with expertise in the U.S. Diversified Biopharma sector, claims:
“GLP-1s have been used to treat T2D since 2005, starting with the approval of Byetta, with follow-on products continually improving on efficacy. The most recent, Ozempic and Mounjaro, offer significant advantages over previous products and have accelerated class growth,” “Indeed, the newest generations of GLP-1s and combos lead to 15-25+% weight loss on average, well above prior generations of products.”
Challenges and Accessibility Issues in the GLP-1 Weight Loss Medication Market
The latest generation of GLP-1 medications are being hailed by some as “miracle drugs” that can cure obesity. However, not all obese persons can utilize GLP-1s due to their high cost and restricted insurance coverage. At the current rate, treating 40% of obese Americans would cost more than $1 trillion annually, according to Jonathan Gruber, an economics professor and the chairman of MIT’s economics department. That is nearly equal to what the government spends on Medicare as a whole. That is a startling amount.
The usage of GLP-1 drugs, such as semaglutide, for weight loss has increased over the past decade, whereas among those with type 2 diabetes, it has decreased by roughly 10%, per a report published in the Annals of Internal Medicine. The prolonged medicine shortage that results could restrict diabetics’ access to the treatments, the experts caution. As the need for obesity drugs rises, it is imperative to guarantee that diabetic patients have access to GLP-1 medicines, stressed Dr. Yee Hui Yeo, a clinical fellow in Cedars-Sinai’s Karsh Division of Gastroenterology and Hepatology.
The FDA says the shortages are a result of rising demand. The GLP-1 medication scarcity is a “major public health concern” that is unlikely to be addressed in 2024, according to the European Medicines Agency, suggesting that the shortages are not limited to the US. NPR reports that some people with diabetes have had to cut back on the number of drugs they can take due to shortages that have made it difficult for them to have their prescriptions filled.
Julia Angeles of Baillie Gifford, Debra Netschert of Jennison Investments, and Gentry Lee of Fayez Serofim were among the panelists on “Weighing the Future of Obesity Drugs,” which discussed the potential of GLP-1 medications, which were initially developed to treat diabetes but are now being used to treat obesity. The evolution of GLP-1 medication delivery from weekly dosages to several daily injections was also noted by Netschert, who also emphasized current attempts to further reduce injection frequency and minimize adverse effects. Notwithstanding their remarkable effectiveness, 1.5 million of the 110 million eligible patients in the US are currently undergoing treatment with GLP-1 drugs, according to Netschert, because of supply constraints.
In their dispute over who should pay, Angeles claimed that the majority of patients paid cash, while Netschert cited large insurance and Medicare/Medicaid reimbursements. Up to 700 million individuals worldwide may need these drugs outside of the United States, according to Netschert. Notably, the panel discovered that the UK had the fastest approval rate of GLP-1 drugs of any nation, demonstrating the recognized worth of these drugs. In general, UK payors are strict.
Our Methodology
For this article, we selected stocks that demonstrated over 10% analyst upside, had a market cap above $2 billion and were backed by strong institutional ownership. We then ranked these stocks based on their price target upside.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A doctor and a patient discussing the benefits of OTC health and wellness solutions.
Perrigo Company plc (NYSE:PRGO)
Price Target Upside: 38.12%
Perrigo Company plc (NYSE:PRGO) is a global leader in over-the-counter health and wellness products, offering a wide range of self-care items like pain relievers, gastrointestinal remedies, and infant formulas. What sets the company apart is its focus on affordable, high-quality OTC alternatives, positioning itself as a leader in the self-care market. This strategy taps into the growing trend of consumer-driven healthcare, where people seek cost-effective solutions for managing their health.
Perrigo Company plc (NYSE:PRGO) offers a range of weight loss and health products to support consumers in achieving their lifestyle goals. Their weight management solutions include clinically proven products, along with Nicotine Replacement Therapy (NRT) like NiQuitin, which can indirectly support weight loss by helping users quit smoking. They also provide nutritional supplements such as the Glucose 15TM Lemon Oral Gel for blood sugar management and various vitamins and minerals to support overall health during weight loss, making it one of the best weight loss drug stocks.
To further assist consumers, Perrigo Company plc (NYSE:PRGO) offers step-by-step weight loss programs, healthcare professional training, and emphasizes affordability and accessibility in its product offerings. Their holistic approach to health includes not just weight loss, but also addressing factors like sleep, stress management, and general nutrition, ensuring a comprehensive approach to improving overall well-being.
In Q3 2024, Perrigo Company plc (NYSE:PRGO)’s net sales decreased by 3.2%, with organic sales down 2.4%. However, the company showed improvement in profitability, with gross margin rising by 160 basis points to 41%, and operating income growing by 21.3%. Earnings per share (EPS) increased by 26.6%. Cost-saving initiatives like Project Energize and the supply chain reinvention program contributed $95 million and $72 million in gross savings, respectively. Despite the sales decline, the company’s strategic shift towards higher-value products and a strong cash position of $1.5 billion, positions the company well for future growth and investments.
Overall, PRGO ranks 2nd on our list of best weight loss drug stocks to buy according to analysts. While we acknowledge the potential of PRGO, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PRGO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.