Could Pfizer Become a Top Weight Loss Drug Stock? Don't Count on It.

On July 11, Pfizer (NYSE: PFE) made an announcement that came as a bit of a surprise to biopharma industry experts and Wall Street analysts alike. It's planning on advancing one of its early-stage weight loss programs into mid-stage trials. In due time, the move could make it a direct competitor to the weight loss market's tycoons, Novo Nordisk and Eli Lilly .

Alas, shareholders are more likely to be left wanting than they are to experience a significant gain from the company's move. Here's why the odds aren't in Pfizer's favor, and what it means for investors.

This strategy seems muddled

It makes sense why Pfizer wants to compete in the market for weight loss therapies. There's more than one credible estimate calling for the size of the anti-obesity drugs market to surpass $100 billion in annual sales by 2030. And with Eli Lilly and Novo Nordisk gobbling up market share today, the later a new player shows up to the scene, the higher the probability that they'll need to wage a costly fight against the incumbents to stake out territory of their own.

The company's most advanced weight loss candidate is a molecule called danuglipron, which shares the same mechanism of action as Novo's famous drug for type 2 diabetes, Ozempic, as well as its sister medicine for weight loss, Wegovy. But danuglipron is formulated as a once-per-day pill rather than as a weekly injection.

The problem with the candidate is that it doesn't seem to be very effective. Last year, Pfizer was running a phase 2b clinical trial testing a version of danuglipron that was formulated for twice-per-day dosing. When that trial concluded, the results were sub-optimal; more than half of the patients in the trial opted to discontinue their participation due to side effects, and the average degree of weight loss was unimpressive compared to a placebo even after 32 weeks of treatment. That formulation did not proceed to late-stage clinical trials.

The decision to advance the once-per-day formulation of the candidate is thus an curious one. When both efficacy and side effects are concerns from a drug development standpoint, opting for a single slow-release pill does not seem to offer much of a chance of helping.

Sure, using the slow-release pill could mitigate the worst of the acute side effects. But it could just as easily leave patients somewhat nauseated all day rather than extremely nauseated for a couple of hours after taking a fast-release dose -- one of the big problems with the two-dose-per-day formulation. That would not make for much of an improvement in patients' willingness to continue treatment.

And if the weight loss efficacy was lacking with two doses, there is little reason to believe it will be much better with just one of a larger size. So, Pfizer's approach here seems wishful at best, and that reduces the chances that it will actually be able to compete with the other top weight loss companies.

What are the next steps?

The phase 1 study is expected to end in late July, which means that the decision to move forward was made on the basis of preliminary yet largely complete phase 1 data. Based on management's comments, phase 2 trials will start before the close of 2024. Those trials will be intended to evaluate the efficacy of differently sized doses of danuglipron.

Per the CEO, Albert Bourla, the program is approximately two years behind Eli Lilly's weight loss candidate with an oral formulation. Therefore, even if the danuglipron program can redeem itself somehow, it won't have a first-to-market advantage in pill-based weight loss drugs. Nor will it have an efficacy advantage, barring an unexpectedly favorable set of phase 2 data. Nor does the pharma have any other anti-obesity programs that are more advanced.

The conclusion here is obvious. Pfizer simply won't be a major player in the weight loss drugs market unless it significantly changes its current approach, perhaps by acquiring another company's pharmaceutical assets and finishing the research and development (R&D) process.

Of course, it's still a decent stock to buy, provided that you're patient. Its portfolio of medicines and its massive pipeline aren't about to go anywhere, despite its struggles with developing a weight loss candidate.

Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy .