This Promising Weight Loss Drug Candidate Could Be a Huge Growth Catalyst for Pfizer

If there's one thing healthcare giant Pfizer (NYSE: PFE) really needs right now, it's a compelling growth catalyst. This year, the company isn't expecting much in the way of growth and investors are unsure about how strong its long-term prospects are, which explains why the stock is in such a slump -- down more than 25% in three years.

But sometimes all it takes is one successful product to turn a company's fortunes around. And one drug candidate that could be just such a game-changer for Pfizer is danuglipron.

Weight loss drug shows promise

One of the hottest areas in the pharmaceutical sector in recent years has been weight loss, as multiple companies have been developing glucagon-like peptide 1 (GLP-1) agonist drugs, which curb a person's appetite and can lead to significant weight loss. But many of the best approved options now are injectable drugs. The ultimate battle may be over which drugmaker can deliver the best, most effective weight loss pill.

Earlier this month, Pfizer said that it would be moving ahead with clinical trials for a once-daily version of danuglipron. It's a GLP-1 agonist that works similarly to semaglutide -- the popular injectable that Novo Nordisk markets as Wegovy for weight loss and as Ozempic and Rybelsus for diabetes.

Pfizer says danuglipron has been well tolerated among trial participants, which is a key consideration because if people have to voluntarily take a pill on a daily basis, one wants any side effects to be minimal or negligible, so they'll be more likely to continue taking it. (Wegovy, by comparison, is a weekly injectable.) The trial showing that it was well tolerated was an important first step for danuglipron. If further studies demonstrate that it is safe, with minimal side effects, and that it can help people lose significant weight, it has the potential to be a huge seller for Pfizer.

The results from a previous phase 2b study showed that taking a twice-daily version of danuglipron helped people lose an average of up to 13% of their weight in 32 weeks. But that regimen was less well tolerated, and in light of the side effects, Pfizer ended up not pursuing that version of the drug.

It could take a while for the drug to become available, assuming it's successful

The GLP-1 agonist market could be worth around $100 billion according to some estimates. If Pfizer can become a big player in it, that could be just the catalyst that the business needs. This year, the company is projecting between $58.5 billion to $61.5 billion in revenue, which would be at best around 5% growth versus its 2023 sales of $58.5 billion. Further down the road, Pfizer also faces increased competition as several of its top drugs are slated to lose patent protection.

Danuglipron, meanwhile, is still in early-stage trials. It could be years before investors find out whether it can earn approval from regulators, or how strong demand for it will be if it does. Other companies are developing their own new weight loss drugs, and some of them could be available sooner.

It's too early to tell if danuglipron will be the real deal for Pfizer, but given the company's vast resources and production capabilities, it would be in an excellent position to manufacture it in large quantities should it obtain approval.

Should you invest in Pfizer's stock today?

Pfizer's stock trades at a fairly modest 13 times its estimated future earnings. There's a good margin of safety there for investors even if the business struggles, which is why the stock may be a compelling buy despite the risks and uncertainty ahead. The average healthcare stock trades at a forward price-to-earnings multiple of just under 21.

If you're willing to be patient with the stock, Pfizer has the potential to be an underrated buy in the long run, especially if danuglipron obtains approval from regulators. There's definitely some uncertainty that comes with both this drug candidate and the overall business, but it may be worth taking a chance on the stock. Pfizer, after all, has a tremendous track record of growth and innovation, and while it may be struggling right now, it could well turn things around. One or two key products could be all that it takes to get investors more bullish about the stock, especially from its current beaten-down valuation.

David Jagielski 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 .