Novo Nordisk and Eli Lilly could have a big rival in the GLP-1 market in a few years

Novo Nordisk (NGO -1.58%) and Eli Lilly (LLY -1.01%) they are the top two companies on the weight loss market right now. Both make billions in revenue from their glucagon-like peptide-1 (GLP-1) drugs. But given how lucrative the market is — one estimate says it will be worth $100 billion by 2030 — you can bet there’s going to be plenty of competition.

In fact, several small, up-and-coming healthcare companies are developing GLP-1 weight loss drugs in hopes of making a dent in the anti-obesity drug market.

However, the immediate and bigger concern for Novo Nordisk and Eli Lilly could be competition from larger, more established healthcare companies.

They are rivals with significant resources and manufacturing capabilities that can not only bring a product to market, but can do it quickly. A potential rival looming on the horizon that Novo Nordisk and Eli Lilly investors should keep a close eye on is Roche (RHHBY 0.42%).

A multi-pronged strategy

The Swiss pharmaceutical giant is developing several GLP-1 weight loss drugs that have shown promise in early trials.

One is CT-388, which is a weekly injectable similar to approved GLP-1 treatments on the market today. In an early-stage study, it helped people lose nearly 19% of their body weight after a 24-week period. That’s right up there with Eli Lilly’s Zepbound, which helped people lose 21 percent — but over a much longer time frame of 72 weeks.

Wegovy, Novo Nordisk’s approved weight loss treatment, saw an average weight loss of 15% after 68 weeks. It’s still early days, but if CT-388 can maintain these kinds of numbers without worrisome side effects, it has the potential to be a real threat in the GLP-1 weight loss market.

Another drug to watch is CT-996, which is a daily pill. Over a four-week period of taking the pill, patients achieved a placebo-adjusted weight loss of 6.1%, on average. The drug won’t enter phase 2 trials until next year, but an effective diet pill could appeal to a wider range of patients and have more potential for long-term growth.

Candidates may enter the market earlier than anticipated

Previously, Roche was a dark horse in this market as it was not expected to come out with an obesity treatment until the next decade. But the company is reportedly looking to speed up the development of these drugs and could have a weight loss drug on the market by 2028.

While this is not imminent, it is a sign that the healthcare giant is taking the market seriously. The more drugs like Zepbound and Wegovy dominate the market, the more recognizable their names become, the more comfortable patients feel about taking them, and the more difficult it can become for new drugs to take market share.

Roche has a market cap of over $250 billion, is a big name in healthcare, and will be a formidable rival for Novo Nordisk and Eli Lilly to worry about. While it may still be years before Roche enters the GLP-1 weight loss market, investors shouldn’t underestimate its potential.

Could Roche stock be an undervalued buy?

Roche trades at a much more attractive earnings multiple than Eli Lilly and Novo Nordisk, which have plenty of GLP-1-driven growth expectations at their current prices. Roche trades at 21 times its trailing earnings, while Novo Nordisk is at a multiple of 44 and Eli Lilly is well over 100.

While there could be plenty of upside potential in Roche stock if it comes to market with a successful GLP-1 drug, it’s still far too early to tell how likely that will be. Every drugmaker would love to be able to take advantage of these opportunities, but that doesn’t mean they’ll end up competing with Zepbound and Wegovy.

The bar has been raised by these drugs, and that’s why investors are paying significant premiums for shares of Novo Nordisk and Eli Lilly.

However, Roche is a stock worth watching. But if you want exposure to the GLP-1 weight loss market now, you’re better off going with Novo Nordisk or Eli Lilly. They already have approved, established drugs on the market that have done exceptionally well, and there is still a lot of room for their sales to grow.