The anti-obesity drug market is expected to remain in focus this year after a bumper 2023 for weight loss drugmakers Novo Nordisk and Eli Lilly , according to Berenberg. The Germany-headquartered investment bank expects a combination of new clinical data, and the expiry of Novo ‘s patent for the active ingredient in first-generation GLP-1 drugs, to unleash new opportunities for several generic drug manufacturers in Europe. GLP-1 drugs encourage the production of hormones that cause weight loss through reduced appetite. Patent protection for Wegovy — Novo Nordisk ‘s blockbuster weight loss drug, which contains the second generation GLP-1 active ingredient and has been found to be at least twice as effective as the first generation drug — is expected to expire by the decade’s end. The soaring demand for this drug increased Novo’s shares by about 50% in 2023. Nevertheless, Berenberg’s analysts believe the bigger, underappreciated, near-term opportunity lies with companies preparing to launch generic versions of the first-generation GLP-1 drugs. For example, patents on Novo Nordisk’s Victoza expired in 2023, opening the door for companies like Teva and Sandoz to launch generics in the first half of 2024, according to the bank. The table below shows Berenberg’s four buy-rated stocks with their upside potential. Sandoz is Berenberg’s top pick for 2024. The analysts said: “Victoza could provide a boost to generic earnings growth in the short term while confirming Sandoz GLP-1 capabilities and longer term pipeline.” They expect sales to ramp up this year and see room for Sandoz to raise its profit margin guidance above 18-19%. Berenberg also highlighted Gerresheimer as a way to play the GLP-1 trend. It expects the company’s GLP-1 revenue to double in 2024 to over 50 million euros ($54 million). The analysts expect shares to rise by 44.4% over the next 12 months. Under-the-radar picks Sartorius and SKAN Group, Berenberg’s “under-the-radar” pick, are also expected to benefit from manufacturing generic GLP-1 drugs. The investment bank sees Sartorius benefiting from the growing commercialization of GLP-1 drugs and forecasts shares to rise by 27% over the next 12 months. As for SKAN, which also trades in the United States, the bank’s analysts said, “We continue to think SKAN is a clear yet under-the-radar beneficiary of GLP-1-related spending, particularly following recent capex announcements from its customers which focus on fill-finish lines.” Correction: This article has been updated to reflect that Novo Nordisk’s second-generation drug has been found to be at least twice as effective as its first-generation drug.
