While weight loss treatments are the most popular on the market, Swiss pharmaceutical company Novartis AG is taking a new path.
Novartis has opted to stay out of the weight loss drug frenzy, while competitors such as Eli Lilly and Novo Nordisk are racing for the market.
The company has decided to focus on other areas of therapeutics such as Alzheimer’s and Parkinson’s diseases, Huntingtons’ disease, and most importantly, cancer radioligand therapy (RLT).
Vas Narasimhan, CEO of Novartis, spoke to CNBC in a recent interview. He stressed the company’s focus on areas that it could lead rather than competing in the overcrowded weight loss space.
Narasimhan emphasized the enormous potential of radioligand therapy, and predicted that it could be a business worth “$20 billion or more” for the multinational pharmaceutical company.
Novartis already has made substantial investments in the launch of two cancer therapies and acquisitions to strengthen its RLT Portfolio.
Novartis’ approach to weight loss market
Novartis doesn’t ignore the weight loss sector, but it’s not a priority for the company.
Weight-loss products are expected to reach a valuation of $200 billion within the next 10 years.
Novartis has chosen a targeted strategy rather than competing directly with the industry giants Eli Lilly or Novo Nordisk which have deep roots in GLP-1 receptor antagonists.
Narasimhan stated this during his appearance on SquawkBox Europe.
Novartis confirmed it is researching these two areas in order to gain a competitive advantage on the market.
Novartis’ shares are up more than 15 percent from the year-to date low. However, they still haven’t outperformed Novo Nordisk – the European weight loss leader.
What is the best time to buy Novartis in September?
The stock of Novartis has performed well in the last few months. However, analysts from Bank of America Securities are concerned about its growth prospects.
The stock could struggle to continue rising if there is no new catalyst.
Novartis’ decision to stay out of the rapidly growing weight loss market only increased their doubts.
Analysts at BofA cited the growing generic competition against Entresto, Novartis’ popular drug for heart failure, for downgrading its stock from “positive” to “neutral.”
A patent dispute between MSN Labs and Kisqali (a drug for breast cancer that was recently approved by the FDA to treat patients in an earlier stage) has also raised concerns about growth over time.
Novartis reported strong results for the second quarter despite these challenges. The company’s revenue grew by 10% from last year to $12.9 billion, and its earnings per share increased by $1.60, compared with $1.09 in 2012.
Wall Street had predicted both metrics. Novartis also offers a dividend yield of 3.37%, making it an appealing option for investors looking to achieve steady returns.
Investors can expect to see a return on their investment beyond current hype about weight loss.
The post Novartis’s plan to compete with Eli Lilly on the weight-loss drug market without directly competing against them may change as new information becomes available.
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