AstraZeneca Is Getting Into the Weight-Loss Drug Game. The Stock Needs a Boost.

AstraZeneca
is the latest pharmaceutical company looking to get in on the hype around weight-loss drugs. Stockholders welcomed the move as its shares have lagged behind peers
Eli Lilly
and
Novo Nordisk.

AstraZeneca
(ticker: AZN) said Thursday that it had entered an exclusive licensing agreement worth up to $2 billion with Chinese company Eccogene for a drug in early development for treating obesity and Type 2 diabetes.

The drug –named ECC5004– is another of the class of GLP-1 receptor agonists pioneered by
Novo Nordisk
(NV) and
Eli Lilly
(LLY) for weight loss and diabetes, triggering a cultural and market frenzy over their potential to revolutionize obesity treatment.

AstraZeneca’s American depositary receipts were up 1.68% in early trading on Thursday but are down 4.81% for the year so far.

Stockholders will hope that progress on the drug could see AstraZeneca’s replicate the performance of Novo Nordisk ADRs, which are up 50% this year so far, or Eli Lilly which has risen 65%,

Novo Nordisk ADRs were down 0.4% on Thursday. Eli Lilly was down 2.4%, giving up some gains from the previous day when it was boosted by approval of its obesity treatment by the Food and Drug Administration.

AstraZeneca has a long way to go to compete with the market leaders. It’s paying $185 million upfront to license Eccogene’s treatment, which is in Phase 1 trials currently. Phase 2 trials are planned for next year. One key advantage could be that ECC5004 is an oral pill, while Novo Nordisk and Eli Lilly’s treatments are injected, although they are also working on oral versions.

BMO Capital Markets analyst Etzer Darout said the licensing deal was an incremental positive and kept an Outperform rating and $83 target price on AstraZeneca ADRs.

Write to Adam Clark at [email protected]

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