This Healthcare Company Believes Its GLP-1 Pill Could Be "Next in Line" After Novo Nordisk and Eli Lilly. Its Valuation Is a Fraction of Theirs.

Novo Nordisk and Eli Lilly are the two leading companies in the GLP-1 drug race right now. But the field is inevitably going to get bigger as more drugmakers are researching obesity drugs in the hopes of securing some significant market share, in what's becoming the next big growth opportunity in healthcare.

The good news is that some smaller stocks may have more potential upside if they obtain approval for their products. There is, of course, the risk that they don't get there. But one company that believes it could soon have an approved GLP-1 pill is Structure Therapeutics (NASDAQ: GPCR).

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Why Structure's GLP-1 pill could be the real deal

This year could be a key one for Structure, as the company's GLP-1 weight loss pill, aleniglipron, enters phase 3 trials. If the results prove to be strong, then it may only be a matter of time before the drug obtains approval from regulators and starts generating significant revenue for the company. In its most recent trial, people taking aleniglipron achieved a placebo-adjusted weight loss of up to 15.3% (on average) when on the highest dosage, after 36 weeks. That puts it in line with other top weight loss treatments in the market today.

Management points out that other GLP-1 drugmakers typically run longer trials that span 60-plus weeks. For Structure to achieve comparable weight loss at a much earlier stage is promising. And with no liver injuries or significant side effects, the treatment also appears to be safe.

Structure's stock comes with significant upside, but also risk

Structure's CEO, Ray Stevens, believes the company's oral pill is "next in line," after Eli Lilly and Novo Nordisk, to obtain approval from regulators. Novo Nordisk has already obtained approval, while Eli Lilly hopes to get the green light potentially by next quarter. However, Structure still needs to post strong phase 3 trial results before it can get to the approval stage, which suggests that it might not obtain approval for some time.

Meanwhile, the healthcare stock has already tripled in just the past 12 months, which may suggest that investors have priced in approval for the drug at this stage. Considering its market capitalization of $6.5 billion, investors are paying a significant premium for a company that isn't generating any revenue right now.

There may still be more upside ahead for the stock, but with an elevated valuation, investors should be careful with Structure, because if there are any bumps in the road, it could be due for a steep sell-off.

David Jagielski, CPA has positions in Novo Nordisk. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.