Could This Anti-Obesity Drug Biotech Be Poised to Soar in 2026?

Biotech investors have been closely monitoring the weight management space over the past few years. Sales of weight loss therapies are projected to soar in the coming years due to several factors, including important breakthroughs in the field and the high prevalence of obesity in some countries, such as the U.S. The drugmakers leading the charge include Eli Lilly and Novo Nordisk.

However, investing in smaller, little-known companies might lead to even stronger returns. And BioAge Labs (NASDAQ: BIOA), a small-cap drugmaker, is a great candidate, at least according to some Wall Street analysts. Could the stock come into its own next year and beyond? Let's find out.

Image source: Getty Images.

The bullish case for BioAge Labs

Citigroup recently doubled its price target for BioAge from $5 to $10, slapping a buy rating on the stock in the process. The company experienced some gains partly as a result of these developments, and based on this price target, its current share price of about $7.70 leaves an upside potential of 30%. Samantha Semenkow, an analyst at Citigroup, believes an upcoming data readout at BioAge will jolt the stock. BioAge Labs has several candidates, most of which are still in preclinical studies.

The most advanced of the bunch is BGE-102. This investigational therapy is unlike many weight-loss medicines that mimic the action of the GLP-1 hormone. Instead, BGE-102 is an investigational inhibitor of NLRP3, a protein that plays a role in our immune system. The science is complex, but it basically boils down to NLRP3 being activated or triggered by excess calorie intake, which signals the body to store excess fat and disrupts its ability to regulate satiety and blood sugar. All of that contributes to weight gain and, potentially, type 2 diabetes.

BGE-102 is being developed to help block the NLRP3-mediated immune response, a highly differentiated approach that could lead to meaningful clinical outcomes. BioAge recently initiated a phase 1 study for BGE-102 and plans to release data from this ongoing trial by the end of the year, with top-line results expected in 2026.

Importantly, BGE-102 is an oral candidate. The current leaders in the anti-obesity market are administered via subcutaneous injection. Oral medicines could be highly successful, though, considering that they're cheaper to manufacture and would help increase the availability of these therapies.

BGE-102 has another advantage. It could be paired with GLP-1 medicines to optimize weight loss, at least according to BioAge Labs. Factoring all that in, the therapy does indeed look highly promising.

Should investors buy the stock?

BioAge Labs' current market cap is about $275 million. At these levels, and considering that we're dealing with a biotech stock -- in an industry that tends to be volatile -- it wouldn't be at all surprising to see its shares soar over the next 12 months and eclipse Citigroup's price target. That's especially the case since many biotech investors are eager to find the next big thing in the weight management market. Picking the eventual winners in the field, especially early on, could lead to monster returns in the next decade.

Of course, BioAge will have to record solid progress from its ongoing phase 1 clinical trial for BGE-102. However, what happens after the biotech does release strong phase 1 data next year, assuming it does so? The company would still be several years away from even considering launching this medicine. And it would still face significant clinical and regulatory hurdles.

True, some of the company's other candidates could make progress in the meantime and finally hit the clinic. BioAge Labs is partnering with several drugmakers, including Eli Lilly, to develop additional medicines. That's great news for the future, as the backing of the leader in this field could make it easier for BioAge to access funding and avoid regulatory setbacks.

Even so, the stock is far too risky for most investors focused on the long game. BioAge Labs shares may well double by the end of next year. And the company could end up launching BGE-102. But it could also fail and become completely irrelevant -- even if BioAge still exists -- within five years. Risk-averse investors should look elsewhere.

Citigroup is an advertising partner of Motley Fool Money. Prosper Junior Bakiny has positions in Eli Lilly and Novo Nordisk. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.