2 Underrated Weight Loss Stocks to Buy and Hold

Investors interested in weight-loss stocks may naturally gravitate toward Eli Lilly and Novo Nordisk. That makes sense. They are currently the leaders in this niche. Their brands, Zepbound and especially Wegovy, have practically become household names and are synonymous with chronic weight management. However, many other drugmakers could capitalize on the soaring demand for weight loss medicines. Two of the most promising to consider right now are Regeneron (NASDAQ: REGN) and Amgen (NASDAQ: AMGN). Here is why these companies are worth a second look for investors seeking exciting weight-loss stocks.

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1. Regeneron

Regeneron plans to start phase 3 clinical trials for one of its leading weight-loss candidates, olatorepatide, sometime this year. This medicine mimics the action of two separate gut hormones: GLP-1 and GIP, just like Zepbound does. What's more, olatorepatide has already posted solid late-stage clinical trial results in China. In a 48-week study enrolling 604 patients, the medicine led to weight loss of up to 19% among participants.

These are excellent results. True, that was in Chinese patients, and Regeneron will have to run studies in the U.S. to support approval there. But things are looking promising for the biotech company. Regeneron is working on other candidates. One of them seeks to help patients on GLP-1 medicines maintain muscle mass even as they lose weight. This investigational therapy performed well in mid-stage studies.

Meanwhile, Regeneron's results remain strong. In the first quarter, the company's revenue jumped by 19% year over year to $3.6 billion. The biotech dealt with biosimilar competition for Eylea, a medicine for wet age-related macular degeneration, in recent quarters, but it is finally putting that in the rearview mirror, partly thanks to a newer, high-dose formulation of Eylea whose sales are growing at a good clip.

Further, the company's biggest growth franchise, Dupixent, a drug for eczema, continues to perform well. Expect Regeneron to post strong financial results over the next few years while also making meaningful clinical and regulatory progress, even beyond weight loss. The company is awaiting approval from the U.S. Food and Drug Administration (FDA) for cemdisiran, an investigational medicine for myasthenia gravis, an autoimmune condition that causes muscle weakness and other symptoms.

Regeneron also has several programs in phase 3 studies and should see a much rejuvenated lineup of approved drugs by the end of the decade. Though the company isn't just a weight-loss stock, if it can make significant waves in that market, it could outperform broader equities over the medium term.

2. Amgen

Amgen is running phase 3 studies for its anti-obesity candidate, MariTide. The company is testing the medicine for chronic weight management, type 2 diabetes, cardiovascular outcomes for certain patients who are overweight or obese, obstructive sleep apnea (OSA), and more. If approved across all these indications, MariTide could become a real challenger to tirzepatide, the active ingredient in Zepbound (also approved for OSA), and the diabetes medicine Mounjaro.

Further, Amgen is positioning MariTide as a medicine with a friendlier dosing schedule. It could be administered once monthly (or less frequently), rather than the once-weekly schedule of competing medicines like Zepbound and Wegovy. So, MariTide could become an important growth franchise for Amgen.

In the meantime, there are other good reasons to buy the stock. Amgen is performing well, with its revenue climbing by 6% year over year to $8.6 billion in the first quarter. Amgen's solid results in the period are all the more impressive given that it recently lost patent exclusivity for denosumab, a bone health medicine that was an important growth driver. The company's sales from denosumab are declining, but other products are helping pick up the slack.

The list includes Tezspire, a medicine for asthma, and Tepezza, which is approved for thyroid eye disease. Amgen also has an exciting pipeline with several important candidates. Lastly, it is an excellent dividend stock, having increased its payouts every year since 2011 (the year it began paying dividends). Amgen offers an attractive forward yield of 3%, versus an average of about 1.1% for the S&P 500. Amgen is a top pick for long-term income seekers and for those looking for attractive weight-loss stocks.

Prosper Junior Bakiny has positions in Eli Lilly and Novo Nordisk. The Motley Fool has positions in and recommends Amgen, Eli Lilly, Novo Nordisk, and Regeneron Pharmaceuticals. The Motley Fool has a disclosure policy.