This Top Dividend Stock Just Entered The Weight Loss Market: Is It a Buy?

Prosper Junior Bakiny, The Motley Fool

Mon, Mar 10, 2025, 4:57 AM 4 min read

It's not too often that pharmaceutical drugs become household names, but that's happening with medicines in the weight loss market. Brands such as Wegovy and Zepbound -- the leading anti-obesity therapies -- are now well known and are generating billions of dollars in annual sales. That's why other drugmakers want to dip their toes in this lucrative and high-growth market.

AbbVie (NYSE: ABBV) is one of them. The company, best known for its work in immunology, recently made a move to enter the weight loss space. Does that make AbbVie stock a buy today?

Developing therapies from scratch is risky and time-consuming. That's why pharmaceutical giants often partner with small companies that already have candidates in early-stage studies -- it helps speed up the process from their perspective. AbbVie is doing just that to join the weight loss market. The company entered into an agreement with Gubra A/S, a Danish drugmaker, to develop GUB014295, a potential weight loss therapy.

Many investigational anti-obesity treatments -- and the current leaders in the field -- mimic the action of the GLP-1 hormone, but that's not GUB014295's approach. Instead, this investigational medicine mimics the activity of two hormones: amylin and calcitonin. The former helps regulate blood sugar levels and controls satiety. The latter regulates calcium levels in the blood.

Per its agreement with Gubra A/S, AbbVie will lead the development of GUB014295. Gubra A/S received an upfront payment of $350 million and could get up to $1.9 billion in various development milestones in addition to royalties.

Can AbbVie become a leader in the weight loss market? It's too early to say. Novo Nordisk and Eli Lilly, the two companies behind Wegovy and Zepbound, respectively, still seem to have a hold on this therapeutic area considering their rich late-stage pipelines of potential GLP-1 therapies. Further, the number of investigational medicines in this field has ballooned in the last two years.

Being first to market matters, but so does having the most effective medicine. Also, it will still be a while before GUB014295 hits the market, that is, if it passes all the clinical and regulatory hoops on the way. So, for now, this licensing agreement should do little to sway investors' decision to purchase shares of AbbVie.

Thankfully, there are many other things going AbbVie's way. Despite losing patent exclusivity for Humira two years ago, AbbVie's financial results remain pretty strong. In 2024, the company's revenue increased by 3.7% to $56.3 billion. AbbVie's adjusted earnings per share decreased by 8.9% to $10.12, but that was partly due to acquisition-related expenses. AbbVie's two immunology medicines, Skyrizi and Rinvoq, were the stars of the show, once again.