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For most of its existence, Altimmune (NASDAQ: ALT) has been a little-known biotech aspiring to compete in a world dominated by whales like Novo Nordisk (NYSE: NVO), the maker of the hit weight loss drug Wegovy and the blockbuster Ozempic for type 2 diabetes.

But if management's three-word hunch about the company's lead program is right -- and there's at least one critical piece of evidence hinting that it is -- Wegovy's reign could face a serious challenge within the next few years. Let's explore their outlook to see how it might affect your thinking about the stock.

This program is starting to really take off

While it doesn't have any products on the market yet, Altimmune has two clinical-stage programs, both of which are in phase 2 trials, and both of which are testing the usefulness of the same molecule, pemvidutide. One aims to treat obesity, and the other is seeking an indication for treating metabolic-associated steatohepatitis (MASH, formerly known as NASH).

It's the obesity program that's a threat to Wegovy. Per some of the data from its trial, after being treated with the highest dose of the candidate for 48 weeks, patients lost an average of 15.6% of their body mass compared to only 2.2% lost for those who were given the placebo. Importantly, there was no evidence of decreasing efficiency over time, meaning that further treatment would probably lead to more weight loss.

Even more important was where the lost weight came from. With medicines like Wegovy, one of the major concerns is that people will lose weight by primarily shedding muscle mass rather than fat -- diminishing their strength in the process. Another problem is that it's far easier to regain lost fat mass than it is to regain lost muscle mass. In the case of pemvidutide, 78.1% of the weight loss was attributable to the degradation of fat mass rather than lean muscle mass.

That's not quite the holy grail of consequence-free weight loss therapies, but it's a giant leap forward in that direction.

In the words of Altimmune's CEO, Vipin Garg, the trial's results suggest that pemvidutide could be a "best in class" medicine if it ultimately gets approved. And if they're true, those three words will make the biotech's candidate likely to top the likes of Novo Nordisk's Wegovy, as well as other contenders like Eli Lilly's Zepbound.

Appreciate this company's context before investing

As of the first quarter, Altimmune had $182.1 in cash, equivalents, and short-term investments on hand. Its research and development (R&D) expenses for the quarter were only $21.5 million, making up the bulk of its total operating expenses of $26.8 million.

In short, this company's small pipeline and tight focus on just two cardiometabolic indications mean that it has plenty of runway before it needs to think about raising more capital, which is great news for potential investors.

There's no reason to think that its obesity program will hit snags at a higher rate than any other trial at the same stage of the process.

However, there's still a risk that phase 3 data will fail to confirm what the recently published data depicted. That'd bruise the stock extremely badly if it happened; there's only one other program in the pipeline that has a chance of making it to the market in the next few years, and it's for a condition that's traditionally hard to develop drugs to treat.

Don't let that risk dissuade you from including Altimmune in your basket of biotech stocks that could capture the gold rush in the obesity market. The stock is up 73% over the last one year, but 47% down in the last six months.

Investors, however, must understand the crux of the matter is that there's a possibility in Altimmune's drug candidate being a superior option. And if the data on targeting weight loss largely to fatty mass instead of muscle mass proves true, it'll be a much more favorable choice for niches where a high risk of losing muscle mass is a potential contraindication, like in older people.

At the same time, understand that this is a risky stock. Even if the U.S. Food and Drug Administration (FDA) eventually approves pemvidutide for sale, it'll need to fight Novo Nordisk and Eli Lilly to gain market share -- and they have far more resources to bring to bear than Altimmune likely ever will.

Should you invest $1,000 in Altimmune right now?

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Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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