Ask most patients if they prefer to receive medicine by swallowing a pill, by injection or infusion, and most will likely opt for the pill. But that’s not always possible for drugs that use delicate molecules that can’t tolerate the physical and chemical conditions in the gastrointestinal tract. That’s where a number of early-stage drug delivery companies come in — and most are flying under investors’ radar. Drug delivery tends to be a “roll-up sector,” explained Edward Nash, an analyst at Canaccord Genuity. “Historically, once you started to get a good, critical mass of biotechs focused on drug delivery, once they really started to show positive proof of concept data, you would see Big Pharma … swoop in and take them over,” he said, reflecting on past industry cycles. Larger companies usually look to expand the pool of patients using their drugs by offering a more accessible, or effective, delivery method. They also see drug delivery innovation as a potential way to extend their exclusive patent protection, said Nash, who suspects the industry may be at the dawn of a new wave of drug delivery technologies coming to market. Nash recently looked at four companies operating in drug delivery: Rani Therapeutics , Biora Therapeutics , Avalyn Pharma and Elektrofi. Nash rates Rani shares a buy, but does not cover Biora. Both Avalyn and Elektrofi are privately held. RANI YTD mountain Rani shares have fallen about 36% year to date. According to FactSet, all six analysts that follow Rani rate the stock a buy. Nash’s $26 price target is higher than the $22 average target, and implies 568% of upside for the stock from Friday’s close. A 36% decline in its value so far in 2023 puts its market capitalization at just under $188 million. Biora, which is valued at $41 million, is only covered by two analysts, according to FactSet. Their average price target is $34, or more than 1,000% above where the stock closed on Friday. ‘An injection by other means’ Rani and Biora use capsules in their drug delivery systems. These “robot pills” can be swallowed like any other regular pill, but include capsules that protect the payload stored inside until the compounds arrive at the right spot in the body. In the case of Rani, its capsules dissolve in the gut. As that occurs, a balloon is released that expands to direct a sugar needle into the wall of the patient’s small intestine. As the sugar dissolves, the drug stored in the needle is released into the bloodstream. Unlike other needles, it isn’t painful because the nerve receptors in the gut aren’t very sensitive. “This is really just an injection by other means,” Rani CEO Talat Imran said in an interview with CNBC. “We’re injecting in one part of your body where you feel no pain.” Rani has studies in the works to deliver drugs for osteoporosis, psoriatic arthritis, hypoparathyroidism and psoriasis. But it says its technology could work with a range of medications, including popular ones based on the gut hormone GLP-1, which are used to treat diabetes and obesity. Obesity drugs have been an area of intense focus for the industry. Although the category is currently dominated by Novo Nordisk , the maker of Ozempic and Wegovy, and Eli Lilly , which has developed Mounjaro, Evercore ISI is tracking 33 companies working on 47 different clinical stage programs in this area. Although this activity involves more than 22 different mechanisms, about half involve GLP-1 in some form, and there is a huge emphasis on creating GLP-1 medications that can be delivered orally to patients, Evercore said. At the moment, the most effective GLP-1 medications for weight loss are delivered via a subcutaneous injection. Both Novo and Lilly are having trouble keeping up with demand for their medications, and some believe it would be faster to manufacture the drugs in pill form. Canaccord Genuity’s Nash stressed that delivery methods can influence the size of a drug’s market. Take osteoporosis , the most common bone disease. Characterized by weak bones susceptible to fracture, it’s estimated that about 1.5 million bone fractures each year are connected to the condition . Although medications exist to improve bone density, many people who would benefit aren’t taking the drugs since they require an injection. An easier way of recieving the therapy could increase compliance, potentially boosting revenue because patients won’t be cycling on and off on a continual basis, Nash said. BTIG analyst Julian Harrison expects Rani’s RT-102 has the potential to become the preferred treatment for osteoporosis. The verstility of the Rani pill also is encouraging, according to Harrison, since it could be used with a wide range of drugs. He noted that Rani’s delivery mechanism has the potential to make some drugs even more effective. Biora’s technology only works with a liquid, and there are two types of therapies it’s developing. One is for medicines targeted to the GI tract and the other is for more systemic use of biotherapeutics, Nash said. The company has several programs in the works, including one for ulcerative colitis and another with adalimumab for autoimmune diseases. It also is developing a delivery mechanism for a GLP-1 agonist. As for Avalyn Pharma, its focus has beeen on delivering medications via inhalation, while Elektrofi is working on concentrating drug formulations, according to Nash. Elektrofi’s technology could be useful for cancer drugs that are delivered via a time-consuming infusion in a clinic or hospital. If the dosage was able to be successfully concentrated, a patient might be able to receive an injection instead of an intravenous infusion — possibly at home. Next few months are critical The direction of Rani and Biora’s stock will depend on how their programs progress from here. Analysts say the next few months will be very important for Rani. The company will begin its phase 2 trial for osteoporosis by the end of the year, starting in the European Union. Perhaps even more critical will be the launch of U.S. trial sites, possibly in the fourth quarter, once it gets the nod from the Food and Drug Administration. If that stays on track, topline results are expected around the second quarter of next year. “The [phase 2] data expected to read out mid-next year has the potential to significantly de-risk the platform and bring the company closer to commercialization, in our view,” Cantor Fitzgerald analyst Olivia Brayer wrote in a recent research note. Rani ended the second quarter with $74.6 million in cash equivalents, which it says is sufficient to fund operations through at least the next 12 months. It also has partnerships with companies like Celltrion . Imran, the Rani CEO, said partnerships are a critical part of its strategy, and that its technology can make existing drugs better. The computer science grad stressed the wide-range of uses for its robot pills, from carrying therapeutic peptides and proteins to antibodies and nucleotides. “We’re not in the business of making drugs,” he said.