Over the past year or so, weight-loss drugs have sparked investor interest and shaken up other industries. Novo Nordisk and Eli Lilly and Company are two early winners from this trend, as their drugs dominate the weight-loss drug market. Yuri Khodjamirian, fund manager of Tema ETF, said both companies are “a very powerful duopoly”. “But there’s clearly room for a market this big. The current Goldman Sachs estimate is about $130 billion. We think it’s going to be multiples of that,” he said last week on CNBC Pro Talks. Khodjamirian believes the space can accommodate at least three players. “I think the market is big enough to sustain three or four players, even at the current market cap, but the market is trying to figure out who the third or fourth player is, and a big breakout could be verbal GLP-1s ,”He said. He was referring to GLP-1, a class of weight-loss drugs originally developed to treat diabetes. GLP-1 is a hormone released in the gut that stimulates insulin secretion, slows gastric emptying and communicates a feeling of satisfaction to the brain. One stock to watch is Amgen, which is developing an injectable drug and other products to treat obesity. He also identified some biotech companies that have potential but where investors must be careful. One of them, he noted, is Carmot, which was acquired by pharmaceutical company Roche last year. He also named smaller biotech companies such as Zealand Pharma and Viking Therapeutics. “These are early-stage biotech companies that are developing data. They are much riskier than larger companies that already have drugs on the market,” Hojamilian said. “So, you have to be very careful when investing in such companies. So, a diversified portfolio may be the best option,” he said. Tema ETF offers actively managed exchange-traded funds focused on the healthcare and life sciences sectors. Khodjamirian is also the chief investment officer of Tema ETF and manages its Monopolies & Oligopolies ETF, which seeks to provide investors with long-term growth through companies operating in monopoly industry structures. Khodjamirian highlighted three healthcare sector ETFs his firm manages: Tema GLP-1, Obesity and Cardiometabolism ETF; Tema Oncology ETF; and Tema Neuroscience and Mental Health ETF. He said there are currently “valuation opportunities” in biotech stocks, but warned of risks. “Small companies in the biotech space are hard to pick. You have to really know what you’re doing, and… in most of our biotech portfolios, we have 50 stocks and we own no more than 1%, 2 Because of these risks, the percentage for some of these companies could drop to zero,” he said. However, Khojamilian said there is “a lot” of innovation happening in the biotech space, and “a lot of it” is trading for less than the cash value on its balance sheet. “So there is a valuation opportunity,” he said.
