The “weight loss trade” has come to a standstill. How to revive people’s interest | Wilnesh News
Anyone who has ever dieted can relate to the feeling of euphoria that comes with the initial weight loss. The voice in my head screams, “Eureka!” But then, inevitably, it becomes a chore. The initial novelty wears off and the real work begins. Investors may see initial euphoria over Novo Nordisk’s Wegovy and Eli Lilly’s Zepbound. These drugs mimic incretin hormones such as GLP-1 and GIP to control blood sugar, suppress appetite and aid weight loss, providing patients with results close to those of bariatric surgery. The medical community cheered the weekly shot as a game-changer, and investors saw a blockbuster opportunity and jumped on their stocks. But that didn’t last long. Yuri Khodjamirian, chief investment officer of Tema ETFs, told CNBC that investors reached a “peak of excitement” last summer. The company manages the Tema GLP-1, Obesity and Cardiometabolic ETF (HRTS) and remains optimistic about the category’s long-term growth potential. In particular, market leaders Novo and Lilly have provided further clinical evidence that GLP-1 not only reduces weight but also improves overall health. Still, market sentiment has cooled due to unpredictable growth rates, leading to disappointing earnings and frustrated investors. As the outlook for GLP-1 drugs grows bleaker, some stocks that were expected to suffer from the drug’s success have recovered. Novo and Eli Lilly have both spent billions of dollars to expand production capacity to meet overwhelming demand. The companies also must contend with drug compounders invading their business by exploiting loopholes in pharmacies’ production of medicines that are in short supply. The direction of the bariatric industry in 2025 will depend on further increases in supply, news about next-generation drugs in development, and regulatory clarity on drug pricing and GLP-1 access. “Eli Lilly and Novo need to start delivering better results,” Hojamilian said. “…This will benefit all players. And then oral presentation can start to unlock that last bit…Once you get to oral presentation, the market size starts to expand.” For many patients, oral medications will Easier to take, especially for patients who are skeptical about currently requiring weekly injections. Additionally, they are cheaper and easier to manufacture, which will ease supply bottlenecks. Trillion dollar market cap coming soon? Phase 3 data for Eli Lilly’s oral GLP-1 drug orforglipron is expected to be released next year. Positive data could put the stock back toward a $1 trillion market cap. In the first half of this year, Eli Lilly’s stock price seemed destined to reach that milestone. But as of Friday’s close, shares had fallen 13% in the past six months. The stock is still up nearly 33% year to date, outpacing the S&P 500’s 26% gain. LLY Eli Lilly stock has gone public so far this year. Analysts remain optimistic about Eli Lilly’s prospects. According to FactSet, 77% rate the stock a buy or overweight; only one is selling. The stock is expected to rise more than 30% from Friday’s closing price of $767.76, reaching an average price target of $1,008. However, the stock is not immune to the political environment, which has weighed on pharmaceutical stocks. Analysts at Barclays said there are concerns that President-elect Donald Trump’s nominee for U.S. Department of Health and Human Services Secretary Robert F. Kennedy may restrict the use of GLP-1. But it’s unclear how Kennedy would prioritize various policy measures if he were nominated. Additionally, Elon Musk has spoken positively about GLP-1 drugs, which may support the category. “We believe Eli Lilly is well-positioned to work creatively with the new administration to expand GLP1 access,” Bernstein analyst Courtney Breen wrote in a recent note to clients. scope (although we recognize there will always be a trade-off between access and price). She expects Eli Lilly to have a slight advantage as a U.S. company compared to Novo and to be able to scale production more quickly. Meanwhile, the Biden administration has proposed a Eli Lilly and Novo have been working to gather clinical evidence that GLP-1 drugs can help treat conditions like sleep apnea and reduce cardiovascular risks, a strategy that would allow Medicare and Medicaid to cover weight-loss drugs. Helping More Patients Get Coverage It’s unclear whether the new administration will take action or preserve the ban on weight-loss drug coverage in federal insurance plans. Hope for Novo’s stock is banking on clinical trials of its next-generation obesity drug, CagriSema. The data. When the news broke on Friday, the company’s $125 billion market cap was gone after 68 weeks, with patients in the trial losing an average of 22.7% of their weight, though the results were below Novo’s expected range of 25% to 30%. The Danish company said it was “encouraged” by the data. With Novo shares at their lowest level in 18 months, analysts’ average price target predicts the stock could rebound 58% next year. Several analysts said Friday’s reaction was excessive and resulted from a poorly structured trial and high expectations. Like Wegovy and Ozempic, CagriSema is administered as a weekly injection and contains semaglutide. However, this drug also contains caglitin, a separate molecule that acts similarly to amylin, a pancreatic hormone. Patients’ weight loss in the trial exceeded Wegovy’s average of 15%, which was comparable to the nearly 23% achieved in the Zepbound clinical study. About 40.4% of people who participated in the CagriSema trial lost more than 25% of their starting weight. Additionally, not all patients received the highest dose of the drug, raising questions about the study. Novo said it will begin a new trial in the first half of next year and could submit the drug for regulatory approval by the end of next year. Stifel analyst Eric Le Berrigaud said 25% looks like a “magic number” because it would make CagriSema the product most likely to deliver significant weight loss for patients and ahead of rival Eli Lilly and Company’s Zepbound . Novo is under pressure to reduce its reliance on semaglutide, the active ingredient in Wegovy and diabetes drug Ozempic, because it could appear on the list of drugs in the next Medicare price negotiations. “(Semaglutide) is expected to account for around 70% of group revenue by 2027, across formulations and brands, and although it remains part of CagriSema, the cagrilin peptide component of the portfolio will The drug’s effects are protective. Zealand Pharma, another company developing an amylin drug, has seen its shares rise 80% so far this year on the Novo news. Underscoring how challenging it will be for the upstart to overturn the duopoly it has established with Eli Lilly, Amgen announced earlier this month that its experimental drug MariTide helped patients lose 20 percent of their weight. Shares of Amgen fell after the news, with VKTX YTD stock down nearly 9% year-to-date. One reason dozens of companies, large and small, are still pursuing the Holy Grail is that the potential market is so large that patients will need to continue using these drugs permanently to maintain their benefits. Some players may emerge with manufacturing advantages, while others may not. Among those stocks, Viking Therapeutics’ stock is “very interesting,” Tema’s Khodjamirian said. “Their data is quietly getting better and better, while their stock price keeps falling.” Viking Therapeutics shares are up 127% so far this year, but the stock closed at $42.25 on Friday, its all-time high since February 28 Since hitting $99.41, the stock price has fallen by more than half. These stocks include diabetes technology providers such as Dexcom and Insulet. Dexcom shares are still down more than 35% this year, but have risen nearly 14% in the past three months. Insulette fared even better. The company’s shares are up 2% this year, thanks to a 34% gain over the past six months. Barclays analysts expect 2025 to be an “inflection point” in the GLP-1 narrative, as the number of patients taking the drug is far smaller than the potential market size. Increased drug production will make drugs available to more patients. That could mean food and drink stocks will be more clearly affected by changes in consumer habits, they said. Companies such as Nestlé and ConAgra have begun developing new products to serve this market. Campbell’s Soup Company commented that the soup may be excellent for people taking these medications. Analysts at Barclays predict that Danone and its protein yogurt brand could become “the biggest potential winner in the GLP-1 space.” The European-listed shares are up around 9% year to date “Health is really at the core of Danone’s brand and ethos – this is reflected in its product portfolio, 90% of which are considered suitable for everyday consumption and are HFSS-free (Barclays analyst Warren Ackerman said in In addition to looking at the benefits of high protein, compliance — or the number of people taking incretin drugs — is also an issue, as many patients stop taking the drugs within a year, the study reported on Dec. 16. In the current market context, where more assets are coming to market and expected shifts in regulation are likely to be constructive for transactions, we expect GLP-1 considerations to continue to be a hot topic in the food and beverage industry.” Priya Ohri. -Gupta, Barclays U.S. consumer analyst.
