For many struggling with obesity, the new drugs have been a “gift,” as Oprah Winfrey recently described it, declaring that “the shame is over.” Investors in drugmakers Novo Nordisk and Eli Lilly may use the same term for their returns over the past year. US-listed shares of Novo Nordisk, the maker of Ozempic and Wegovy, are up nearly 52% year-to-date, while Lilly’s has gained 56% over the same period. Lilly’s Zepbound recently entered the weight loss market and is off to a strong start. It has the same active ingredient, tirzepatide, as the type 2 diabetes treatment Mounjaro. But what lies ahead for the weight loss trade in 2024? “We’re very bullish on this market and we’re very, very early stage,” said Andy Acker, a portfolio manager in Janus Henderson’s healthcare group. The firm has held positions in both stocks for the past decade and expects there is room in the category for many companies to create “strong, profitable new franchises that can help many patients around the world.” Lilly and Novo have the market to themselves right now. A majority of Wall Street analysts maintain buy ratings on both stocks, according to FactSet. Views are slightly more bullish on Lilly, but some analysts have become more cautious as valuations have gotten richer. But with an average price target of $646, Lilly shares could rise 13% from Friday’s close, the data provider said. Both companies have invested heavily to develop production capacity, as the supply today is far less than the demand for the drugs. Investors will be eager to see how companies manage that balance in 2024. Wall Street expects the market for these drugs to swell to more than $100 billion before the end of this decade. Beyond Ozempic In 2024, investors may want to consider the many other companies, large and small, vying to enter the category with their own versions of these drugs. The new drugs mimic incretin hormones found in the gut, such as GLP-1 and GIP, to suppress appetite and regulate insulin secretion. In this way, the drugs help patients lose 15% to 20%—or more—of their weight. However, since the drugs work as a hormone replacement, patients can regain weight if they stop treatment. Next-generation versions may have a longer duration of action or may be taken orally instead of by injection once a week, as is the case now. Acker also expects further innovation as companies develop drugs to help manage side effects such as loss of lean muscle mass. Regeneron and Biohaven are two companies Janus owns that are working on drugs that help preserve muscle. “How do we lose weight while maintaining muscle? How can we have better maintenance therapy that is easier for patients to do?” Acker said. “These are all unmet medical needs that we’re investing in that can help address grand challenges as we develop them globally,” he said. Buzz was built ahead of an expected update from Amgen on its anti-obesity drug mari-tide (formerly AMG 133). The stock received several upgrades from analysts this month, citing this event as a possible catalyst. “The new growth segments are key to the story as the longer-term value drivers (looking beyond 2030) and the bridge to move from lagging legacy commercial assets to emerging oncology, [inflammation and immunology], rare disease and cardiometabolic/obesity platforms,” RBC Capital analyst Gregory Renza wrote in a research note, upgrading Amgen to outperform the sector on Dec. 12. Renza expects updated trial results to show how Amgen’s product competes with existing therapies. Other companies working on incretin drugs include Pfizer and Structure Therapeutics, both of which have had recent setbacks in their programs. AstraZeneca has entered the fray by licensing a GLP drug -1 in growth from Eccogene Beyond weight loss One of the most important 2023 key events in the space was the release of Novo Nordisk’s top results from the Select trial in August. These data, along with the full results that published in November, showed that taking semaglutide, the active ingredient in Wegovy and Ozempic, to treat obesity gave patients more than a cosmetic benefit. It also reduced the risk of cardiovascular disease. In the coming years, we will learn more about other health outcomes , which will continue to shape treatment and health insurance coverage. “In total we see 20+ related trials in progress that are due to be read out over the next few years, providing a steady pace of information on the potential broader health benefits of AOMs [anti-obesity medications]Goldman Sachs analyst Chris Shibutani said in a research note in mid-December. “Results from these studies are expected to have a substantial impact on how obesity as a disease is mainstreamed and treated, and ultimately how widely these drugs are used and, importantly, reimbursed.” Beyond pharmaceutical stocks Me every data release, there can be volatility. In 2023, the boom around weight loss drugs shook the markets in many unexpected ways. Since obesity and overweight are so common, many investors began to think about how these drugs that changed lives could begin to ripple through society. The result was unexpected turmoil in some sectors. Starting with the Select study data, investors sold shares in restaurant, food and beverage stocks, expecting those companies to lose some of their best customers.Medical device stocks of all kinds took off as speculation grew that people wouldn’t want to have bariatric surgery when they could get a drug or not have to replace their knees and hips once they slimmed down . PODD YTD mountain Insulet shares year to date The list of affected sectors has grown. For a while, it seemed that almost no sector of the economy would escape. One day, there was speculation that airlines would save fuel by carrying lighter passengers. On another day, packaging stocks would sell off on the belief that falling sales of tortilla chips, ice cream and cookies would hurt the companies that make the boxes and bags of those products. Wall Street analysts were quick to reassure investors, saying these changes would not happen overnight — if at all. Since November, some of the worst-hit stocks have pared their losses, and some of the battered names are ending up on lists of stocks to buy in 2024. Leerink Partners analyst Mike Kratky, for example, named diabetes device makers Insulet and Dexcom as two of his top three picks heading into 2024. (The third was Vericel , which works in sports medicine and burn care.) “We see significant valuation drifts remaining in MedTech after the sharp sell-off under GLP -1 in 3Q23,” Kratky said in a research note last week. DXCM YTD Mountain Dexcom participates year to date. Kratky remains cautious about stocks exposed to “major risk” associated with obesity drugs, but sees opportunity for names that have “upcoming catalysts that could remove the perceived GLP-1 overhang.” Insulet shares have lost nearly 27% in 2023, having fallen as low as $125.82 in October. Still, Kratky expects the data from Insulet to help support the use of insulin pumps even as more patients turn to GLP-1 drugs. He has a $270 price target on the stock, implying a 25% upside. Dexcom rebounded to nearly 8% growth this year. However, shares traded as high as $74.75 in October. Leerink sees the stock rising as high as $144, or 17% above Friday’s close. The affected companies have also been very vocal in discussing how they plan to co-exist with these weight loss products. For example, food companies such as Nestle have discussed how they could develop protein bars and drinks for those taking incretin drugs. “The Oprah Effect” The new year will also bring more education about obesity as a chronic disease, more discussion about how these drugs work, and hopefully more realistic expectations about their benefits. Many reports in 2023 showed how misunderstood obesity and overweight are, even by those who experience it themselves. Speaking on a panel published on Oprah Daily in September, Winfrey criticized weight-loss drugs and said she had to lose weight on her own, adding that taking a drug was “the easy way out.” WW YTD stock on WW mountain is up 143% in 2023. “I have to do it the hard way. I have to keep climbing mountains. I have to keep suffering, I have to do this because otherwise somehow I cheated myself,” she said at the time. As in the past, Winfrey’s comments rattled the markets. Winfrey is an investor and sits on the board of Weight Watchers parent company WW International, which runs its traditional stewardship program weight as well as Sequence, a telehealth platform that helps its users obtain weight-loss drugs. After Winfrey’s comments in September, the stock took a hit. But WW shares rose 25% last week. The energy came after People magazine published an interview with Winfrey in which she said she uses weight-loss drugs as a “maintenance tool.” With those gains, WW shares are up 144% year-to-date, though the stock has declined sharply in recent years. If the gains hold in the final week of 2023, it will be the stock’s first positive year since 2017, according to FactSet. In the People cover story, Winfrey said, “The fact that there is a medically approved prescription for weight management and health maintenance in my lifetime feels like a relief, like a redemption, like a gift, not something to be taken away from. hide behind and be again. I’m done being shamed by other people and especially myself.” – CNBC’s Michael Bloom contributed reporting.
Amgen Inc AstraZeneca PLC Biohaven Ltd Biotechnology and Pharmaceuticals business news Dexcom Inc drug Eli Lilly and Co flip Healthcare industry Insulet Corp Investment strategy Nestle SA Novo Nordisk A/S Oprah Winfrey Oprahs Ozempic Pfizer Inc Regeneron Pharmaceuticals Inc sign Structure Therapeutics Inc trade Vericel Corp Weightloss whats WW International Inc