Oprah’s Weight-Loss Drug Revolution Is a Sign of ‘Ozempic Trade’ to Come in 2024
For many struggling with obesity, the new drugs have been a “gift,” as Oprah Winfrey recently described, noting that she was “over with shame.” Investors in drugmakers Novo Nordisk and Eli Lilly can use the same term for their gains over the past year. US-listed Novo Nordisk, maker of Ozempic and Wegovy, is up nearly 52% year-to-date, while Lilly shares have gained 56% over the same period. Lilly’s Zepbound recently entered the weight loss market, and it’s off to a strong start. It contains the same active ingredient as its Mounjaro type 2 diabetes treatment, tirzepatide. But what’s in store for the weight loss business in 2024? “We’re very optimistic about that market, and we’re very, very early stage,” said Andy Acker, Janus Henderson’s healthcare group portfolio manager. The firm has held positions in both stocks for the past decade, and expects there is room for several companies in the category to create “robust and profitable new franchises that can help many patients around the world.” Lilly and Novo have the market to themselves at the moment. Most Wall Street analysts maintain buy ratings on both stocks, according to FactSet. Opinions are slightly more positive for Lilly, but some analysts have become more cautious as valuations have gotten richer. Still, 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 in developing their manufacturing capacity, as the current supply is far from the demand for medicines. Investors will be eager to see how companies manage this balance in 2024. Wall Street expects the market for these drugs to grow to more than $100 billion before the end of this decade. Beyond Ozempic in 2024, investors will want to look at several other companies, large and small, competing 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. Thus, the drugs help to lose between 15% and 20% of the weight. However, because the drugs work as hormone replacements, patients may regain weight if they stop treatment. Next-generation versions may be long-acting or could be taken orally, via an injection once a week, as is the case now. Acker also expects more innovation to happen as companies develop drugs to help manage side effects, such as loss of lean muscle mass. Regeneron and Biohaven are two companies owned by Janus that are developing drugs to help preserve muscle. “How do we lose weight while preserving muscle? How can we have better maintenance therapy that is easier for patients to take?” Acker said. “These are all unmet medical needs we’re investing in that can help address the big challenges as we expand globally,” he said. Buzz is building ahead of an update on Amgen’s anti-obesity drug, mari-tide (formerly AMG 133). The stock has received several upgrades this month from analysts, citing this event as a potential catalyst. “New growth segments are central to the story as a longer-term value driver (with a post-2030 outlook) and bridge the transition from legacy commercial assets to emerging oncology. [inflammation and immunology], rare diseases and cardiometabolic/obesity platforms,” RBC Capital analyst Gregory Renza wrote in a Dec. 12 research note to give Amgen a sector outperform. treatments. Other companies working on incretin drugs include Pfizer and Structure Therapeutics, which both have recently experienced some setbacks in their programs.AstraZeneca has jumped into the race with the license of a GLP-1 drug under development by Eccogene.Beyond weight loss one of the most 2023. The most important event in the space was Novo Nordisk’s release of first-line results from the Select trial in August These data, along with the full results published in November, showed that semaglutide, the active ingredient in Wegovy and Ozempic, provided patients with obesity more than a cosmetic benefit. It also reduced the risk of cardiovascular disease. In the coming years, another health outcome more will be learned about some, which should continue to shape treatment and health insurance coverage. “Overall, we see more than 20 important trials that will be read over the next few years, providing a steady cadence of information about the broader health benefits of AOM. [anti-obesity medications]”said Goldman Sachs analyst Chris Shibutani in a mid-December research note. “The results of these studies are expected to have a material impact on the context of obesity as a disease and how it is managed and, ultimately, to what extent. these drugs are used and importantly, they come back.” Beyond pharma stocks With every data release, there can be volatility. In 2023, the vibrancy around weight loss drugs affected the market in many unexpected ways. With obesity and overweight so common, many investors Life began to theorize how these mind-altering drugs began to ripple through society. The result was unexpected upheaval in some sectors. Starting with data from the Select study, investors sold shares of restaurant, food, and beverage stocks because they thought those companies would lose some of their best customers. All kinds medical device stocks were hammered as speculation grew that people wouldn’t want to have bariatric surgery when they could take a drug, or need knee and hip replacements. It thinned out. was. For a while, it seemed that almost no area of the economy would escape. Back in the day, airlines thought they could save fuel while carrying lighter passengers. On another day, packaging stocks would be sold off, with the drop in sales of tortilla chips, ice cream and cookies being a blow to the companies that make the boxes and bags that these products come in. Wall Street analysts moved to reassure investors, saying these changes would not happen overnight, if they did happen at all. Since November, some of the worst-hit stocks have pared 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 two diabetes device makers Insulet and Dexcom. Among his three picks for 2024. (The third was Vericel, which works in sports medicine and burn care.) “We see significant valuation dislocations remaining in MedTech after the sharp GLP-1-driven selloff in 3Q23,” Kratky said. he said in a research note last week. DXCM YTD Mountain Dexcom Shares Year-To-Date Kratky remains cautious about stocks facing the “major risk” associated with obesity drugs, but sees opportunity for names that will have “upcoming catalysts that may remove the perceived GLP-1 overlap.” Insulet shares have lost nearly 27% in 2023, falling below $125.82 in October. Still, Kratky hopes the Insulet data will help support the use of insulin pumps even as more patients switch to GLP-1 medications. He has a $270 price target on the stock, which implies a 25% upside. Dexcom is up nearly 8% this year. But shares traded as low as $74.75 in October. Leerink shares rise to $144, or 17% above Friday’s close. The affected companies have also been very vocal about whether 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 people taking incretin medications. 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 among those who suffer from them. Speaking on a panel on Oprah Daily in September, Winfrey criticized weight-loss drugs and said she needed to shed the pounds on her own, adding that taking a medication was the “easy solution.” WW YTD mountain WW stock is up 143% in 2023. “I’ve got to do it the hard way. I’ve got to keep climbing mountains. I’ve got to keep suffering, I’ve got to do that because otherwise I kind of cheated myself,” he said at the time. As in the past, Winfrey’s comments moved the markets. Winfrey is an investor and sits on the board of Weight Watchers parent WW International, which runs a traditional weight management program and Sequence, a telehealth platform that helps its users access weight-loss drugs. After Winfrey’s September comments, the stock took a hit. But WW shares rose 25% last week. The action came after People magazine published an interview with Winfrey, in which she said she is using weight loss medication as a “maintenance tool.” With those gains, WW stock is up 144% year-to-date, even though the stock has fallen sharply in recent years. If the gains hold in the final week of 2023, it will be the first positive year for stocks since 2017, according to FactSet. In the People cover story, Winfrey said, “Having a medically approved prescription for weight management and health in my life feels like a relief, like redemption, like a gift, and not something to hide behind and have again. For ridicule. It’s all over.” I’m ashamed of other people and especially myself.” – CNBC’s Michael Bloom contributed reporting.
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