Anyone who has ever gone on a diet can relate. When you first lose weight, you feel euphoric. A voice in my head screams, “I got this!” However, this inevitably leads to a long process. The initial novelty wears off and the real work begins. Investors may see similarities to the early euphoria of Novo Nordisk’s Wegovy and Eli Lilly’s Zepbound. The drug mimics incretin hormones such as GLP-1 and GIP to control blood sugar levels, suppress appetite and aid weight loss, so patients can expect results close to those seen with bariatric surgery. The medical community hailed the once-weekly shot as a game-changer, and investors snapped up the stock, seeing it as a blockbuster opportunity. But it didn’t last. Yuri Khojamilian, chief investment officer of Tema ETF, told CNBC that investors reached “peak excitement” last summer. The firm manages Tema GLP-1, Obesity and Cardiometabolic ETF (HRTS), and remains optimistic about the long-term growth potential of this category. Market leaders Novo and Lilly, in particular, are presenting further clinical evidence that GLP-1 can go beyond weight loss to improve overall health. Still, the mood has cooled as the pace of growth has proven unpredictable, leading to disappointing results and investor dissatisfaction. As the outlook for GLP-1 drugs becomes uncertain, some stocks that were expected to struggle due to the drug’s success have rebounded. Both Novo and Lilly have spent billions of dollars expanding manufacturing capacity to meet massive demand. Companies have also had to face battles with drug compounders who infringe on their business by exploiting loopholes that allow pharmacies to manufacture drugs that are in short supply. Where the weight loss industry heads in 2025 will be determined by further supply increases, news about next-generation medicines in development, and regulatory clarity around drug pricing and access to GLP-1. “Lily and Novo need to start producing better results,” Khojamilian said. “It will benefit all players, and Oral could start to unlock that final key. … Once you get Oral, the size of the market will start to increase.”This drug An oral version of the drug would be easier to take for many patients, especially those who are resistant to the once-weekly injections currently required. They are also cheaper and easier to manufacture, easing supply bottlenecks. Will market capitalization reach trillions of dollars? Phase 3 data for Lilly’s oral GLP-1 drug, orforglipron, is expected to be released next year. Good data could put the stock back on track for a $1 trillion market cap. In the first half of this year, Lilly’s stock seemed destined to reach this milestone. But as of Friday’s close, the company’s stock had fallen 13% over the past six months. The stock is still up nearly 33% year-to-date, outpacing the S&P 500’s 26% rise. LLY YTD Mountain Eli Lilly’s stock price from the beginning of the year to the present. Analysts remain optimistic about Lilly’s prospects. According to FactSet, 77% rate the stock as a buy or overweight. Only one is on sale. The stock is expected to rise more than 30% from Friday’s closing price of $767.76 to an average price target of $1,008. However, the company’s stock is not immune to the political environment that puts pressure on pharmaceutical stocks. There are concerns that President-elect Donald Trump’s choice of Robert F. Kennedy Jr. to head the U.S. Department of Health and Human Services could limit the use of GLP-1, Barclays analysts said. But it is unclear how Kennedy will prioritize various policy initiatives if confirmed. There are also positive comments about GLP-1 drugs by Elon Musk, which may support this category. “We believe Lilly is in a strong position to work creatively with the new administration to expand access to GLP1,” Bernstein analyst Courtney Breen said in a recent note to clients. Although we recognize that there is always a trade-off between Compared to Novo, she expects Lilly to have a slight advantage as a U.S.-based company and a faster path to scale up production. Meanwhile, the Biden administration has proposed rules that would allow weight-loss drugs to be covered under Medicare and Medicaid. Lilly and Novo have been working to gather clinical evidence that GLP-1 drugs improve conditions such as sleep apnea and reduce cardiovascular risk. This strategy allowed more patients to receive insurance coverage. It is unclear whether the new administration will adopt this philosophy or leave the ban on weight loss drugs in federal insurance programs in place. Kagrisema Disappoints Expectations for Novo were based on clinical trial data for Kagrisema, a next-generation obesity treatment drug. When the news broke on Friday, the company’s market capitalization was wiped out by $125 billion. Patients in this study lost an average of 22.7% of their body weight after 68 weeks. Although the results were below the 25% to 30% range Novo had expected, the Danish company said it was “encouraged” by the data. Novo stock is trading at an 18-month low, and analysts’ average price target predicts Novo stock could recover 58% over the next year. Analysts said Friday’s reaction was too harsh and blamed a poorly structured trial and high expectations. NVO YTD Mountain Novo Nordisk Year-to-date Share Like Wegovy and Ozempic, CagriSema is administered as a weekly injection and contains semaglutide. However, the drug also contains another molecule, kagrylintide, which acts like the pancreatic hormone amylin. The patient weight loss achieved in this trial exceeded Wegovy’s average of 15% and was comparable to Zepbound’s clinical study results of approximately 23%. Approximately 40.4% of participants in the CagriSema trial also lost 25% or more of their starting weight. Additionally, not all patients received the highest dose of the drug, raising questions about how the study was structured. Novo said it plans to start a new clinical trial in the first half of next year and will likely apply for regulatory approval in the second half of next year. According to Stifel analyst Eric Le Berrigault, 25% seemed like a “magic number.” That’s because, at 25%, CagriSema would likely give patients a chance at significant weight loss, making it a product that would likely outperform rival Lilly’s Zepbound. Novo is facing pressure to reduce its reliance on semaglutide, the active ingredient in Wigovy and the diabetes drug Ozempic, as it could be next on the list for Medicare price negotiations. “[Semaglutide]is expected to account for approximately 70% of the group’s revenue in 2027, across its various formulations and brand names, and while still part of Kaglisema, the cagrilintide component of this combination It may have a protective effect on what the drug produces,” Le Berrigault wrote in a research note ahead of the publication of the trial data. Zealand Pharma, another company developing an amylin-like drug, also fell on Friday in response to the Novo news. The company’s stock price has increased 80% since the beginning of the year. Novo’s experience highlights how difficult it is for startups to break out of the duopoly built with Lilly. Amgen announced last month that its experimental drug Maritide helped patients lose 20% of their body weight. In the past, this would have been hailed as a major advance, but now investors need to be more impressed. Amgen shares fell on the news, dropping nearly 9% this year. VKTX YTD Mountain Viking Therapeutics’ year-to-date stock price. But dozens of companies, large and small, are still chasing the holy grail. One reason for this is that the potential market is vast and patients need to continue on these drugs indefinitely to maintain their benefits. Some companies may emerge with manufacturing advantages, while others may develop drugs that provide better health benefits for some patients. Therefore, the field remains crowded. Among these stocks, Viking Therapeutics stock is “very interesting,” said Tema’s Khojamilian. “While the stock price is down, the data continues to quietly improve.”Viking Therapeutics’ stock has risen 127% since the beginning of the year, but Friday’s closing price of $42.25 has increased since Feb. 28. Since hitting an all-time high of $99.41, the stock has fallen by more than half. , the other side of the weight loss drug deal has recovered. These stocks include diabetes technology providers such as Dexcom and Insulet. Dexcom stock is still down more than 35% since the beginning of the year, but the stock has risen about 14% in the past three months. Insulet is doing even better. The company’s stock is up about 20% this year, thanks to a 34% rise in the past six months. Barclays analysts expect 2025 to be an “inflection point” in the GLP-1 story, as the number of patients taking the drug is far smaller than the potential market size. As the production of medicines increases, more patients will have access to them. This could mean food and beverage stocks will be more significantly affected by changes in consumer habits, they said. Companies such as Nestlé and Conagra have begun developing new products to serve this market. Campbell Soup commented on how their soups are suitable for people taking these medications. Barclays analysts predict that Danone, with its protein-packed yogurt brand, could be “the biggest potential winner in the GLP-1 space.” European-listed shares up around 9% since the beginning of the year “Health is truly at the heart of Danone’s brand and ethos, and this is reflected in the company’s portfolio, 90% of which is deemed suitable for everyday consumption. , non-HFSS (high quality),” Barclays analyst Warren Ackerman said in a Dec. 16 research note. “Protein products are likely to become increasingly popular as GLP-1 users turn to fortified products to tackle muscle.”Although in vain, Danone’s Oikos products have consumers It has the high protein benefits you are looking for. ” In addition to monitoring penetrance, or the number of people taking incretin drugs, compliance is also an issue, as many patients stop taking these drugs within a year. “Given the current market environment where more assets are coming to market, we expect GLP- I expect that consideration of 1 will continue to be a hot topic.” Priya Auri-Gupta, an analyst in Barclays’ U.S. consumer division, said: Correction: Amgen announced last month that its experimental drug Maritide helped patients lose 20% of their body weight. Previous versions had incorrect timing. Insulet stock is up about 20% this year. Percentages were listed incorrectly in previous versions.
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The “weight loss trade” has stalled. What does it take to regain interest?
By Reid Novak
