Quiver Quantitative - In the backdrop of the rising potential of obesity drugs like Novo Nordisk (CSE:NOVOb)'s Wegovy, which experts predict could dominate a market valued at up to $100 billion within the next decade, healthcare companies profiting from addressing obesity-related health issues are working to reassure investors. While the robust performance of such weight-loss drugs has resulted in a sell-off in businesses ranging from bariatric surgery device makers to those addressing weight-induced ailments like diabetes and sleep apnea, both these companies and market analysts are highlighting the significant cost of these drugs, potential uncertainties regarding long-term usage, and possible lack of insurance coverage as factors that might restrict their market penetration.
The stock market has mirrored these shifting sentiments. Shares of Novo Nordisk have surged by 28% in the past quarter, while Eli Lilly (NYSE:LLY), on the cusp of launching its own obesity drug Mounjaro, has seen its stock rise by 25%, making it the world's most valued healthcare company at over $550 billion. In contrast, the iShares U.S. Medical Devices exchange-traded fund has witnessed a dip of over 22% in the same period. Injectable weight-loss drugs, categorized as GLP-1 receptor agonists, come with a hefty price tag exceeding $1,300 per month. Kenneth Stein of Boston Scientific (NYSE:BSX) emphasized that only a minority of obese Americans would eventually use these drugs, and its impact on the company's cardiac devices would be negligible.
While some industry players and investors believe the new drugs could reduce the demand for invasive procedures like bariatric surgeries, Johnson & Johnson (JNJ) reported that sales from medical devices for bariatric surgeries in the third quarter missed analysts' predictions. However, data indicates that approximately only one-third of patients prescribed weight-loss drugs like Wegovy continued its use after a year. This trend suggests that many might eventually consider surgical interventions after a brief stint with these drugs. Insurers remain cautious about extending coverages for these drugs in the near future, anticipating stricter access until at least 2025, according to Ann Hynes, an analyst at Mizuho Securities.
This article was originally published on Quiver Quantitative