{"id":21217,"date":"2023-09-21T19:07:06","date_gmt":"2023-09-21T19:07:06","guid":{"rendered":""},"modified":"2023-09-21T19:07:06","modified_gmt":"2023-09-21T19:07:06","slug":"weight-loss-drugs-are-bad-news-for-these-stocks","status":"publish","type":"post","link":"https:\/\/microloannexus.com\/?p=21217","title":{"rendered":"Weight-Loss Drugs Are Bad News for These Stocks"},"content":{"rendered":"

The weight-loss drugs called GLP-1s are producing some of the market\u2019s biggest losers: investors in companies that treat obesity complications. <\/p>\n

\n

Outside the GLP-1 revels, their echo casts gloom over shares of businesses that grew with America\u2019s waistlines.<\/p>\n

Insulin-pump makers
\n Insulet
\n (PODD) and
\n Tandem Diabetes Care
\n (TNDM) are down 40% and 50% this year, respectively, while the glucose monitor leader
\n DexCom
\n (DXCM) has lost 16%.
\n ResMed
\n (RMD) dominates the devices called \u201cCPAP\u201d machines that treat sleep apnea. Its stock is off 30%. Inspire Medical Systems (INSP) sells another sleep apnea device, and its shares have dropped 18%. Liver-disease drug developer
\n Madrigal Pharmaceuticals
\n (MDGL) is down 40%.<\/p>\n

Before GLP-1s grabbed center stage, these firms\u2019 sales growth made them some of the highest-valued medical stocks on the market. Now, investors are looking to a future when fewer people develop diabetes and sleep apnea, so they\u2019re dumping the stocks.<\/p>\n

\u201cIt\u2019s impossible to disprove a negative,\u201d grumbles
\n J.P. Morgan
\n medical technology analyst Robbie Marcus. \u201cTo prove that this market won\u2019t get cut by X percent\u2026there\u2019s no way you can do that.\u201d<\/p>\n

Turning the tide of obesity will take years, so plenty of patients will still need these companies\u2019 help. But even after their summer slide, stocks like DexCom and Insulet have traded near triple-digit earnings multiples. As GLP-1 sales ramp up, those multiples may ramp down.<\/p>\n

While the average human life span has increased in recent decades, the years lived in good health haven\u2019t kept pace. That\u2019s largely because of obesity and its complications. In just the U.S., the medical costs of obesity are estimated to run to the hundreds of billions a year.<\/p>\n

Obesity seemed untamable, before Novo Nordisk and Lilly found drugs that let people shed 15% to 20% of their weight. Wall Street sees the duo\u2019s sales of the drugs exceeding $40 billion a year by the decade\u2019s end, according to Visible Alpha. <\/p>\n

In early spring, the implications of a world on GLP-1s became topics of Monday morning brainstorming sessions at hedge funds. Some began exiting stocks like DexCom and Madrigal\u2014and then betting on their decline by selling shares short. <\/p>\n

The wider market started paying attention this summer. On July 20, the surgical-robot maker
\n Intuitive Surgical
\n (ISRG) mentioned on its earnings call that patients were deferring weight-loss surgery to try GLP-1s first. Those procedures are a small percentage of robotic surgeries, but a contributor to Intuitive\u2019s growth.<\/p>\n

On Aug. 8, Novo Nordisk released a study showing that overweight patients on Wegovy had 20% fewer strokes and cardiac events after losing weight on the drug. Investors started believing that GLP-1s could reduce obesity-related illnesses, and the markets for their remedies.<\/p>\n

\u201cThose two events really catalyzed this imperceptible, intangible fear and crystallized it,\u201d said J.P. Morgan\u2019s Marcus. \u201cFrom that point on, it\u2019s just been nonstop GLP-1.\u201d<\/p>\n

Obesity-associated medtechs are still falling. \u201cEveryone has become trigger-happy with GLP-1s\u2014putting bullets in medtech,\u201d said Will Sevush, the analyst for healthcare strategies at Jefferies.<\/p>\n

The insulin pump firms Insulet and
\n Tandem
\n already sell well to patients with the autoimmune form of diabetes known as Type 1. For their next leg of growth, the pump vendors are looking to Type 2 diabetes, which most commonly results from obesity. Several million Americans have Type 2 diabetes that has gotten bad enough for them to need insulin injections. Few use pumps. <\/p>\n

GLP-1s could crimp that opportunity. Last month, Baird analyst Jeff Johnson surveyed 25 endocrinologists and was surprised when they suggested that GLP-1s could delay the progression to insulin for half of their Type 2 patients. Johnson cut his sales forecast and stock price targets. His target for Insulet went from $320 to $219, and his rating went from Outperform to Neutral.<\/p>\n

Insulet declined to discuss GLP-1s with Barron\u2019s<\/em>, and Tandem didn\u2019t respond to our queries. At the Baird healthcare conference this month, Insulet CEO James Hollingshead told the audience that GLP-1s haven\u2019t affected his company\u2019s 40% year-over-year growth. Patients have trouble getting insurance coverage for GLP-1 drugs, he said, and most stop taking them within two years.<\/p>\n

Baird analyst Johnson doesn\u2019t think GLP-1s will slow the growth of glucose monitor maker DexCom in the Type 2 market. While taking down his price target, from $153 to $130, Johnson maintained his Outperform rating. So did Raymond James analyst Jayson Bedford, in a note this month arguing that diabetic patients will use glucose monitors along with GLP-1s.<\/p>\n

That aligns with a DexCom statement to Barron\u2019s<\/em>, which says glucose monitoring will complement GLP-1 use in Type 2 diabetes. The company says its market extends beyond diabetes, because healthy people will want to track their glucose levels as they diet and exercise.<\/p>\n

DexCom stock rallied for a few days this month, after the company circulated insurance data suggesting that use of its monitors went up among Type 2 patients who started on GLP-1s. The numbers were old, however, and didn\u2019t address whether widening use of GLP-1s in coming years will shrink the number of people who need to monitor their glucose. <\/p>\n

DexCom shares soon resumed their slide. Its recent levels still represent 70 times earnings, so an investor is betting GLP-1s won\u2019t shrink DexCom\u2019s opportunity.<\/p>\n

The sleep apnea device vendors, ResMed and Inspire Medical, also tell investors that GLP-1s won\u2019t hurt their markets. Inspire Investor Relations Officer Ezgi Yagci told Barron\u2019s<\/em> that her company\u2019s nerve-stimulating device isn\u2019t recommended for patients with high body mass. \u201cWe believe GLP-1s will expand Inspire\u2019s addressable market,\u201d she wrote.<\/p>\n

ResMed CEO Mick Farrell told Barron\u2019s<\/em> that the company had seen no impact on new patient flow because of GLP-1s. \u201cWe believe that increased utilization of GLP-1s to treat obesity will bring many new people into the healthcare funnel,\u201d said Farrell in a written statement. \u201cWe believe that this will open them up to sleep apnea awareness, diagnosis, and treatment pathways.\u201d<\/p>\n

Many analysts think the drop in the sleep apnea stocks has more than accounted for the modest impact they foresee from GLP-1s. That was the thinking of Needham\u2019s Mike Matson when he raised ResMed to a Buy this month.<\/p>\n

Jefferies\u2019 Will Sevush disagrees. Most sleep apnea patients are overweight, he told Barron\u2019s<\/em>, and studies of patients who had weight-loss surgery showed that many were relieved of their sleep apnea. \u201cObesity is clearly the driver,\u201d said Sevush. \u201cGLP-1s are going to impact everything that touches sleep apnea.\u201d<\/p>\n

One more stock sector got hurt by the good news on GLP-1s: liver drugs.<\/p>\n

In June, a study showed that the Lilly experimental drug retatrutide not only let people lose 24% of their weight, but also cleared the high fat levels in their livers. That weighed on shares of companies like Madrigal Pharmaceuticals, which are developing drugs for the fatty liver disease known as NASH.<\/p>\n

NASH can destroy a liver, and there\u2019s no approved treatment\u2014so Wall Street had high regard for Madrigal and others developing NASH drugs, like
\n Akero Therapeutics
\n (AKRO) and
\n 89bio
\n (ETNB).<\/p>\n

Having just changed CEOs, Madrigal begged off from talking with Barron\u2019s<\/em>. At 89bio, CEO Rohan Palekar said it could take a decade before NASH cases start declining from GLP-1 usage. Meanwhile, patients will need NASH drugs, he said.<\/p>\n

An enormous population of young and middle-age people suffer from obesity-driven liver disease, said Nezam Afdhal, a NASH expert at Harvard\u2019s Beth Israel Deaconess Medical Center. While GLP-1s may reduce liver fat, he noted that they haven\u2019t been shown to reduce the liver\u2019s deadly scar tissue like the NASH drugs.<\/p>\n

J.P. Morgan\u2019s Marcus has maintained his Overweight ratings on DexCom, Insulet, and Inspire\u2014confident they\u2019ll do well in a GLP-1 world. But he worries that investors will adopt a nightmare scenario for medtech, if they embrace the GLP-1 dream.<\/p>\n

\u201cIf you\u2019re dreaming really big on the plus side, you could be expecting a big negative on the downside,\u201d he said.<\/p>\n

Write to Bill Alpert at william.alpert@barrons.com<\/p>\n<\/p><\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The weight-loss drugs called GLP-1s are producing some of the market\u2019s biggest losers: investors in companies that treat obesity complications. Outside the GLP-1 revels, their echo casts gloom over shares of businesses that grew with America\u2019s waistlines. Insulin-pump makers Insulet (PODD) and Tandem Diabetes Care (TNDM) are down 40% and 50% this year, respectively, while<\/p>\n","protected":false},"author":1,"featured_media":21218,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[49],"tags":[],"class_list":{"0":"post-21217","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-investing"},"yoast_head":"\nWeight-Loss Drugs Are Bad News for These Stocks | Micro Loan Nexus<\/title>\n<meta name=\"description\" content=\"The weight-loss drugs called GLP-1s are producing some of the market\u2019s biggest losers: investors in companies that treat obesity complications. 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