Investors have such high hopes for popular weight-loss medications like Wegovy and Ozempic, the wonder drugs have sent shock waves through the stock market. Yet besides helping patients shed pounds, the meds have shaved billions in market valuation from companies that investors think will suffer as a result.
This means obesity-related medical technology companies including Zimmer Biomet Holdings
ZBH,
-0.18%,
Medtronic
MDT,
+0.76%
and Abbott Laboratories
ABT,
-0.16%,
along with processed-food companies such as Utz Brands (UTZ
UTZ,
-0.64%
), Mondelez International
MDLZ,
-0.26%,
and J.M. Smucker
SJM,
-0.42%,
among others like them. These are up in the recent market rally. But they’d be up a lot more without this challenge. The damage will wear off. There are several reasons to think expectations for GLP-1 weight-loss drugs are high, say analysts at RBC Capital Markets, and Stanford University bariatric surgeon and weight-loss expert Dan Azagury. “GLP-1 noise is overdone,” says RBC Capital Markets analyst Shagun Singh. Stanford’s Azagury says it will be many years before there’s broad adoption and health benefits from these drugs. Plus, corporate insiders at several of the damaged stocks are buying shares on weakness, confirming this view. All of this makes the companies getting hit look like timely buys, as the reality sets in. Here are three reasons why, and several companies to consider, according to both analysts and corporate insiders: 1. Widespread adoption of these drugs will take longer than people think: GLP-1 drugs help people lose weight by stimulating receptors that produce hormones which slow digestion and curb hunger. They can lead to as much as 20% weight loss. But widespread use of these drugs will take a long time, Azagury says. “The time frame for this is different from what the market is thinking,” he says. “The effect people are counting on in market will be way slower than expected.” He cites two reasons: First, the drugs are hard to get. Supply cannot keep up with demand because these therapies are tricky to produce. Next, the drugs are hard to pay for. Insurers don’t cover their use for weight loss, and they cost about $12,000 per year. Azagury thinks that will change. “You can’t have a drug that has so many benefits for patients and hold off on it.” He says increased competition will drive down prices, citing as many as 16 similar weight-loss drugs in pipeline development. But again, all of this will take years to play out. Medtech stocks: This suggests the near-term concerns about the shares of obesity-related medical technology companies like Medtronic, Stryker
SYK,
-0.91%,
Zimmer, Abbott Laboratories, and Insulet
PODD,
-0.97%
are exaggerated, and the stocks are attractive. Medtronic sells equipment used in weight-loss surgery, devices for diabetics like insulin pumps, and equipment used to diagnose and treat cardiovascular disease. People who are obese are more prone to joint replacement, diabetes and cardiovascular issues. Stryker sells equipment used in weight-lo …
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This means obesity-related medical technology companies including Zimmer Biomet Holdings
ZBH,
-0.18%,
Medtronic
MDT,
+0.76%
and Abbott Laboratories
ABT,
-0.16%,
along with processed-food companies such as Utz Brands (UTZ
UTZ,
-0.64%
), Mondelez International
MDLZ,
-0.26%,
and J.M. Smucker
SJM,
-0.42%,
among others like them. These are up in the recent market rally. But they’d be up a lot more without this challenge. The damage will wear off. There are several reasons to think expectations for GLP-1 weight-loss drugs are high, say analysts at RBC Capital Markets, and Stanford University bariatric surgeon and weight-loss expert Dan Azagury. “GLP-1 noise is overdone,” says RBC Capital Markets analyst Shagun Singh. Stanford’s Azagury says it will be many years before there’s broad adoption and health benefits from these drugs. Plus, corporate insiders at several of the damaged stocks are buying shares on weakness, confirming this view. All of this makes the companies getting hit look like timely buys, as the reality sets in. Here are three reasons why, and several companies to consider, according to both analysts and corporate insiders: 1. Widespread adoption of these drugs will take longer than people think: GLP-1 drugs help people lose weight by stimulating receptors that produce hormones which slow digestion and curb hunger. They can lead to as much as 20% weight loss. But widespread use of these drugs will take a long time, Azagury says. “The time frame for this is different from what the market is thinking,” he says. “The effect people are counting on in market will be way slower than expected.” He cites two reasons: First, the drugs are hard to get. Supply cannot keep up with demand because these therapies are tricky to produce. Next, the drugs are hard to pay for. Insurers don’t cover their use for weight loss, and they cost about $12,000 per year. Azagury thinks that will change. “You can’t have a drug that has so many benefits for patients and hold off on it.” He says increased competition will drive down prices, citing as many as 16 similar weight-loss drugs in pipeline development. But again, all of this will take years to play out. Medtech stocks: This suggests the near-term concerns about the shares of obesity-related medical technology companies like Medtronic, Stryker
SYK,
-0.91%,
Zimmer, Abbott Laboratories, and Insulet
PODD,
-0.97%
are exaggerated, and the stocks are attractive. Medtronic sells equipment used in weight-loss surgery, devices for diabetics like insulin pumps, and equipment used to diagnose and treat cardiovascular disease. People who are obese are more prone to joint replacement, diabetes and cardiovascular issues. Stryker sells equipment used in weight-lo …nnDiscussion:nn” ai_name=”RocketNews AI: ” start_sentence=”Can I tell you more about this article?” text_input_placeholder=”Type ‘Yes'”]