Weight-Loss Drugs Like Wegovy Are Bad News for These Stocks

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Shares of companies that treat everything from Type 2 diabetes to sleep apnea have been sinking since new weight-loss medications skyrocketed.

The weight-loss drugs called GLP-1s are producing some of the market’s biggest losers: investors in companies that treat obesity complications.

Read More Before GLP-1s grabbed center stage, these firms’ 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’re dumping the stocks. 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’s sales of the drugs exceeding $40 billion a year by the decade’s end, according to Visible Alpha.

“Those two events really catalyzed this imperceptible, intangible fear and crystallized it,” said J.P. Morgan’s Marcus. “From that point on, it’s just been nonstop GLP-1.” Newsletter Sign-up Insulet declined to discuss GLP-1s with Barron’s, and Tandem didn’t respond to our queries. At the Baird healthcare conference this month, Insulet CEO James Hollingshead told the audience that GLP-1s haven’t affected his company’s 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.

DexCom shares soon resumed their slide. Its recent levels still represent 70 times earnings, so an investor is betting GLP-1s won’t shrink DexCom’s opportunity.

 

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