Anyone who has been on a diet has probably related to the following: Those first lost pounds are met with a feeling of euphoria. The voice inside one's head screams: “I've got this!” But after that, it inevitably becomes daunting. The initial novelty wears off, and the real work begins. Investors may see a similarity to the initial jubilation around Novo Nordisk's Wegovy and Eli Lilly's Zepbound. Drugs that mimic incretin hormones such as GLP-1 and GIP to control blood sugar, suppress appetite and aid in weight loss offer patients the promise of results approaching the levels seen in bariatric surgery. The once-a-week injection was cheered by the medical community as a game-changer, and investors bid up the stock, seeing it as a big opportunity. But it didn't last. Yuri Khodjamiryan, chief investment officer at Tema ETFs, told CNBC that investors reached “peak excitement” last summer. The firm manages the Tema GLP-1 Fund, Obesity and Heart Disease ETFs (HRTS), and remains optimistic about the long-term growth potential of this category. Especially since market leaders Novo and Lilly provide more clinical evidence that GLP-1s improve overall health beyond weight loss. However, the mood was missed as the pace of growth proved unpredictable, leading to earnings disappointments and investor frustration. As the outlook for GLP-1 drugs becomes more uncertain, some stocks that were expected to suffer from the drugs' success have recovered. Both Novo and Lilly have spent billions expanding manufacturing capacity to meet massive demand. Companies have also had to deal with drug compounds encroaching on their business by exploiting a loophole that allows pharmacies to manufacture copies of drugs in short supply. Weight loss business trends in 2025 will be determined by further supply increases, news about next-generation drugs in the pipeline and regulatory clarity on drug pricing and access to GLP-1. “Lilly and Novo need to start achieving better results,” Khadjamirian said. “…This will benefit all players. Then word of mouth can start to open up that last part. …Once you have lips, the market starts to expand in size.” Taking medications orally will be easier for many patients, especially those who are wary of the once-a-week injections that are currently necessary. They are also less expensive and easier to manufacture, which will alleviate supply bottlenecks. The next trillion dollar market capitalization? Phase 3 data for orforglipron, Lilly's oral GLP-1 drug, is expected next year. Positive data could put the stock back on its path toward a trillion-dollar market cap. During the first half of the year, Lilly stock seemed headed toward achieving this milestone. But as of Friday's close, shares were down 13% over the past six months. Year to date, the stock is still up about 33%, outpacing the S&P 500's gain of 26%. LLY YTD Mountain Eli Lilly has been participating for a year now. Analysts remain optimistic about Lilly's outlook. According to FactSet, 77% rated the stock as a Buy or Overweight; Only one in sale. Shares are expected to rise more than 30% from Friday's close of $767.76 to an average price target of $1,008. However, the stock is not immune to the political environment that has pressured pharmaceutical stocks. There are concerns that Robert F. Kennedy Jr., President-elect Donald Trump's nominee to head the US Department of Health and Human Services, may restrict the use of GLP-1, according to Barclays analysts. But it is unclear how Kennedy would prioritize various policy initiatives if confirmed. There have also been positive comments from Elon Musk about GLP-1 drugs, which could support this category. “We see Lilly as being in a strong position to work creatively with new management to expand access to GLP1s (although recognizing that there is always a trade-off between access and price),” Bernstein analyst Courtney Breen wrote in a recent note to clients. Compared with Novo, it expects Lilly to have a slight advantage as a US-based company and a faster path to ramping up production volume. Meanwhile, the Biden administration has proposed a rule that would allow Medicare and Medicaid to cover weight-loss drugs. Lilly and Novo are gathering clinical evidence that GLP-1 drugs help with conditions like sleep apnea and reduce cardiovascular risk — a strategy that has helped more patients get coverage. It is unclear whether the new administration will address the issue, or leave in place a ban on coverage of weight-loss drugs in federal insurance programs. CagriSema disappoints because Novo shares were relying on clinical trial data for CagriSema, the next generation obesity drug. When the news broke on Friday, the company saw $125 billion in market value disappear. Patients in the trial lost an average of 22.7% of their weight after 68 weeks. The result was below Novo's expected range of 25% to 30%, although the Danish company said it was “encouraged” by the data. With Novo shares trading at an 18-month low, analysts' average price target estimates the stock could rebound 58% in the next year. Many analysts said Friday's reaction was too extreme and the fault of a poorly organized trial with high expectations. NVO YTD Mountain Novo Nordisk Stocks YTD Like Wegovy and Ozempic, CagriSema is given via a weekly injection and contains semaglutide. However, the drug also contains cagrelintide, a separate molecule that acts like amylin, a pancreatic hormone. The percentage of weight loss achieved by patients in the trial exceeded the Wegovy average of 15%, and was on par with Zepbound's result of approximately 23% in clinical studies. About 40.4% of CagriSema trial participants lost more than 25% of their starting weight. Furthermore, not all patients took the highest dose of the drug, leading to questions about the study generated. Novo said it will begin a new trial in the first half of next year and will likely submit the drug for regulatory approval late next year. According to Stifel analyst Eric Le Berrigaud, 25% seemed like a “magic number” because it would have made CagriSema the product most likely to give patients the greatest chance of significant weight loss and outperformed competitor Lilly's Zepbound. Novo is facing pressure to reduce its reliance on semaglutide, the active ingredient in both Wegovy and the diabetes drug Ozempic, as it may end up on the next list of drugs for Medicare price negotiations. “It (Semaglutide) across different formulations and brand names is expected to represent around 70% of the group's revenue in 2027 and although it is still part of CagriSema, the cagrilintide component of the group will be protective of what the drug generates.” Le Perigod wrote in a research note before the trial data was published. Other companies in the pipeline Zeeland Pharma, another company working on the amylin analogue drug, pulled back on Friday, in response to the Novo news. Its shares are up 80% year to date. Novo's experience underscores the challenge that startups will face in overcoming the duopoly that has been built with Lilly. Amgen announced earlier this month that its experimental drug MariTide helped patients shed 20% of their body weight. At one point, this might have been hailed as huge progress, but now investors need to be more impressed. Amgen shares fell on the news, down nearly 9% year to date. VKTX YTD Mountain Viking Therapeutics shares year-to-date. But dozens of companies, large and small, are still seeking the Holy Grail. One reason is that the potential market is broad, and patients need to keep taking these drugs forever in order to maintain their benefits. Some players may gain a manufacturing advantage, while others may create a drug that provides health benefits that is better suited to some patients. So the field will remain crowded. Of these, Viking Therapeutics shares are “very interesting,” said Khadjamirian of Tema. “Their data is quietly better and better, while their stock price is falling.” Viking Therapeutics shares are up 127% year to date, but the stock, which closed at $42.25 on Friday, has fallen by more than half since hitting an all-time high of $99.41 on February 28. , the other side of the weight loss drug business has rebounded. These stocks include diabetes technology providers such as Dexcom and Insulet. Dexcom shares are still down more than 35% this year, but the stock is up about 14% over the past three months. Insulet has performed better. Its shares are up 2% this year, thanks to a 34% rise over the past six months. DXCM Shares Year-to-Date Barclays analysts expect 2025 to be an “inflection point” in the GLP-1 narrative, as the number of patients taking the drugs is well below the potential market size. Increasing the production of medicines will enable more patients to access them. That could mean food and beverage stocks would see a more pronounced impact from changes in consumer habits, they said. Companies such as Nestle and Conagra began developing new products to serve this market. Campbell Soup commented on how soup can be a great fit for those taking these medications. Barclays analysts expect Danone, with its protein-packed brands, to be “the biggest potential winner from the GLP-1 landscape.” European-listed stocks are up almost 9% year-to-date. “Protein products will likely become more popular as GLP-1 users look to fortified products for muscle processing,” Barclays analyst Warren Ackerman said in a Dec. 16 research note. Waste, Danone's Oikos has the high protein benefits that consumers may be looking for.” In addition to monitoring penetration — or the number of people taking incretin medications — compliance is also an issue, with many patients stopping taking the medications within a year. He said: “Under the current market conditions, as more assets are coming into the market, and with the expected shift in regulation that could be constructive for deal making, we expect GLP-1 considerations to remain topical in the food and beverage sector, Priya Ohri Gupta, analyst.” In the consumer division of Barclays Bank in the United States.
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The “weight loss business” has stopped. What it will take to revive interest
