It was the largest breakthrough in diabetes care because the discovery of insulin.
A brand new Kind 2 diabetes treatment that can be utilized when different therapies fail. One which persistently lowers blood sugar ranges and regulates insulin with only one dose per week.
Even for these with out diabetes, the drug can decrease the danger of coronary heart assaults or strokes by greater than 20%.
And that’s not all…
The drug imitates a singular hormone (referred to as “glucagon-like peptide-1”) to handle insulin ranges. That very same hormone is liable for managing starvation, signaling that we’re full after a meal and slowing the speed at which our abdomen empties.
In different phrases — Novo Nordisk (NYSE: NVO), the Danish pharmaceutical firm behind this revolutionary remedy, stumbled upon the final word weight reduction drug.
It’s no exaggeration to say that semaglutide, which is offered beneath the names “Ozempic” and “Wegovy” is as shut as science has come to a magic capsule for weight-reduction plan.
As a result of that very same weekly injection can dramatically lower down on cravings and starvation.
It reduces what research name “meals noise,” which is that fixed nagging suspicion that you need to have a bag of chips in your hand.
The drug is already taking Hollywood by storm, with dozens of celebrities talking frankly about taking Ozempic to remain slim.
Comic Tracy Morgan mentioned he acquired a prescription: “And I ain’t letting it go… It cuts my urge for food in half. Now I solely eat half a bag of Doritos.”
Chelsea Handler advised the press that: “My anti-aging physician simply palms it out to anyone. I didn’t even know I used to be on it.”
When Elon Musk was requested about his personal weight reduction, he merely responded: “Fasting … and Wegovy.”
It’s even taken social media by storm, with TikTok’s #Ozempic web page being considered 273 million instances.
And that is solely the start…
By 2030, Wegovy and Ozempic are anticipated to grow to be the bestselling medicine of all time with an estimated $38.5 billion in mixed annual gross sales.
That’s nice information for Novo Nordisk and its traders (extra on that in only a second).
So why are European authorities desperately slamming on the brakes and preventing to maintain this miracle drug from reaching mass attraction?
Too Standard for Its Personal Good
When it’s prescribed as a diabetes treatment, the semaglutide is known as “Ozempic.”
If Ozempic is prescribed particularly for weight reduction, which means it’s not strictly getting used for its supposed function.
There’s no drawback with that. It’s all as much as the physician’s discretion. However it means the prescription is “off-label,” and insurance coverage typically gained’t cowl it.
Because of the reputation of off-label prescriptions, Novo Nordisk created a higher-dosage model of the drug that might be prescribed to deal with weight problems, and named that “Wegovy.”
Each medicine are immensely well-liked, they usually’re typically briefly provide. When Wegovy isn’t obtainable, docs prescribe off-label Ozempic as a substitute.
The difficulty arises as a result of Ozempic is a real life-saving drug for these with Kind 2 diabetes. Interrupting provide for these of us may represent a serious well being danger.
60 Minutes coated this situation extensively of their Ozempic function from January of this 12 months. (Test it out right here.)
Since then, the scarcity has solely gotten worse. So authorities in Europe — the place the drug is produced — are stepping as much as shield these in danger.
Final Tuesday, Belgium’s authorities introduced it was banning off-label prescriptions of Ozempic till summer time of subsequent 12 months.
British docs at the moment are additionally forbidden from prescribing Ozempic exterior of Kind 2 diabetes circumstances for the foreseeable future.
The scarcity in Europe has escalated to the purpose that German authorities are even contemplating an outright export ban.
And the drug’s restricted availability will final properly into subsequent summer time.
Right here in America, Ozempic is obtainable at a large markup — however demand isn’t slowing.
Which brings us again to the traders…
Drug of the Decade = Funding of the Decade?
Buyers (and human beings on the whole) have a pure tendency to affiliate reputation with success.
Should you see a inventory plastered everywhere in the headlines and listen to about it within the monetary media, you’re more likely to pay extra consideration.
Possibly you’ll even spend money on the enterprise.
This isn’t at all times a nasty factor.
In spite of everything — well-liked shares like Fb, Apple and Google have been fairly good investments during the last 5 years.
However I don’t suppose we must always accept “fairly good.”
I feel it’s our obligation as traders (and particularly mine as a monetary editor) to ensure we’re placing our cash towards the absolute best investments for our portfolio and our scenario.
It’s essential to comprehend that one nice product doesn’t at all times make for a very nice enterprise.
Even an awesome enterprise isn’t at all times investable.
And proper now, I don’t suppose Novo Nordisk is a superb funding.
As traditional, we’ll begin with its Inexperienced Zone Energy Rankings:
A “Bullish” 77 out of 100 isn’t a nasty rating. NVO ought to simply ship 2X market returns after which some over the following 12 months.
NVO’s shares have already gained 70% during the last 12 months, they usually’re up over 335% within the final 5 years.
So Momentum and Volatility scores are each off the charts (in a good approach). However it struggles on Worth and Dimension.
At first, it seems to be like the corporate’s financials are going gangbusters, with North American gross sales up 45% 12 months over 12 months.
However most of that progress is because of the large markup I discussed earlier (with Ozempic prescriptions itemizing at $936 within the U.S., in comparison with $83 in France and $87 in Australia).
In Europe, the place costs are decrease, gross sales are up simply 14%. Not dangerous, however not nice.
There’s additionally the matter of competitors…
Latest trials have confirmed that Eli Lilly’s Mounjaro is much more efficient in terms of shedding pounds — serving to individuals lose upward of 40 to 60 kilos.
And simply two weeks in the past, Mounjaro was cleared by authorities within the U.S. and Nice Britain for widespread use.
Eli Lilly is even creating oral variations of those medicines, so that you keep away from injections.
Based on Evan David Seigerman from BMO Capital Markets, we’re witnessing the delivery of an entire new weight reduction drug trade — one that can develop to be price $70 billion within the U.S. by 2035.
NVO will completely be a serious participant in that new trade.
However it gained’t be the type of payday many traders anticipate.
This may even play out just like the final large miracle drug mania of the early 2000s.
Medical Breakthroughs & Market Duds
Again within the late Nineteen Eighties, Pfizer developed Sildenafil as a medication to deal with coronary heart illness.
However identical to Ozempic, it was quickly found to have … different results.
It was authorized by the FDA in March 1998, and marketed as an erectile dysfunction capsule beneath the model title “Viagra.”
Similar to Ozempic, Viagra opened up a complete new multibillion-dollar trade.
The brand new drug was all the fashion.
Its aggressive advert marketing campaign featured none aside from Senator and former Presidential candidate Bob Dole.
Viagra gross sales steadily grew within the following years earlier than climaxing in 2008 at $1.9 billion.
To today, Viagra holds a 58% share of the erectile dysfunction drug market and sells for $70 per capsule.
So Pfizer Inc.’s (NYSE: PFE) traders will need to have made a fortune, proper?
Effectively, not precisely:
Nice product. Nice enterprise, even. However not an awesome funding.
PFE has paid regular dividends through the years, however in any other case, its inventory hasn’t actually gone anyplace within the quarter-century since Viagra was launched.
You had been a lot better off investing in PFE in the course of the years earlier than Viagra was launched.
Throughout these years, the corporate was a lot smaller.
And its earlier breakout merchandise like Zoloft (an antidepressant) had been extra about bettering upon current medicines than breaking new floor.
So the place can we discover these forms of up-and-coming shares within the pharmaceutical or well being care area?
Choose Your Pharma Investments With Care
Large pharma shares don’t current a lot in the best way of nice alternatives in right now’s market.
My staff carried out a fast “X-ray” of the highest ten holdings of the SPDR S&P Prescription drugs ETF (NYSE: XPH) for this text.
We discovered that simply 1 of the ten shares had “Bullish” Inexperienced Zone Energy Rankings at 74 out of 100.
The remaining got here in a lot decrease, which is sensible.
Proper now, massive pharmaceutical corporations are beneath great stress.
Producers of generic options are driving costs decrease.
Medicare’s worth negotiation program is forcing them to work with tighter margins.
And other than the few pharma gamers who’ve developed weight loss program medicine and COVID remedies over the previous couple of years, earnings are fairly weak.
Buyers are additionally extra risk-averse in right now’s local weather, and it’s exhausting responsible them.
That’s why I’ve personally began seeking to the smaller pharma corporations for greater alternatives…
Corporations with the identical potential Pfizer had within the early 90s…
Or Novo Nordisk had earlier than it took off…
Smaller corporations that will not be trailblazers, however are nonetheless on the market innovating to higher serve their market.
Nice companies which can be additionally nice investments. Even when they’re not well-liked.
And I simply added one to my 10X Shares portfolio.
Get the main points on that inventory HERE.
To good earnings,
Adam O’Dell
Chief Funding Strategist, Cash & Markets
