Daily Management Review

Healthcare Firms Allay Investor Concerns Regarding The Wegovy Impact


Healthcare Firms Allay Investor Concerns Regarding The Wegovy Impact
Healthcare organisations that make money from treating patients who are overweight or obese are attempting to persuade investors that potent new medications for weight loss won't negatively impact their operations.
Because Novo Nordisk's Wegovy and other similar medications are so effective, the global market for obesity therapies could grow to $100 billion in the next ten years.
These projections have led to a sell-off in a variety of businesses, including those that manufacture equipment for bariatric surgery and those that provide solutions for health problems caused by being overweight, such as sleep apnea and diabetes.
However, those businesses and experts argue that the long-term market for these medications may be constrained by the exorbitant costs of the weight-loss medications, the ambiguity surrounding their long-term use, and the possible absence of insurance coverage for the associated costs.
"The market is in a shoot-first, ask-questions-later mood when it comes to weight-loss drugs," said Nicholas Anderson, manager of the Thornburg International Growth Fund, which holds shares of Novo Nordisk. "What's less clear on the losers side is who will actually be affected and how long will it take to show up in numbers."
Novo Nordisk's Danish pharmaceutical shares have increased by 28% during the past three months. Eli Lilly, the most valuable health care firm in the world, is up 25% and is anticipated to debut its own weight-loss medicine Mounjaro soon. This has caused the company's market worth to soar to over $550 billion.
In comparison, about 22% of the value of the iShares U.S. Medical Devices exchange-traded fund has been lost in the last three months.
GLP-1 receptor agonists, which are injectable weight-loss medications, are thought to be quite successful but also very costly—they can run up to $1,300 a month. A few rivals have questioned the GLP-1 market's potential reach.
"We expect it will take at least a decade to reach peak penetration of these products in the indicated population," Kenneth Stein, Boston Scientific's global chief medical officer, told investors on Thursday, adding that only a minority of obese American patients will use the drugs. Boston Scientific (BSX.N) said the effect on the company's heart devices would be "very limited."
William Blair analyst Margaret Kaczor Andrew, who covers medical technology businesses, said she does not see a significant impact on diabetes management tools such as glucose monitors. She brought up the introduction of new drug classes, such as statins, which had decreased cardiovascular disease but not the requirement for cardiac devices.
"Ultimately, it does not impact device utilization," she said.
Resmed's CEO, Michael Farrell, stated during a Thursday investor call that the business is "tracking many thousands of patients on GLP-1 and we're seeing maintenance of adherence." Resmed manufactures devices to treat sleep apnea. Programmes for resupply are being maintained, with little to no change."
Certain investors stated that the medications might lessen the necessity for intrusive weight-loss techniques like bariatric surgery.
"It seems very natural for people to try the drugs, see about the weight loss they get, and how long-lasting it is and then delay bariatric surgery or avoid it all together," said Jeff Jonas, portfolio manager at Gabelli Funds.
Johnson & Johnson said that a slowdown in the sales of devices used in bariatric procedures was the reason why third-quarter medical device sales fell short of analyst projections.
However, according to Reuters in July, which cited a study of pharmacy claims data, only roughly one-third of patients prescribed a weight-loss medication like Wegovy were still taking it a year later at this point.
"We expect that many of them will not stay on the drug for longer than a year or two, and at that time, will consider bariatric surgery," Myriam Curet, chief medical officer at Intuitive Surgical (ISRG.O), said on the company's Oct. 19 earnings call. "Overall, we'll see an increased interest in bariatric surgery, but that will get delayed in the short term."
According to Ann Hynes, a healthcare services analyst at Mizuho Securities, the cost of the weight-loss medications and the lack of knowledge about whether their use will benefit patients' long-term health and save healthcare costs may restrict the near-term growth of insurance coverage.
She recently gave investors insight into corporate health plans during a call with two health insurers.
"Nothing is going to change in '24. If anything, I think (insurance) access is going to get stricter. It could evolve in 2025, 2026," Hynes said.