It was the most important breakthrough in diabetes care for the reason that discovery of insulin.
A brand new Sort 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 chance of coronary heart assaults or strokes by greater than 20%.
And that’s not all…
The drug imitates a novel hormone (known as “glucagon-like peptide-1”) to handle insulin ranges. That very same hormone is answerable 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 therapy, stumbled upon the last word weight reduction drug.
It’s no exaggeration to say that semaglutide, which is offered below 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 minimize down on cravings and starvation.
It reduces what research name “meals noise,” which is that fixed nagging suspicion that it is best 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 instructed the press that: “My anti-aging physician simply fingers 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 change into 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 buyers (extra on that in only a second).
So why are European authorities desperately slamming on the brakes and combating to maintain this miracle drug from reaching mass enchantment?
Too Common 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 downside with that. It’s all as much as the physician’s discretion. However it means the prescription is “off-label,” and insurance coverage usually gained’t cowl it.
Because of the reputation of off-label prescriptions, Novo Nordisk created a higher-dosage model of the drug that may very well be prescribed to deal with weight problems, and named that “Wegovy.”
Each medicine are immensely in style, they usually’re usually in brief provide. When Wegovy isn’t accessible, medical doctors prescribe off-label Ozempic as a substitute.
The difficulty arises as a result of Ozempic is a real life-saving drug for these with Sort 2 diabetes. Interrupting provide for these people might represent a serious well being danger.
60 Minutes lined this concern extensively of their Ozempic characteristic from January of this yr. (Check it out here.)
Since then, the scarcity has solely gotten worse. So authorities in Europe — the place the drug is produced — are stepping as much as defend these in danger.
Final Tuesday, Belgium’s authorities introduced it was banning off-label prescriptions of Ozempic till summer season of subsequent yr.
British medical doctors are actually additionally forbidden from prescribing Ozempic outdoors of Sort 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 nicely into subsequent summer season.
Right here in America, Ozempic is obtainable at an enormous markup — however demand isn’t slowing.
Which brings us again to the buyers…
Drug of the Decade = Funding of the Decade?
Buyers (and human beings on the whole) have a pure tendency to affiliate reputation with success.
When 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.
Perhaps you’ll even spend money on the enterprise.
This isn’t at all times a foul factor.
In any case — in style 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 believe it’s our responsibility as buyers (and particularly mine as a monetary editor) to ensure we’re placing our cash towards the very best investments for our portfolio and our state of affairs.
It’s vital to comprehend that one nice product doesn’t at all times make for a really nice enterprise.
Even an amazing enterprise isn’t at all times investable.
And proper now, I don’t suppose Novo Nordisk is a good funding.
As ordinary, we’ll begin with its Green Zone Power Ratings:
A “Bullish” 77 out of 100 isn’t a foul 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 yr, 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 appears to be like like the corporate’s financials are going gangbusters, with North American gross sales up 45% yr over yr.
However most of that development 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 unhealthy, however not nice.
There’s additionally the matter of competitors…
Latest trials have confirmed that Eli Lilly’s Mounjaro is much more efficient with regards to 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 beginning of a complete new weight reduction drug business — one that can develop to be value $70 billion within the U.S. by 2035.
NVO will completely be a serious participant in that new business.
However it gained’t be the type of payday many buyers anticipate.
This would possibly even play out just like the final massive miracle drug mania of the early 2000s.
Medical Breakthroughs & Market Duds
Again within the late Eighties, Pfizer developed Sildenafil as a medication to deal with coronary heart illness.
However similar to Ozempic, it was quickly found to have … different results.
It was authorised by the FDA in March 1998, and marketed as an erectile dysfunction capsule below the model title “Viagra.”
Similar to Ozempic, Viagra opened up an entire new multibillion-dollar business.
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 this present day, Viagra holds a 58% share of the erectile dysfunction drug market and sells for $70 per capsule.
So Pfizer Inc.’s (NYSE: PFE) buyers will need to have made a fortune, proper?
Properly, not precisely:
Nice product. Nice enterprise, even. However not an amazing funding.
PFE has paid regular dividends through the years, however in any other case, its inventory hasn’t actually gone wherever within the quarter-century since Viagra was launched.
You had been significantly better off investing in PFE through 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 enhancing upon present medicines than breaking new floor.
So the place can we discover these sorts of up-and-coming shares within the pharmaceutical or well being care house?
Choose Your Pharma Investments With Care
Huge pharma shares don’t current a lot in the best way of nice alternatives in right now’s market.
My workforce carried out a fast “X-ray” of the highest ten holdings of the SPDR S&P Prescribed 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 remainder got here in a lot decrease, which is smart.
Proper now, massive pharmaceutical corporations are below super strain.
Producers of generic alternate options are driving costs decrease.
Medicare’s worth negotiation program is forcing them to work with tighter margins.
And apart from the few pharma gamers who’ve developed eating regimen medicine and COVID remedies over the previous few years, earnings are fairly weak.
Buyers are additionally extra risk-averse in right now’s local weather, and it’s arduous in charge them.
That’s why I’ve personally began trying to the smaller pharma corporations for larger alternatives…
Firms with the identical potential Pfizer had within the early 90s…
Or Novo Nordisk had earlier than it took off…
Smaller corporations that is probably not trailblazers, however are nonetheless on the market innovating to raised serve their market.
Nice companies which are additionally nice investments. Even when they’re not in style.
And I simply added one to my 10X Shares portfolio.
To good income,
Chief Funding Strategist, Cash & Markets