The weight loss frenzy is making some pharma stocks more volatile. Will the drama continue?
Recent volatility in key GLP-1 stocks has highlighted the concerns Wall Street has about the weight loss market. The market is huge – potentially worth $150 billion a year by the end of the decade – and any financial miss, or misinformation of any kind, will cause more selling.
This past week, for example, Amgen (AMGN) lost $12 billion in market value. Hims & Hers (HIMS) fell 10% in one day in October when the FDA cleared drug shortages for Eli Lilly (LLY). (Its worst day on record was Nov. 14, down 24% after Amazon ( AMZN ) launched a direct doctor-matched service.)
Last month was the most dramatic, when Lilly saw more than 127 billion in stock value wiped out in a massive loss in one day. The company missed analyst estimates for its diabetes and weight loss drugs, Mounjaro and Zepbound. (Investors bought Lilly's dip and losses were compounded at $54 billion by the market close).
The stock's recovery came only after CEO David Ricks answered an analyst's question on the earnings call about the sales loss, saying demand was up 25% in the quarter. The stock started to rally after that, according to Citi health analyst Geoff Meacham.
How flexible is that? The movement seen in Lilly's stock is generally reserved for Magnificent Seven stocks. For example, the day after the election, the market price of Tesla (TSLA) increased by 120 billion dollars.
On the day of Lilly's loss, another company on its way to the GLP-1 space was grappling with what the sale would mean for its future.
Amgen CFO Peter Griffith told Yahoo Finance that the company, whose GLP-1 candidate MariTide is in mid-stage clinical trials, is concerned that investors will change the way they value the company's stock — from an overall performance scale to a focus on a single product. .
“There's no doubt that MariTide … will overtake all our other issues here very soon,” Griffith said, not knowing at the time that he would meet that fate two weeks later.
The company's stock was hammered on November 12 after old MariTide data published by an analyst briefly appeared to highlight a problematic side effect, which was quickly circulated by other analysts and Amgen itself.
The potential for higher profits has created momentum for leading GLP-1 companies – and serves as a warning to those who will follow.
“There are more eyes on Novo and Lilly than any other health care stock, by a mile. That alone will learn more volatility,” said Mizuho's healthcare industry expert Jared Holz.
