Shares of Eli Lilly & Co. LLY, +1.02%
shot up 9.0% into record territory in premarket trading Tuesday, after the drug giant reported second-quarter profit and revenue that climbed above expectations and provided a big boost its full-year outlook, as results were helped by the $579 million received from the sale of rights for Baqsimi. Net income jumped to $1.76 billion, or $1.95 a share, from $952.5 million, or $1.05 a share, in the year-ago period. Excluding nonrecurring items, adjusted earnings per share of $2.11 beat the FactSet consensus of $1.98. Revenue grew 28.1% to $8.31 billion, well above the FactSet consensus of $7.58 billion. Volume increased 29%, driven by growth in Mounjaro, Verzenio, Jardiance and Taltz, partially offset by lower volume from Alimta due to the loss of exclusivity. For 2023, the company raised its guidance ranges for adjusted EPS to $9.70 to $9.90 from $8.65 to $8.85 and for revenue to $33.4 billion to $33.9 billion from $31.2 billion to $31.7 billion. The stock, which was on track to open well above its June 30 record close of $468.98, has rallied 24.1% year to date through Monday while the S&P 500 SPX, +0.90%
has advanced 17.7%.
A national obsession with a new class of weight-loss drugs is turning dangerous, doctors and researchers say, as many patients are inappropriately prescribed Wegovy, Ozempic and similar medications and supply shortages generate a market for unauthorized, potentially risky copycat versions of these drugs.
Social media buzz about the drugs has promoted the mistaken perception that the medications are appropriate for a broad swath of people who may want to shed a few pounds–with disastrous consequences for some patients, doctors say. Patients who previously recovered from eating disorders, for example, are coming in for treatment because they “have had their eating disorder reactivated by use of these medications,” said Dr. Elizabeth Wassenaar, a regional medical director at the Eating Recovery Center, which specializes in treating the disorders. Some patients have wound up in the hospital, she said, and in some cases the providers who prescribed the drugs were unaware of the patients’ eating-disorder history. “It’s a real warning to people who prescribe these medications that it’s not without risk,” she said.
Some doctors also question whether the safety of the drugs has been adequately studied in older adults, who may have an undesirable loss of lean muscle mass when taking the medications. That complicates an ongoing debate about whether Medicare should cover these drugs for weight loss.
And patients of all types are put at risk, experts say, by the illegal production of knock-off versions of the medications. The Food and Drug Administration and several state pharmacy boards in recent weeks have warned that some compounding pharmacies are producing unauthorized versions of the drugs–which poses particular safety concerns for injectable drugs such as Wegovy, said David Margraf, a pharmaceutical research scientist with the Resilient Drug Supply Project at the University of Minnesota’s Center for Infectious Disease Research and Policy. “It’s not just a victimless crime,” he said. “People can be severely injured.”
Novo Nordisk NVO, +0.33%,
the maker of Wegovy and Ozempic, itself sought to tap the brakes on the craze around these drugs in a statement posted on its website this month, saying it’s concerned about reports of the drugs being used “for purely cosmetic or aesthetic weight loss,” unauthorized versions of the drugs hitting the market, and “insufficient clinical evaluations by some telehealth providers” promoting the drugs.
Drugs such as Novo Nordisk’s Wegovy, Ozempic and Rybelsus and Eli Lilly’s LLY, -0.36%
Mounjaro mimic the effects of a gut hormone known as GLP-1, which can help control blood-sugar levels and reduce appetite. (Mounjaro also affects another hormone called GIP.) Ozempic, Rybelsus and Mounjaro are FDA-approved for treatment of type 2 diabetes, while Wegovy is approved for people with obesity and certain people with excess weight combined with weight-related medical problems.
Billions of dollars in drug sales hinge on the breadth of the patient population prescribed these medications. Last year, more than 5 million prescriptions for Ozempic, Mounjaro, Rybelsus or Wegovy were written for weight management, up from just 230,000 in 2019, according to data and analytics firm Komodo Health. Obesity drugs could be a $54 billion market by 2030, up from $2.4 billion in 2022, Morgan Stanley said in a report last year. Reports of GLP-1 drug users seeing improvements in addictive behaviors such as smoking and drinking have lately amplified interest in the medications.
The drugs have become such a cultural phenomenon that Walmart during its quarterly earnings call last week blamed the medications for a shift in consumer-spending patterns that pressured its margins. In the first quarter, the company saw “a shift to health and wellness,” John Rainey, Walmart Inc.’s WMT, +0.18%
executive vice president and chief financial officer, said on the call with analysts. “And part of that is related to these GLP-1 drugs that are to treat diabetes,” he said, adding that the shift “comes at a lower margin, and so that has some impact on our business as well.”
Noom, a digital health company that for years has emphasized a behavioral approach to weight management, this week announced a new program that will make Ozempic, Wegovy, Mounjaro and other medications available to eligible patients. “Prescriptions are not the goal of our program. They’re very much an adjunct,” Dr. Linda Anegawa, Noom’s chief of medicine, told MarketWatch. Medical professionals will review patients’ entire health history, order labs to assess their metabolic health, and engage in video visits with patients as they determine what treatments might be appropriate, she said.
Telling your brain you’re not hungry
The reason GLP-1 drugs help control weight is pretty straightforward, said Dr. Daniel Drucker, who helped discover GLP-1 and is senior scientist at Lunenfeld-Tanenbaum Research Institute in Toronto. When people take these drugs, he said, they simply eat less because they feel more full. “GLP-1 will tell your brain that you’re not hungry,” he said, and people taking these medications may feel less stressed about food or find themselves thinking less about food. And the effects may go beyond eating, he said, as some people also see improvements in smoking, drinking, and other addictive or compulsive behaviors. “These are really interesting areas for further investigation,” he said. Drucker has been a consultant or speaker for Novo Nordisk, Pfizer PFE, -0.61%
and other pharmaceutical companies.
Novo Nordisk said in a statement to MarketWatch that it is not conducting any dedicated clinical studies to evaluate Ozempic, Rybelsus or Wegovy in patients with substance-use disorders or addiction-related illnesses, and Eli Lilly said it does not have any studies planned for investigating tirzepatide–the active ingredient in Mounjaro–for treatment of addiction.
Adolescents’ use of the drugs for weight loss is a particular concern for some doctors. Wegovy is approved for treatment of obesity in children 12 and older. “The adolescent mental health crisis is unprecedented,” said Wassenaar, with many teens suffering severe mood disorders, eating disorders, and suicidality, and teens struggling with depression may think, “if I lose weight, I’ll feel better and people will like me. There’s this magic drug, and all I have to do is inject it.” And if patients can start taking these drugs as early as 12 years of age, “we just don’t know what that’s going to do to them in 10 or 20 years,” she said, because there’s not enough long-term data.
Novo Nordisk said in a statement to MarketWatch that “teenage obesity is linked to weight-related health problems such as high blood pressure, high cholesterol and type 2 diabetes,” and that cutting calories and increasing physical activity may not be enough for some patients. “The decision to prescribe an anti-obesity medication is at the discretion of the physician and the patient/parents,” the company said.
Eli Lilly said that tirzepatide is not currently being studied for chronic weight management in children or adolescents.
Many patients may have trouble filling lower-dose Wegovy prescriptions through September, according to drugmaker Novo Nordisk.
Novo Nordisk via AP
Some doctors are also concerned about broad use of the drugs among older adults. Many older adults have sarcopenia, an age-related loss of muscle mass and strength that can contribute to frailty and fall risk later in life–and losing weight can mean an additional loss of muscle mass that may not be advisable for some patients, doctors and researchers say.
While “there’s a huge push to get Medicare to cover these drugs, it’s not really certain whether they would be helpful in this population or actually more harmful,” said Judy Butler, a research fellow at PharmedOut, a research and education project at Georgetown University Medical Center. Noom is not enrolling patients over age 60 in its new program, Anegawa said, partly because “we really don’t have enough data yet with many of these drugs in the geriatric population.”
In the pivotal clinical trials for Wegovy, 9% of the Wegovy-treated patients were between 65 and 75 years of age, and 1% were 75 and older, Novo Nordisk said in a statement. “No overall differences in safety or effectiveness have been observed between patients 65 years of age and older and younger adult patients,” the company said. In an ongoing cardiovascular outcomes trial, about 38% of patients are 65 or older, the company said.
By law, Medicare generally does not cover drugs prescribed for weight loss–although some drugmakers and industry groups are pushing to change that. Some of the drugs now generating intense demand also come with a hefty sticker price: Wegovy, for example, has an estimated annual net cost of about $13,600, according to the Institute for Clinical and Economic Review. If Medicare coverage rules changed and 10% of beneficiaries with obesity used Wegovy, total annual Medicare Part D spending on the drug could be as much as $26.8 billion, according to a recent study published in the New England Journal of Medicine. That’s more than 18% of the net total Part D spending by beneficiaries and the Medicare program in 2019.
Dangerous copycats
There are potential physical as well as financial costs. Side effects of the drugs can range from nausea and vomiting to gallbladder problems, inflammation of the pancreas, and thyroid cancer.
More broadly, some doctors question the prescribing of drugs solely based on obesity, absent other risk factors. “If somebody is obese and has diabetes, high blood pressure, and high cholesterol, losing weight may improve those parameters, but obesity on its own does not need to be treated,” said Dr. Adriane Fugh-Berman, a professor at Georgetown University Medical Center and director of PharmedOut. “It’s cardiovascular fitness that is important, no matter what weight you are,” she said. “We should stop focusing on the weight itself as a risk factor.”
Dr. Robert Gabbay, chief science and medical officer at the American Diabetes Association, counters that “obesity is a disease, and therefore needs to be treated as such.” Although there are people with obesity who don’t have other serious conditions, he said, “that’s relatively uncommon.”
Despite the concerns, shortages of the drugs persist. Novo Nordisk says it anticipates that many patients will have trouble filling lower-dose Wegovy prescriptions through September.
For patients who are relying on GLP-1 drugs for treatment of diabetes, even a short-term interruption in access to the drugs can cause blood-glucose levels to rise and result in serious complications, Gabbay said. Patients also tend to gradually ramp up dosage of these drugs to get to the effective dose, he said, and if they lose access to the medication “they might have to start back at the beginning again,” putting them several months behind on their treatment.
The shortages can also create risks for a broader set of patients, experts say, as they spur demand for copycat versions of the drugs. The approved active ingredient in Wegovy and Ozempic is semaglutide in its base form, but some compounding pharmacies may be using salt forms of semaglutide, the FDA said in a late April letter to the National Association of Boards of Pharmacy. “We are not aware of any basis for compounding a drug using these semaglutide salts that would meet federal law requirements” restricting the types of active ingredients used in compounding, the FDA said in the letter. Boards of pharmacy in several states, including West Virginia, North Carolina and Mississippi, have also recently issued warnings about compounded semaglutide.
Novo Nordisk said in the statement posted on its website this month that it is “actively monitoring and taking action against” entities unlawfully selling compounded semaglutide, adding that no FDA-approved generic versions of semaglutide currently exist.
Unauthorized compounded versions of the drugs could raise serious concerns about sterility and other quality-control issues, the Resilient Drug Supply Project’s Margraf said. “If this drug is in high demand and there isn’t enough supply, people will find a way to get it from a gray-market source,” he said. “People are going to find ways around the laws and potentially harm patients.”
Eli Lilly & Co.’s market cap neared Johnson & Johnson’s market cap on Friday, as the stock has benefited from a slew of positive data in trials for key treatments.
Earlier Friday, Lilly stock LLY, +0.00%
was on track to close with a greater market capitalization than J&J JNJ, -0.13%,
which would have marked the first time since 1997. Lilly stock ended flat, however, for the session at $434.43.
The stock has been steadily rising since the release of positive data from a trial of a treatment for Alzheimer’s disease in early May, showing significant slowing of cognitive and function decline in patients with early symptomatic Alzheimer’s disease.
Nearly half, or 7% of participants, had no clinical progression at one year, compared to 29% on placebo. The drug, called donanemab slowed clinical decline by 35% compared to a placebo and resulted in 40% less decline in the ability to perform activities of daily living, including managing finances, driving, engaging in hobbies and conversing about current events, the company said.
The company is planning to proceed with global regulatory submissions as quickly as possible and expects to make a submission to the U.S. Food and Drug Administration this quarter.
That’s not all. In April, Eli Lilly released data on its new obesity drug tirzepatide that showed patients in a trial losing up to 15.7% of their body weight, or about 34.4 pounds.
More than 80% of people taking tirzepatide lost at least 5% of their body weight, the company said, compared with about 30% of those taking a placebo.
The degree of average weight reduction seen in the trial “has not been previously achieved” in similar Phase 3 trials, Dr. Jeff Emmick, senior vice president for product development at Lilly, said in a statement.
Source: FactSet, Dow Jones Market Data
The company is planning regulatory submissions for that drug later this year. Tirzepatide was approved by the FDA last year as Mounjaro, a treatment for Type 2 diabetes.
Lilly has several other pipeline prospects, including lebrikizumab, a treatment for atopic dermatitis; mirikizumab for ulcerative colitis; empagliflozin, a treatment for chronic kidney disease; and pirtobrutinib for relapsed/refractory mantle cell lymphoma.
Lilly’s stock is up about 20% in the year to date and up 50% in the past 12 months.
Johnson & Johnson’s stock, meanwhile, has fallen 9% in the year to date and is down roughly the same over the past 12 months.
The company swung to a first-quarter loss as it booked a multibillion-dollar charge to settle lawsuits stemming from its talc-containing powders.
J&J booked a $6.9 billion one-time litigation charge relating to lawsuits filed by people alleging the company’s talc-containing powders caused cancers, asbestos poisoning and other illnesses. The company has offered to pay at least $8.9 billion to settle the suits, and remove an overhang on the stock.
It has taken just one day for Tesla Inc.’s stock to erase the entire bounce it enjoyed over the last three days trading sessions of 2022, as disappointing deliveries data helped trigger the biggest selloff in more than two years.
The stock’s TSLA, -12.24%
Tuesday drop knocked the electric vehicle maker’s market capitalization to 15th on the list of most valuation S&P 500 index companies.
On Tuesday, Tesla’s market cap fell below that of consumer products company Procter & Gamble Co. PG, +0.01%,
with a current market cap of $359.18 billion, and was just below Nvidia Corp. NVDA, -2.05%
at $352.15 billion, according to FactSet data. Tesla sat just above Chevron Corp. CVX, -3.06%,
which was at $336.43 billion. (See list of S&P 500’s 20 most valuable companies as of Tuesday’s closing prices below.)
Tesla’s stock took a $15.08, or 12.2% dive, to $108.10 on Tuesday, to lead the S&P 500’s SPX, -0.40%
decliners, after the company reported over the weekend that fourth-quarter deliveries that came up short of expectations for the third quarter in a row. It suffered the biggest one-day decline since it plummeted 21.1% on Sept. 8, 2020, and closed at the lowest price since Aug. 13, 2020.
With about 3.16 billion shares outstanding as of Oct. 18, the stock’s decline shaved about $47.62 billion off Tesla’s market cap, to bring it down to $341.35 billion. That’s a far cry from the peak market cap of $1.24 trillion reached exactly one-year ago.
If there’s a bright side to Tuesday’s stock selloff, it’s that even though the price fell below the Dec. 27 closing price, the RSI ended the day at 24.86, which is up from the Dec. 27 record low of 16.56.
That could be a preliminary sign of what chart watchers call “bullish technical divergence,” which is when prices make lower lows while the RSI makes a higher low. It’s still rather early to make that determination, however, as the stock needs to start bouncing again to see if RSI bottoms above the previous low.
Market caps of the Top 20 most valuable S&P 500 companies: