Advertisement

Pharmaceutical companies behind weight-loss drugs are slimming down a new target: The Magnificent 7

Pharmaceutical companies behind weight-loss drugs are slimming down a new target: The Magnificent 7

Happy Friday! President Joe Biden delivered a State of the Union yesterday that was unlike any in recent memory. He seized the opportunity to tear into his predecessor, Donald Trump — and Trump was quick to vent his fury online.

In today's big story, we're looking at pharma companies' surging stocks and threatening tech darlings thanks to their weight-loss drugs.

What's on deck:

But first, there's a new kid on the block.


If this was forwarded to you, sign up here.


The big story

Magnificent weight loss

A person holding a vial.
AP

Weight-loss drugs have become a trendy way to shed pounds in recent years. The companies behind them are now slimming down a new target: The Magnificent 7.

Mom-and-pop investors have been net sellers of most of the Magnificent 7 stocks, selling off shares of Tesla, Apple, Alphabet, and Microsoft, according to a new note from JPMorgan.

Meanwhile, pharmaceutical companies appear to have gained what the market's tech darlings lost, writes Business Insider's Yuheng Zhan. Eli Lilly, Pfizer, and Novo Nordisk have grabbed the attention of retail investors, according to JPMorgan.

That shift was evident Thursday. Shares of Novo Nordisk, the drug maker behind Wegovy, surged to a record high following an update on a new obesity drug, pushing its market cap ranking past Magnificent 7 laggard Tesla.

Expectations are high for fellow weight-loss drugmaker Eli Lilly. Bank of America assigned it a $1,000 price target, the highest on Wall Street, off the potential its weight-loss drug tops $60 billion in sales by 2030. And some have speculated it could become the first trillion-dollar drug company.

Market experts expected investors to exit some of their Magnificent 7 positions to realize some of the massive gains they accumulated last year. And retail investors remain buyers of Nvidia, the crown jewel of the Mag 7, JPMorgan said.

But the growth these pharma companies have already shown is impressive. And it comes despite only 1% of US adults taking weight-loss drugs, according to Bank of America, which predicts that number could rise to 15% by 2035.

Four photos of patients and doctors against a blue background.
Hannah Latham; Octavio Jones; Christian Rodriguez; Laura MacPherson; Jenny Chang-Rodriguez/BI

Not unlike artificial intelligence, which has pushed tech stocks higher, the weight-loss drugs fueling pharmaceuticals' recent rally have their critics.

The most notable concerns stem from a lack of understanding of the long-term effects of the drugs, which act on our neural pathways. For some, their loss of appetite has come with a similar apathy towards other things, like work or sex.

Weight-loss drugs are also cutting more than just fat. Doctors have raised concerns about the major loss of muscle mass people on these drugs can experience, especially if they're not getting enough protein or exercise.

Drug companies are already considering ways to incorporate drugs that can help users build muscle while also losing fat, according to The Atlantic.

For Wall Street, meanwhile, the equation is much simpler: Getting more people on weight-loss drugs boosts the economy. The US GDP could grow an extra 1% if 60 million Americans took GLP-1 drugs by 2028, according to Goldman Sachs' chief economist.


3 things in markets

Market bull money stocks
Business Insider
  1. Companies buying their own stock is back in fashion. Share repurchases will hit $925 billion this year and $1 trillion next year, according to Goldman Sachs. The trend, which will be powered by cash-rich mega-cap tech companies, is thanks to strong earnings growth, the bank said. However, the Biden administration is mulling quadrupling taxes on stock buybacks.

  2. A billionaire real estate mogul has some stern words for the Fed. Barry Sternlicht said the real estate industry was "minding our own business" when it became "collateral damage" of the Fed's aggressive rate hikes. He also pointed to the Fed's tightening policy amid government spending on the Infrastructure Investment And Jobs Act and the Inflation Reduction Act.

  3. An old hedge-fund strategy makes a comeback. Alpha capture strategies, which generate investment portfolios by aggregating inputs from sources including human traders, market data, and sell-side research, are hot again in the hedge-fund world.


3 things in tech

The Apple logo on a store.
Fernando Gutierrez-Juarez/Getty Images
  1. Apple can't catch a break. It's been a rough week for the iPhone maker: On Monday, the European Commission slapped it with a $2 billion fine. Then, a report found its iPhone sales in China had dropped 24% in the first six weeks of the year. And that's saying nothing of its abandoned EV ambitions.

  2. Tesla's value is sagging — bringing Elon Musk down with it. The EV company has seen its value slump by $234 billion this year. That's more than McDonald's, Disney, or Nike are worth. In turn, Musk's wealth has dropped by almost $40 billion since the start of 2024.

  3. TikTok is fighting back against Congress. Lawmakers are talking about banning the app once again — and the White House has signaled it thinks that's a good idea. TikTok has responded by sending messages to some users that urge them to help it stop a shutdown.


3 things in business

An illustration of a bike locked to a parking meter.
Pete Ryan for BI
  1. Bike lanes are good for business. Some store owners worry that bike lanes take away parking spots, hindering customers' access to shops. But studies have shown bike lanes do nothing to reduce business — and may actually help improve sales.

  2. Temu will open to US merchants soon. US-based merchants told BI they're eager to sell on Temu as it rapidly grows. The Chinese ecommerce platform has made a splashy entrance into the American market, reportedly spending $2 billion for advertising on Meta.

  3. Check out Rivian's new EVs. The carmaker revealed two new SUVs on Thursday: the long-awaited R2 and a surprise, smaller version called the R3. "These represent our future," Rivian CEO RJ Scaringe said. Take a look at the designs, specs, and other features.


In other news


What's happening today

  • SXSW kicks off today.


The Insider Today team: Dan DeFrancesco, deputy editor and anchor, in New York. Hallam Bullock, editor, in London. Jordan Parker Erb, editor, in New York. George Glover, reporter, in London.

Read the original article on Business Insider