Novo Nordisk, the Danish drugmaker, recently unveiled long-awaited data on the cardiovascular benefits of its weight-loss drug, Wegovy. This announcement has the potential to expand insurance coverage for not only this particular medication but also other popular diabetes and obesity drugs categorized as GLP-1 drugs. The release of this data was highly anticipated and has analysts buzzing with excitement.

Interestingly though, the stocks that experienced the most significant surge in trading following this news were not those of Novo Nordisk but rather medical-device makers and other diabetes-related companies. These companies have previously suffered from the increasing popularity of GLP-1 drugs. Midday on Monday, shares of continuous-glucose-monitoring company DexCom Inc., insulin-pump maker Insulet Corp., and dialysis company DaVita Inc. saw increases of roughly 4% to 7%. In contrast, Novo Nordisk's American depositary receipts remained relatively unchanged.

Leerink Partners analysts reviewed the Novo Nordisk study and found that the rates of risk reduction and progression to prediabetes and diabetes were consistent with expectations based on previously reported data on GLP-1 drugs. This outcome is particularly favorable for stocks like Insulet, DexCom, and Intuitive Surgical Inc., which have been disproportionately affected by concerns surrounding GLP-1 drugs.

However, the analysts noted that despite the reduction in diabetes risk, the discontinuation rates for patients taking GLP-1 drugs remain high in a real-world setting. They do not anticipate patients who discontinue therapy to experience similar benefits. In fact, in the Novo Nordisk study, approximately 17% of patients taking Wegovy had adverse events that led them to stop using the drug, primarily due to gastrointestinal problems. This is in comparison to around 8% of those in the placebo group.

Overall, Novo Nordisk's new data has created quite a stir in the healthcare stocks market. While the spotlight may be on Novo Nordisk, it's clear that other players, specifically medical-device makers and diabetes-related companies, are capitalizing on this opportunity. As the landscape of GLP-1 drugs continues to evolve, investors will closely monitor the performance of these stocks.

Modestly De-risking Medical-Technology Stocks: A Closer Look at GLP-1 Data


Mixed Results for Drugmakers

While the GLP-1 data holds promise for certain drugmakers, analysts believe that the overall impact is mixed. Though it could potentially pave the way for broader insurance coverage of GLP-1 drugs, Medicare remains legally prohibited from covering prescription drugs specifically for weight loss. Nonetheless, some expect that this study could exert pressure on Medicare to consider covering Wegovy, a GLP-1 drug used for the treatment of cardiovascular disease, even without any changes in legislation pertaining to obesity-drug coverage, as noted in a report by Citi analysts.

Challenging Arbitrary Coverage Hurdles

Another potential consequence of the study's findings is the increased difficulty facing insurance providers seeking to implement arbitrary coverage hurdles, like restricting coverage of the drug to patients above a certain body-mass index. Analysts from Leerink Partners suggest that the observed cardiovascular benefits in the results indicate that weight loss alone may not be the sole driver of these advantages. Consequently, the study challenges the validity of such stipulations.

A Pathway for Eli Lilly's Zepbound

The study also presents an opportunity for Eli Lilly's recently approved obesity drug, Zepbound, to build upon the positive results observed with Wegovy. In clinical trials, Zepbound has demonstrated even greater weight loss efficacy. BMO Capital Markets analysts suggest that the favorable outcomes associated with tirzepatide, the active ingredient in Zepbound, seen in the Wegovy study bodes extremely well for its potential success.

Market Indicators

As a result of these developments, Eli Lilly shares have increased by approximately 2% as of midday Monday and have shown significant gains of 67% year-to-date. Moreover, Novo Nordisk's ADR has also seen a boost of about 49% this year, while the S&P 500 SPX has gained 15%.

In conclusion, the newly released GLP-1 data plays a vital role in mitigating risks associated with medical-technology stocks. Furthermore, it has the potential to shape the future of insurance coverage while creating opportunities for advancements in obesity-drug treatments.

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