What the Expanding Reach of Weight-Loss Drugs Means For Health Care 10/11/23

0:01Live from the NASDAQ market side in the heart of New York City's Times Square. This is Fast Money. Here's what's on tap tonight. Deep impact, the growing power of obesity drugs on full display today. Lillian Novo Nord is soaring while the dialysis, diabetes and device makers fall hard. A deep dive on how the street is now viewing these drugs as game changers for the future of health care. Plus, unhappy feet. Investors not sliding on shares of Birkenstock on its first day of trading. The stock closing nearly six dollars below its offer price. We'll take a look at why so many of the recent IPOs have hit the street like two left feet.

0:35And later, inside gold and silver's bright and shiny week, breaking down the banks ahead of earnings season, and is more turbulence in the forecast for Delta. We've got the options action there. I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Karen Feinerman, Guy Adami, and Julie Beal. We start off with the monster implications of a potential do-it-all drug. Shares of Novo Nord is soaring over 6 % today, closing just shy of its all-time high. The move coming after early tests suggests that diabetes and weight loss drug Ozempic could be used to treat kidney failure as well.

1:06The new sending shares of med tech companies like Davida, Fresenius and Baxter International Plunging. Baxter, in fact, hitting its lowest level in nearly eight years. And this could be just the start. Ozempic and drugs like it could find uses in treating alcohol and drug addiction, Alzheimer's, even in lowering blood pressure, just to name a few. So what could such a potentially far reaching treatment mean for the health care space? We always say the pendulum swings too far. So you wonder right now if we've swung too far in terms of it being the miracle drug guy. I think it's in terms of names like you mentioned a few.

1:40I'll throw another one. Medtronic. It swung way too far. I mean, this is one of the great companies. I mean, people are selling first, asking questions later. We're talking about a stock that's now a seven year low, which, by the way, actually, in terms of valuations, probably it's reasonable. It's been for quite some time. Flip side will be, well, guy, you're missing the point. Earnings are going to come down based on everything we talked about. Don't be so sure. Eli Lilly, we've all collectively talked about. It's an amazing company. And we said that last pullback to, I think, 525, 530. We've seen this before every time it's been bought.

2:10That proved to be the case. The question is going to come at some point. Valuation is going to get in the way. So if you're looking for places that make sense, MDT to me is an interesting play. So for Lilly, I mean, it's hard to justify at the moment, right? As a value investor, it's hard to be long this. But I do think this is such an extraordinary case. We don't know how big it's going to get. Obviously, it has tons of hype, which we don't normally love. But I feel like it's I've made a mistake before of owning it, both Novo and Lilly, and just think, oh, my God, they've gotten out of control and getting out of both of them and then had to buy Lilly much higher than where I sold it.

2:51I don't want to make that same mistake again, but I do think it is getting a bit frothy here. The way for me to look at it, then it would probably be to sell some upside calls. I do want to stay in the story. But these reactions are—I mean, I'm very interested. We were talking about this in the ride home yesterday in the car. Yes, we do. Yes, they do. Whenever we look back on this five years from now, will everyone be on a Zempic? No. Will it be everywhere? Some kind of GLP-1 activist. Right. Or will it—or something very different. But it could treat kidney impairment. I understand. I mean, so many different things.

3:27So let me, after being cynical, let me be positive. I think today's kidney ramifications and so dialysis companies and all the medical technology device companies, I think they should be scared. I think this is at least this study was one of the most powerful in terms of secondary uses. The speculation and I'm not going to challenge Walmart, the biggest retail in the world, and their data. And they've invested massively in their data. I bet their data is some of the best on the consumer in the world. But they talked about they're starting to see an impact even in food purchases. I think what's going on, we'll talk about staples and what's going on in that space.

3:59I think there's a different reason why those stocks have mostly sold off. As it relates to today's news, this is a study that's profound. It's a study that also was ended early because it was so definitive that it made it very clear for people to say the impact here is significant. And that is, there's no question. And that's why we get into the addressable market back to Novo and Lilly. I don't think we totally know here. I do think, though, we've made assumptions on where these are going. And also, the insurance dynamics are still so unknown. Who can afford them? Who will they be available to?

4:31And what it means to the insurance companies? Well, the more and more studies that are out in terms of it improving other conditions, the more likely I would think that it would be reimbursed by insurance. I mean, if it's good for them, right? If you're taking it to reduce cardiovascular incidents, then it will probably be insured. If that is found to be the case when the final study comes out. But I'm curious, Karen, before we get to Julie, you've owned NVIDIA. You've owned NVIDIA. I do. How is the story different in terms of the possibility of AI and how much market cap those stocks gained on the back of the hope and promise of AI versus this?

5:04No, you're right. They're very, very similar. I think that particularly for – Novo is actually further along than Lilly, right? We all expect that they will get approval. For weight loss. And it would be horrific for the stock if that did not happen. So there is a level of risk there. I think they're similar in the, you know, the widespread, oh, it's going to be in everything and, you know, you've got to own it. And actually, to me, NVIDIA is cheaper than Lilly at the moment. But the moment is not this moment. What, on a growth perspective? So in other words, like on a pay basis? Potential earnings.

5:41Right. Right now. But they're similar. You're right. They're sort of, you know. In terms of the hope. Yes, they are. In terms of the total addressable market being, you know, unlimited or unknowable and definitely huge. Yes. So this is a kind of AI dust. We can name it. We did. Some other kind of dust. I mean, this was, this was, we called, I think we called it the NVIDIA of healthcare. And I think so far so good on that call. And on some level, the doors open wider and wider for these two companies every day. Julie Beal, would you rather NVIDIA or Novo Nordisk? Not at all. I personally probably know the Lord, but I really agree that the parallel between AI and the GLPs is the right one to be making.

6:26I actually think that in the next five years, the GLPs will have a bigger impact on our economy because the second order effects are massive. Right. You imagine if we suddenly are able to address the problem of obesity in this country, how much that's going to impact health care costs, how much that's going to impact people's psyche in terms of, you know, antidepressant use. What's going to happen with gyms? Probably negative things, right? Because either people are feeling healthier and they go to the gym more, increasing costs, or they recognize that the real way to lose weight is, you know, in the kitchen without eating and people just stop going and stop subscribing.

7:00So I think there's massive, massive second order effects. And I think for the economy, it's going to be really, really meaningful. Right. And also for GLP-1s and its applications, there are studies. There are clinical trials being done as opposed to AI, which is sort of like we believe that it's going to increase productivity. Let me push back a little bit. Okay. Okay. And I rarely push back. You should push back more. I know. You do it well. We talked about when NVIDIA announced that$7.5 billion going to$11 billion. We talked about how it's going to be much bigger than that. Already, this revenue growth is extraordinary.

7:37That's already happening. And I don't think it's over. Right. Yeah. But will companies look back and say, we spent this much on this NVIDIA chip and it's paid off X amount? Yeah. To the impact, you know, in terms of like in a parallel fashion to, you know, these patients in a double-blind study took Ozempic once weekly and found this reduction in renal failure. Well, we come back to the Picks and Show. And think, too, right? I'm sorry, Julie, go ahead. NVIDIA is a capital cost, right? It's a one-time capital cost. They don't have necessarily contracts in terms that they're going to have an extension out towards.

8:15They do in terms of the immediate supply, but not long-term. People are likely going to stay on these drugs long-term. So there is a recurring revenue element to this business that, to me, makes it more valuable than one-time capital purchases. It's interesting she says that long-term. I mean, that might be the case, and maybe they're going to be perfectly safe. The flip side of these coins is that this drug was not set up to be on for the rest of your life. At these dosages. Correct. So we'll see how this, I mean, there's a lot of runway left in these stories. And listen, I hope it is the wonder drug that everybody seems to think it is.

8:49We've heard about wonder drugs before, and we'll see. To Karen's point, though, it's interesting. In the game of would you rather, I mean, I can't even believe I'm about to say this. I mean, I love Eli Lilly for the longest time, but I understand what she's saying about NVIDIA compared to Eli Lilly. In terms of the tangible revenues right now that you're seeing. It's a fascinating would you rather. Yeah. Do you want to play this game, too? I always feel left out when I'm not allowed in. All right. Come on in. I think NVIDIA. And I just but again, I'll emphasize, I think, today's news for dialysis companies, again, the impact from diabetes, et cetera, on kidney dynamics and what this means.

9:28This is this isn't a vague line. This is this is right there. And it's powerful. And by the way, this is what these drugs really are made for. So as it relates to NVIDIA, it's been powerful. I still think the companies this is kind of what Julia was just saying, companies that have the ability to have some kind of an annuity factor. And that goes back to Microsoft, who right away rung the register, even though I think Google was at it before they were. So I guess NVIDIA. All right. So do the other potential uses for obesity drugs warrant all this euphoria? Let's ask Dr. Kavita Patel. She's an NBC News medical contributor, former White House policy director during the Obama administration.

10:05Dr. Patel, always great to get your perspective. So, so far, we've gotten a lot of different sorts of studies when it comes to cardiovascular events, when it comes to this flow study, when it comes to sleep apnea. So we're getting drips and drabs here. We know that there are a lot of other trials going on, particularly for Alzheimer's, that Novo Nordisk is doing. How do you regard this drug right now? Is it, in your view, looking like a miracle drug? Melissa, I'd love to think it was a miracle drug. I'll be honest. I was a little shocked at kind of the precipitous drop in the dialysis companies because none of us were surprised.

10:42This trial was halted, as you kind of mentioned earlier, a year in advance because the outcomes were so strong. But they were in diabetics. We know this drug works really well in diabetics, but there are so many barriers to getting there, including cost, adherence, prescriber rate. Go out and survey a lot of doctors. They're not even aware of kind of all the uses. They're just hearing about it on TikTok and thinking about it for weight loss. So I was a little surprised at that kind of sharp decline. However, it is a very big deal. It is a game changer. It is something that is going to absolutely create these secondary effects.

11:16In terms of its expansion to kind of be that one drug that cures all ills, all I do is go back to the science, look at its mechanism, that kind of mechanism of inhibiting the glucagon release, which we get after we eat kind of any sort of meal and get that sugar input into our bodies. That is not necessarily the chemical basis of what we know for a lot of things like addiction disorders or other mental health disorders. And those trials, as you pointed out, Melissa, are nowhere near as robust as the data we have on flow, on sleep apnea, on cardiovascular risk, on diabetes control, double-blinded placebo randomized controlled trials that are incredible.

11:53And we've got like less than 20 patients in a liraglutide trial around mental health and addiction disorders. And then rat studies, animal studies. We have a long way to go for that. And I've seen a lot of miracle drugs before. this will probably make the biggest dent in our mortality. And I think that's important to consider. It's Karen. Thanks for being on. So what do you see as a scientist? You look at this. What do you see as the biggest risk for this drug? Yeah. So the biggest risk is really that we have no long term studies of this drug. And you've probably you've talked about it, Karen, like there are things we just don't know.

12:28You're already seeing a kind of a warning that the FDA has put on Ozempic to talk about that kind of stomach paralysis or that intestinal paralysis that can be a symptom and very concerning, potentially even fatal. So we're learning more and more. Remember, in a controlled trial setting, we have a lot of things that we try to control and root out. When you bring it into a broader population and you use it off-label, you start to pick up things and you start to see a change in the effect size. In other words, as you widen the denominator of any drug, you're going to see some of those limitations and signals show up in the numerator.

13:01And I think that's what you're seeing. So but no question, Lily and Novo Nordisk and kind of Pfizer and thinking about the oral drug and having an oral and IV, sorry, intramuscular kind of sub-Q approach for a drug. It gives you a lot of shots on goal because not everybody wants to inject. So oral drugs could be a big game changer in this as well. Yeah, there are limitations, though, to oral, too, as I understand it, in terms of having to take it a certain time before meals and et cetera. So the timing aspects can be a challenge for people who want to go that route. In terms of specifically for the treatment of chronic kidney disease, CKD, do you think that Ozempic will get that label?

13:39And if that happens, I mean, as we see more and more of these studies, is it more likely that insurance reimbursement will be much greater? Yeah. So right now we are seeing active kind of employers in entire states that are kind of declining to cover on the weight loss indication. It is very hard after looking at this data from flow and we'll get kind of final package of the data published in probably in the New England Journal, I would expect. But we'll see a final package of data that will just be so compelling that it would be wrong not to cover this because it should be superior to what we have available to us.

14:12That is something that I think insurance companies will have a difficult time. But I have seen a lot of drugs where there are superior data right now and we don't utilize them. The reason we have patients with chronic kidney disease is because we have uncontrolled, poorly controlled diabetics. Not because doctors are doing bad things or patients are doing bad things. We just have an access problem in our country. And it's not easy, as you point out, to stay on all these drugs. So I don't think it's as easy as that. It certainly helps when you have an on indication label from the Food and Drug Administration.

14:42That's just one barrier out of many. All right. Dr. Patel, always great to get your take. Thank you, Kavita Patel. Let's turn now to the market ripple effect in the stocks impacted by the wide-ranging effects of these drugs. Mazuho Healthcare Sector Strategist Jared Hols joins us here on set. Jared, great to have you with us. When you look at the decimation that happened across the kidney treatment space, how far has a pendulum swung in that direction? Too far? Well, it's not only the kidney space. It's the entire medical device space. We haven't seen value destruction like this even during the pandemic when there were no procedures being done literally.

15:20And so I feel like, yes, it's extreme. On the other hand, this is sort of a risk in perpetuity. We really don't know the impact in terms of the financials. And we'll start getting numbers soon with earnings. It's really tough to defend the stocks. And, you know, I think guys have tried to and they've been stopped out as a result because they keep on going down every day. I actually think the financial impact, the economic impact is it impacts med tech, including the kidney players, is probably not so severe near term, but longer term as the drugs catch on. I think it's a little bit more difficult to defend them.

15:52For Senius's management response is sort of interesting. This prolongs the lifespan of these patients with chronic kidney disease. so it just pushes out the dialysis and when that happens. And because people live longer, they will actually need dialysis for longer. And so there is no impact. I mean, do you buy that or is that just sort of, you know, glass half full? I kind of buy it. I feel like there's definitely some offsets in the market, whether it's Fresenius, whether it's orthopedic players, in terms of patients getting thinner, then being more active, then needing some knee surgery or hip surgery later in life.

16:26So all these things are deferred. But I feel like the market is so short term focused now that if we start to bring in the thesis where long term things are fine, but near term there are major issues. I just don't know who wants to buy those stocks in this type of tape. So to the stocks, because seeing your notes, you say take profits in Lilly and Novo and you say there's huge value creation. And so where is that? Because where are the places that have also at the expense here? Again, we're talking about dialysis companies. Do you go after Davida? Do you go after Baxter? I mean, you know, J &J has had some collateral impact, even though it's a much bigger, diverse company.

17:01Yeah, I mean, I think I'm probably overly cynical having covered health care for so long. So taking profits in pharma stocks that have gone bonkers, to me, makes sense. And that's why, you know, we discussed a couple of weeks ago around AbbVie and Merck and trying to just diversify, not sell everything you owned in Novo and Lilly, but at least, you know, contemplate diversifying away from them, just given the euphoria and, you know, the valuation versus, you know, Amgen, Pfizer, Merck, you know, the entire space is incredibly dispersed, right? We haven't seen this type of valuation disconnect between the peer group, maybe in the history of the sector.

17:36So it's less about being negative on Novo and Lilly. It's more about just finding other options. I'm not sure I want to dabble so much in med tech. It's again, the rhetoric and the noise to me is overwhelming. Yeah, value sometimes can really be value trapped, especially it seems in pharma, because when something is done, it's done. Right. That's what it kind of feels like in MedTech. We're going to get numbers soon. I would have thought that some of the names like Dexcom, Insulate, would start to pre-announce just to give the street some sort of idea of, if we're not seeing it, let's show everybody.

18:06So I wouldn't be surprised if we could get a pre-announcement tomorrow night, maybe early next week, weeks before they report, because they are literally down every day. And today was very extreme, I thought. Back to Big Cap Pharma. Bristol Myers has its own issues, but Mark is another one. Both stocks have not traded particularly well. Feels as if to me that there's been this move. If we're going to be in Big Cap Pharma, we're going to be in Eli Lilly or Novo and we're going to get out of the rest. Does that seem to be going on to you? I think that's been the trade for over a year now. Like we have the clear winners and then the other players that don't have this revenue exposure to weight loss.

18:42The street is kind of jettisoned. They don't they don't want it or they want the companies to do deals. And then when they do a deal, it's well, was that the right deal? So I think they're kind of up against the gun, diversify, do more M &A. Hopefully they get credit for it. But so far, they really haven't. So what makes you still, I don't know what the right word is exactly, cautious about the valuation of Lilly and Novo Nordisk? Do you think that can you not do the math in terms of getting to the valuation in terms of the addressable market? Or is it just that the run has been so fast, so quickly?

19:15I mean, what is it? Because it's probably a hard case to make, I would imagine, to an investor who's like, Jared, you told me to diversify away from Lilly and here we are new high today. No, I totally get it. Yeah, you can make any number up you want for the addressable market, go and excel, multiply the population by some sort of price, and it's hundreds of billions. We get that. I think the issue is the supply versus the demand. The companies can't make enough, I don't think, to actually put up revenue that's going to appease investors, given where the stocks are trading. They're going to report in a few weeks.

19:47Manjaro is still not approved for obesity, so that line item is not going to be massive. We know that. And then the payers, at some point, are going to say, we get it, but we cannot pay for these at this volume without seeing the benefit, which may be 10 years from now, 20 years from now, 30. We have no idea when the offset is going to be. So I think some of that, too. So who is more expensive through that prism, Lilly or Novo? I think Lilly a little bit more. Yeah. Jared, thank you. Always good to see you. Thank you. Appreciate it. What do you think? Well, I do own some Elevance and I think about, OK, the insurers and if it's as effective as we think it's effective, they're going to have to pay for it.

20:28I don't know quite what the offset is. If you have obese patients who now are not, you're paying whatever it is per month to keep them on indefinitely. That's obviously a big ticket. I don't know what the other side of the ledger is. How much are you saving from all of the things that go along with that? The heart attacks that they don't have, the knee replacements that they don't need anymore, et cetera. Yeah, but as Jared pointed out, it has been a have and have nots. There have been a few that have been coming on. Look at Amgen. You know, the closing of that Horizon deal has been a catalyst to the stock.

20:57People now can actually call their pipeline, make some calls. So I think, you know, and he was on a couple of weeks ago talking about Biogen. So there are places where you have mega cap companies, great balance sheets that I think the coast is a lot clearer than in some other cases. All right. Coming up, the other shoe just dropped. Bergen stock getting kicked on its first day of trading. But can the sandal stock shake off those first day jitters? The traders will give that one a try on next. Plus, as good as gold, the metal bouncing back from a recent drop. So is the old safe haven trade headed even higher?

21:27Don't go anywhere. More Fast Money in two.

21:35Welcome back to Fast Money. Birkenstock having a less than stylish market debut today. The latest high-profile IPO opening for trade at$41 a share. That's$5 below where it priced last night and even below its wide expected range of$44 to$49. The stock closing the day at just over$40. So why does Wall Street have cold feet on this name? It's open-toed for the most part. But, Karen, you've been going through multiples and how it stacks up versus peers. Yeah, really, really expensively is how it stacks up versus peers. The$5 off that they're on sale right now isn't enough to me. I mean, the growth is there, although the rate is slowing a little.

22:14It's, you know, if you look at On, the growth there. The sneaker brand. Right? It has a little bit better margin, but gross margin. But gross margins here are excellent. But if you compare it to something like a Nike, which is wildly, wildly bigger, doesn't grow as much for sure. The margins aren't as good. But the valuation at 25 times next year's earnings, let's say, I'd way rather be in that. I don't get this. I don't get how this multiple should be here right now. How about you, Jill? You look like you're agreeing with Karen, although I feel like you might have a pair or two in your closet.