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  • Jonathan Poyer

Obesity Drugs Pushing AI for the BIG Winner

Obesity headlines seem to be outnumbering those for AI since Novo Nordisk (NOVOB DC) announced positive data ahead of expectations from the highly anticipated SELECT cardiovascular outcomes trial of weight loss drug Wegovy.

The trial achieved its primary objective demonstrating a statistically significant and superior reduction in composite outcomes (defined as the first occurrence of cardiovascular death, non-fatal myocardial infarction or non-fatal stroke) of 20% compared to placebo. In aggregate, leading obesity companies gained >$100 billion in market cap on the news as analysts expect these drugs to be more widely prescribed and reimbursed given the demonstrated clinical benefit. These new generation obesity medicines are now projected to be the #1 drug class by revenue in history.

Several additional therapeutics companies reported top line beats as earnings season drew to a close further reinforcing the broader based demand for life-enhancing therapies. Specifically, Amicus Therapeutics (FOLD) reported orphan drug Galafold revenue ahead of consensus and projected growth between 14 and 18% at CER.

Likewise, Amylyx Pharmaceuticals (AMLX) announced newly approved ALS drug Relyvrio continues to impress with a revenue run rate that is approaching $500 million less than a year post launch.

Jazz Pharmaceuticals (JAZZ) reported a top and bottom line beat and raised full year guidance above the street. The timing of the obesity data ironically comes just ahead of the September 1st projected release of the initial list of drugs selected for price controls under the Inflation Reduction Act (IRA). One key point IRA commentators often overlook in the context of 'controlling drug prices' is how the failure rate impacts R&D costs. Investors bear the cost of both successful and unsuccessful drug development endeavors and only accounting for the R&D costs of the former dramatically underestimates the ROI needed to make the sector viable.

Galera Therapeutics (GRTX) found themselves in the latter group as FDA declined to approve their investigational therapy for radiotherapy-induced severe oral mucositis (SOM). GRTX stock crashed 80% on the news that disclosed FDA's stance that the filing was "not sufficiently persuasive".

Creative destruction continues as SMID cap biotechs grapple with raising cost of capital. Alaunos Therapeutics (TCRT), Bioxcel Therapeutics (BTAI) and Atreca (BCEL) all announced strategic reviews and reductions in force of 40-60%.

Perhaps pharmaceutical lobbyists might consider providing obesity drugs to congress to help slim down pressures on drug pricing.

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