SHEDDING POUNDS, DELIVERING GAINS

New weight-loss drugs show promise for investors.

- ADAM SHELL

INVESTING in shrinking waistlines might not have the wow factor of other market obsessions. But a new class of weight-loss drugs that help people shed pounds without dieting or doing cardio looks like a game-changer. These next-generation pharmaceuticals enable obese and overweight people to lose 15% to 20% of their body weight. "This could be the biggest opportunity that we've ever seen in the pharma industry," says Andy Acker, portfolio manager at Janus Henderson Investors.

No doubt, weight-loss drugs are trending. Traders are comparing U.S. weight-loss drug innovator Eli Lilly to artificial intelligence chip frontrunner Nvidia. Denmark's Novo Nordisk, thanks to its first-mover advantage in obesity drugs, is now Europe's largest company by market value ($572 billion). TV ads pitching Novo's first-tomarket weight-loss drug Wegovy and Lilly's challenger Zepbound are filling the airwaves.

And the drugs' impact could reach far beyond their target users. The success of these appetite-suppressing drugs and resulting health benefits for millions of people could create headwinds for shares of snack makers and packaged-food firms, as well as medical device makers that specialize in knee replacements, insulin pumps and sleep apnea machines. Although stocks in some of these areas have wobbled recently, a growing number of analysts say the long-term risks to other market sectors from weight-loss drugs are overblown.

You may have heard of GLP-1 (glucagon-like peptide 1), Wall Street's new buzzword. GLP-1s are the pharmaceutical equivalent of a successful crash diet. They are hormones responsible for the "incretin effect" that makes you feel more full and eat less. Currently, it's a two-horse race between Novo and Lilly, the only players with GLP-1 drugs approved by the Food and Drug Administration to treat obesity in the U.S. (In 2005, the FDA approved this type of drug to fight type 2 diabetes but didn't okay its use for weight loss until 2021.)