We recently compiled a list of the 12 Best Weight Loss Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Biohaven Ltd. (NYSE:BHVN) stands against the other weight loss stocks.
The Revolution in Obesity Treatment: Opportunities and Challenges of GLP-1 Medications
Most people have at some point sought to include weight loss and physical exercise in their daily life. The weight loss and fitness market is quite substantial worldwide since improving one’s fitness can have direct physical and psychological benefits. Over one billion people worldwide—650 million adults, 340 million adolescents, and 39 million children—are obese, according to the WHO. A novel class of weight-loss medications that don’t include strict exercise regimens or diets seems to be revolutionary. People who are overweight or obese can lose 15% to 20% of their body weight with the aid of these ground-breaking medications. According to Andy Acker, portfolio manager at Janus Henderson Investors, “This may be the largest opportunity we’ve ever seen in the pharmaceutical industry.” Weight-loss medications are undoubtedly well-liked. Investors are drawing comparisons between the leader in artificial intelligence chips and the US pioneer in weight-loss drugs.
Given this increase in demand, Morgan Stanley Research has raised its forecast for the worldwide obesity medication market from $77 billion to $105 billion by 2030. Branded obesity medications brought approximately $6 billion in 2023.
According to Forbes, the most prescribed Glucagon-Like Peptide-1 GLP-1 agonist in 2023 was Semaglutide, the market leader for obesity medications and the generic form of Ozempic, Wegovy, and Rybelsus. It accounted for almost 88% of all new prescriptions. At present, the FDA has approved just three GLP-1 medications for weight control: tirzepatide, liraglutide, and semaglutide.
By 2030, the GLP-1 market is expected to grow to $100 billion, driven equally by obesity and diabetes, according to JP Morgan Research. Thirty million GLP-1 users, or around 9% of the population, may be in the US by 2030. The rising demand for obesity drugs will have a broad effect, helping industries like biotech but creating challenges for others like the food and beverage industry.
According to Chris Schott, a Senior Analyst specializing in the U.S. Diversified Biopharma industry,
“GLP-1s have been used to treat T2D since 2005, starting with the approval of Byetta, with follow-on products continually improving on efficacy. The most recent, Ozempic and Mounjaro, offer significant advantages over previous products and have accelerated class growth,” “Indeed, the newest generations of GLP-1s and combos lead to 15-25+% weight loss on average, well above prior generations of products.”
Some are praising the most recent generation of GLP-1 pharmaceuticals as “miracle drugs” for the treatment of obesity. However, because GLP-1s are expensive and have limited insurance coverage, not all obese people can use them. According to Jonathan Gruber, a professor of economics and the chairman of MIT’s economics department, the annual cost of treating 40% of obese Americans at the current rate—roughly $15,000 per person—would surpass $1 trillion. That’s almost the same as the government spends on the entire Medicare program. That’s a staggering figure.
GLP-1 Medications: Balancing Rising Demand, Shortages, and Market Potential
According to a study released in the Annals of Internal Medicine, the use of GLP-1 medications, including semaglutide, for weight loss has increased over the last ten years, while it has dropped by about 10% among those with type 2 diabetes. The researchers warn that the ensuing extended drug scarcity may limit the treatments’ availability to diabetics. Dr. Yee Hui Yeo, a clinical fellow in Cedars-Sina’s Karsh Division of Gastroenterology and Hepatology, emphasized that it is crucial to ensure that diabetic patients have access to GLP-1 therapies as the demand for obesity medications increases.
According to the FDA, growing demand is the cause of the shortages. The European Medicines Agency warned that the GLP-1 medicine shortage is a “major public health concern” that is unlikely to be resolved in 2024, indicating that the shortages affect more than only the US. According to NPR, shortages have made it difficult for those with diabetes to get their prescriptions, and some have had to reduce the medications they can use.
The potential of GLP-1 medications, which were first created to treat diabetes but are currently being used to treat obesity, was covered by the panelists on “Weighing the Future of Obesity Drugs,” which included Julia Angeles of Baillie Gifford, Debra Netschert of Jennison Investments, and Gentry Lee of Fayez Serofim. Netschert highlighted ongoing efforts to further reduce injection frequency and minimize adverse responses, as well as the development of GLP-1 medicine delivery from weekly dosages to multiple daily injections. Despite their exceptional efficacy, Netschert noted that due to supply limits, 1.5 million of the 110 million eligible patients in the US are now receiving therapy with GLP-1 medications. In their disagreement over who should foot the bill, Netschert pointed to significant insurance and Medicare/Medicaid reimbursements, while Angeles asserted that most patients pay cash. According to Netschert, up to 700 million people globally might require these medications outside of American borders. Notably, the panel found that GLP-1 medications were approved more quickly in the United Kingdom than in any other country, indicating their perceived value. The UK payors are generally stringent.
Since the market for obesity medications is still in its infancy, it would be a good idea to add several weight reduction stocks to your watchlists.
Our Methodology
For this list, we scanned through holdings of weight loss ETFs and online rankings to form an initial list of 20 weight loss stocks. From that list, we picked 12 stocks with the highest number of hedge fund holders as of Q3 2024, based on data tracked by the Insider Monkey database. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A pharmacist in a white coat with a range of drugs on shelves behind her.
Biohaven Ltd. (NYSE:BHVN)
Number of Hedge Fund Holders: 42
Biohaven Ltd. (NYSE:BHVN) is a clinical-stage biopharmaceutical company developing innovative treatments for neurological, immunological, and oncological diseases. Its pipeline includes drugs for conditions like epilepsy, migraines, OCD, SMA, obesity, and cancer. Key drug candidates are BHV-7000 (Kv7 activator), Troriluzole (tripeptide prodrug), and Taldefgrobep (HV-2000) for obesity.
Biohaven Ltd. (NYSE:BHVN) is developing taldefgrobep alfa, which is a myostatin inhibitor targeting obesity through a unique mechanism that increases lean muscle mass and resting metabolism. It stands eighth on our list of the best weight loss stocks. Unlike GLP-1 agonists, which often reduce both fat and muscle, taldefgrobep promotes fat loss while preserving and enhancing lean mass. Preclinical and early human trials show significant fat reduction (11% in mice) and a 25% increase in lean muscle. Additional benefits include improved metabolic health, with lower insulin and leptin levels observed in treated mice. Taldefgrobep has demonstrated a favorable safety profile, with no serious adverse events in over 500 patients in prior SMA trials.
In the third quarter of 2024, Biohaven Ltd. (NYSE:BHVN) reported a net loss of $160.3 million ($1.70 per share), an increase from the net loss of $102.6 million ($1.50 per share) in the same period in 2023. The non-GAAP adjusted net loss was $164.1 million ($1.74 per share), up from $98.1 million ($1.44 per share) in Q3 2023. This increase in net loss was primarily attributed to higher research and development (R&D) and general and administrative (G&A) expenses.
Biohaven Ltd. (NYSE:BHVN)’s R&D expenses rose significantly to $157.6 million, up from $95.5 million in Q3 2023, due to ongoing clinical trials and preclinical research. Additionally, G&A expenses increased to $20.6 million from $15.0 million in the same period last year, reflecting higher share-based compensation. Despite these challenges, the company saw an improvement in other income, which surged to $17.8 million from $4.7 million in Q3 2023. This increase was largely driven by changes in the fair value of derivative liabilities and higher investment income.
Analysts hold a consensus Strong Buy rating on the stock and as of Q3 2024, 42 hedge funds held shares in the company.
Overall BHVN ranks 8th on our list of the best weight loss stocks to buy according to hedge funds. While we acknowledge the potential of BHVN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BHVN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.