Robert F. Kennedy Jr.’s potential appointment to the Department of Health and Human Services has sent ripples through the healthcare and pharmaceutical sectors. This move has not only spooked Eli Lilly (LLY) stock but also affected shares of other companies involved in the weight-loss drug market. Let's delve deeper into the implications and explore the various aspects at play. Unraveling the Consequences of Kennedy's HHS Appointment
Impact on Eli Lilly Stock
President-elect Donald Trump's announcement of Kennedy's potential appointment to the HHS role on November 15th sent shockwaves through the market. Eli Lilly stock, in particular, has dropped 4.8% in the aftermath. This decline is significant as it reflects the uncertainty and potential changes that could occur under Kennedy's leadership. The company's tirzepatide-based drugs, Mounjaro and Zepbound, which had shown promising sales, missed forecasts with combined sales of $4.37 billion instead of the expected $5.49 billion. This led to a slump in Eli Lilly stock by 6.3%.Furthermore, the FDA's review of whether tirzepatide is in shortage has added to the complexity. Compounding pharmacies are now able to make copies in the interim, which could further impact Eli Lilly's market position. Kennedy's stance on the high price tag of Novo's Ozempic has also raised concerns. He has called for measures to address the cost of weight-loss drugs, which could potentially affect Eli Lilly's revenue streams.Effects on Novo Nordisk Stock
Novo Nordisk stock has also felt the impact, shedding 2.2% since the Kennedy news. The company sells semaglutide as both a diabetes treatment (Ozempic) and a weight-loss drug (Wegovy). While Wegovy sales beat third-quarter forecasts, Ozempic came in light, and Novo tightened its outlook for the year. Shares fell more than 4%, indicating the market's concern about the company's future performance.Like Eli Lilly, Novo Nordisk is facing competition from new entrants in the weight-loss drug market. The expanding market for weight-loss drugs presents both opportunities and challenges for these companies. Analysts expect Zepbound alone to bring in more than $22.4 billion in 2029 sales, and Wegovy to generate over $19.4 billion. However, Trump's second presidency and the potential for increased regulatory scrutiny could put a slight chill on their advance.Overlap in Views with Dr. Marty Makary
In addition to Kennedy, Trump has tapped Dr. Mehmet Oz to head up the Centers for Medicare and Medicaid Services. The next key pick will be the Food and Drug Administration Commissioner, and media reports suggest Dr. Marty Makary is a leading candidate. Makary's and Kennedy Jr.'s views overlap in key areas such as chronic diseases. He has noted that GLP-1 drugs can lead to muscle mass decline, which has an impact on longevity. This could further impact companies like Eli Lilly and Novo Nordisk, which rely on these drugs for their revenue.BMO Capital said in a recent client note that Makary may be particularly unfavorable for antibiotic, vaccine, obesity, and chronic disease companies. This could have long-term implications for the healthcare industry and the stocks of companies involved.RFK Jr.'s Stance on Weight-Loss Drugs
In a recent interview with Fox News, RFK Jr. suggested that the best approach to treating obesity is through nutrition rather than pharmaceuticals. He called out Denmark-based Novo Nordisk's Ozempic, a diabetes treatment that uses the same active ingredient as weight-loss drug Wegovy. This stance challenges the traditional reliance on pharmaceutical solutions for weight loss and could lead to significant changes in the industry.Kennedy also emphasized the need to address the sick food system and corrupt government agencies to make the country healthy again. He proposed replanting kitchen gardens as a way to promote healthier lifestyles. This approach goes beyond just treating obesity with drugs and highlights the importance of a holistic approach to health.Rating Declines for Weight-Loss Behemoths
Eli Lilly stock has a low Relative Strength Rating of 27, indicating its poor performance compared to other stocks. Novo Nordisk has a poor RS Rating of 17, ranking in the lowest 17% of all stocks in terms of 12-month performance. These ratings have dropped significantly from a respective 96 and 95 a year ago, highlighting the market's negative sentiment towards these weight-loss behemoths.On the other hand, Viking Therapeutics has retained its strong RS Rating of 96, suggesting its relatively better performance in the market.In conclusion, Robert F. Kennedy Jr.'s potential HHS appointment has had a profound impact on the healthcare and pharmaceutical sectors. The implications for Eli Lilly and Novo Nordisk stocks are significant, and the overlap in views with Dr. Marty Makary adds another layer of complexity. As the industry continues to evolve, it will be interesting to see how these developments play out and what changes will occur in the future of weight-loss drug treatment.
