First, apologies as I am not an 'active' investor. I tend to set it and forget it, so I'm usually late to the party.
I have been noticing over the last few years that investing in healthcare (for example PRHSX T Rowe Price Health Sciences, which we are in) has really sucked (relative to the market as a whole). From 2000 to mid-2015 it consistently outperformed the s&p500. That all turned around in mid-2015 and it has been underperforming ever since. I've been patiently waiting for the worm to turn. (Did some seismic event happen in mid-2015 to damage this whole sector?)
Lately I've noticed FSMEX Fidelity Select Med Tech & Devices, a real world-beater from 2000 to late-2021 has gotten hit. Flat in 2022 relative to the market, and in a real nosedive in 2023.
What is going on in this sector, and is it something that will eventually reverse?
Thanks for your thoughts on this.
Comments
An excerpt from the linked article shows how a medication that’s healthy for consumers might turn out to be unhealthy for certain health care providers.
“The news from Novo Nordisk wasn't as well received by shareholders of dialysis treatment companies. Shares of DaVita dropped 17% in premarket trading, while Fresenius Medical Care's stock was down 16% before the market opened Wednesday morning … Dialysis stocks have already been under pressure from advances related to Ozempic and similar drugs. To the extent that treatments are effective in halting the progression of kidney diseases and avoiding renal failure, fewer patients might need to get regular dialysis treatment. DaVita and Fresenius are among the top providers of dialysis services, so it's understandable that they're taking sizable hits on the news.
https://www.fool.com/investing/2023/10/11/ozempic-is-moving-a-bunch-of-stocks-wednesday-morn/
It goes way beyond the example cited. I’m riding a large food conglomerate I think is a good long term play. But like other food providers, it’s been taken to the woodshed lately based at least in part on the ozempic hysteria. (Walmart has documented that people picking up the drug at their pharmacies are buying less food / with fewer calories.)
Other potential effects as the global population slims down:
- Airlines should profit as passenger’s average weights fall leading to fuel savings
- Hospitalization and care for cardiovascular health issues should see a sharp decrease, affecting health care providers. The drug(s) have been shown to lower the incidence of such diseases.
- Health insurance companies should benefit from fewer serious medical claims. On the other hand, they may be saddled in paying for these expensive drugs.
- Agriculture could suffer and, correspondingly, agricultural land prices might fall..
- John Deere? I just checked. It’s off 11.5% YTD. Wouldn’t ya know?
It gets really silly. The real impact remains to be seen.
Here’s some related articles. Unfortunately, not all are accessible without subscription.
https://www.nytimes.com/2023/09/02/business/dealbook/weight-loss-drugs-diet-companies-ozempic.html?smid=nytcore-ios-share&referringSource=articleShare
https://www.reuters.com/business/healthcare-pharmaceuticals/corporate-america-weighs-risks-ozempic-effect-2023-10-19/
https://www.washingtonpost.com/business/2023/10/09/ozempic-weight-loss-drugs-impact/
https://www.msn.com/en-us/money/companies/it-s-overblown-beer-stocks-take-plunge-after-major-corporation-warns-ozempic-weight-loss-drugs-could-affect-sales/ar-AA1i095V
It is notable that NVO is so crazy now that it has market-cap larger than its home country - Denmark. Moreover, it has the largest market-cap in Europe. Imagine if something like that happened to the US LLY.
IMO, I think that outcome will be a good thing for society.
Only injectables, no oral tabs yet.
Most insurance cover them only for diabetes, not obesity.
Title: ”Moderna shaves off $7 billion in value after Pfizer warning”
https://gulfnews.com/business/markets/moderna-shaves-off-7-billion-in-value-after-pfizer-warning-1.98912855
Above article relates to shrinking demand for Covid vaccines. Sounds right to me. Can’t react to every bit of news. Markets run to extremes. I’ve recently picked up a few additional shares of the food conglomerate I mentioned earlier at lower prices.
Ozempic, a GLP-1 receptor agonist, is a weekly injection aimed at reducing people’s appetite for addictive foods, helping them lose weight. It’s been a problem for many stocks. But GLP-1 drugs were originally designed to treat diabetes, and the market fears they will do such a good job of combating the kind of overeating that causes diabetes that people won’t need to buy DexCom’s (DXCM) continuous glucose monitoring devices, or CGMs, anymore. DexCom stock has dropped 43% during the past three months as a result.
The “Hits” just keep on rolling!
https://www.nytimes.com/2023/10/22/health/ozempic-wegovy-price-cost.html
https://www.novomedlink.com/semaglutide.html
https://www.aei.org/wp-content/uploads/2023/09/Estimating-the-Cost-of-New-Treatments-for-Diabetes-and-Obesity.pdf
Current discounts from list price (from NYTimes reporting on AEI report): The NYTimes quotes "Jalpa Doshi, professor of medicine and director of the economics evaluation unit at the University of Pennsylvania" as speculating that prices will drop as competition increases. I'm not so sure. These will all be patented drugs (high barrier to entry) with a limited number of players, suggesting de facto (implicit collusion) oligopoly pricing.
OTOH, evidence that competition has at least some impact (again from the NYTimes): ... and ... Actual prices paid and insurance coverage are all over the map. As the NYTimes notes, "Those on Medicare, for instance, have no insurance coverage for Wegovy because Medicare is prevented by law from covering weight-loss drugs."
Other insurance may cover the drugs but with high co-pays and deductibles that keep them out of reach of many patients.
- Malnutrition https://www.nytimes.com/2023/04/21/well/eat/ozempic-side-effects-malnutrition.html?smid=nytcore-ios-share&referringSource=articleShare
- Facial aging https://www.nytimes.com/2023/01/24/style/ozempic-weight-loss-drugs-aging.html?smid=nytcore-ios-share&referringSource=articleShare
- You may lose the desire to drink https://www.nytimes.com/2023/02/24/well/eat/ozempic-side-effects-alcohol.html?smid=nytcore-ios-share&referringSource=articleShare
https://www.washingtonpost.com/opinions/2023/10/23/medicare-negotiations-drug-prices-lawsuit/
This argument seems to fly in the face of the fact that they are willing to sell the drugs at far lower prices in other countries.
So far all the non diabetic weight loss studies have been short term. Presumably long term ( ie lifetime?) use will be needed. Those side effects are less known.