Do airline companies dream of slimmer people?
September was challenging for equities in general, driven mostly by expectations for a higher interest rate environment for an extended period. On the healthcare side, markets have continued to extrapolate the future impact of further GLP-1 penetration. The Centers for Medicaid and Medicare Services published the list of drugs subject to price negotiations in 2026 under the Inflation Reduction Act. Markets reacted little, though the long-term impact could be substantial.
Overall, September highlighted the industry’s innovation power. Extreme share price reactions are often buying or selling opportunities as broad healthcare themes are not usually as binary as initially thought.
Market-wide GLP-1 implications
• Since the impressive read-out of the semaglutide SELECT study, there has been widespread attention to what the potential implications of a “slimmer” society would be.
• Almost no industry has been spared by analysts trying to figure out the ultimate impact. These have ranged from the rational (“There will be less demand for diabetes management solutions as obesity is a major risk factor for diabetes”) to the creative (“Jet fuel is a major expense driver for airlines, so a slimmer overall population will increase airline margins.”)
• Overall, GLP-1 adoption, even if very broad, will most likely coexist with existing therapeutic solutions (such as CGMs or insulin pumps). We think the market has overreacted on many of the moves seen thus far.
Rates: higher for longer
• The US Federal Reserve sent a strong message to the markets on the 20th of September: interest rates will stay higher for longer.
• This had a strong impact across all sectors, and healthcare was not spared.
• On the positive side, managed care companies benefited from this announcement, as higher rates typically improves investment income. In addition, the group benefitted from a flight to quality amidst risk-off sentiment.
• On the negative side, unprofitable companies have been under pressure across the board, with small biotech companies suffering most.
• Overall, the environment will remain challenging. This will again highlight the importance of having innovative solutions to address high unmet medical needs.
- Centene 12% Rates-driven subsector strength
- CVS 7% Rates-driven subsector strength
- SOBI 6% Strong product launch
- UNH 6% Rates-driven subsector strength
- Molina 6% Rates-driven subsector strength
- Bachem -20% Management changes
- Exact Sciences -20% Rates-driven growth stock
- Align -17% Rates-driven growth stock
- Illumina -17% CEO change, sentiment
- Insulet -16% GLP-1 driven weakness
Chart of the Month:
Shares of GLP-1 producers have been surging with the data release of Novo Nordisk’s SELECT trial. The trial showed that patients taking GLP-1 can loose 15-20% body weight and reduce cardiovascular risk.
First this is amazing news for patients, but then if you think a bit further, being able to treat obesity could have huge implications.
Investors quickly implied that with less obese people there will be less patients with sleep apnea or diabetes and shares of companies active in these two areas collapsed.
It is amazing to see what innovation can do and how much we still have to discover.
Check out our video on this subject here.
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