Robert F. Kennedy Jr.'s potential appointment to the Department of Health and Human Services has spooked Eli Lilly stock and shares of other companies that make popular weight-loss drugs.
Though Kennedy has yet to overtly comment on how he would handle weight-loss drugs, there are hints that he's not that impressed with the new wave of treatments.
In a recent interview with Fox News, RFK Jr. suggested the best approach to treating obesity is through nutrition rather than pharmaceuticals. He also called out Denmark-based Novo Nordisk's Ozempic, a diabetes treatment that uses the same active ingredient as weight-loss drug Wegovy.
"While I'm working in the next administration, I will address our sick food system — and the corrupt government agencies — to help make our country healthy again," he said in a post on X. "In the meantime perhaps we should consider replanting the kitchen garden before sending more money to Denmark."
Eli Lilly Stock Chilled On Kennedy Appointment
President-elect Donald Trump announced his plan to appoint Kennedy to the HHS role in a Nov. 15 post on X, formerly called Twitter. The appointment still has to pass muster with the Senate. RBC Capital Markets analyst Brian Abrahams also noted that Trump has a "tendency to change his mind last minute."
Still, in the aftermath, Eli Lilly stock has dropped 4.8%. Novo Nordisk stock has shed 2.2%.
Shares of Amgen, Pfizer and Roche have lost between 2% and 4%. Smaller biotech Structure Therapeutics has plunged more than 17% since the news Kennedy may head HHS, as of midday Thursday.
Viking Therapeutics, on the other hand, reversed a steep decline and is now roughly flat with where it was trading before the Kennedy announcement.
BMO Capital Markets analyst Evan Seigerman recently said the sell-off of stocks tied to weight-loss drugs reflects "more fear than real fundamental downside risk." He says the HHS Secretary is an administrative position and won't afford RFK Jr. the ability to change policies around the use of incretin-based drugs (reduce blood sugar and body weight) like Wegovy or Lilly's Zepbound.
"Investors appear to be reading into previous comments by RFK Jr. that outline his skepticism about both the price of antiobesity medications and the rationale for covering such drugs," he said in a report. "We note that while RFK Jr. appears less optimistic on the use of incretins to curb the obesity crisis, he remains limited in his ability to influence either policy or pricing of obesity medications."
FDA Commissioner Pick Is Up Next
In addition to Kennedy, Trump has tapped Dr. Mehmet Oz — better known as TV's Dr. Oz — to head up the Centers for Medicare and Medicaid Services. The next key pick will be the Food and Drug Administration Commissioner.
Media reports suggest Dr. Marty Makary is the leading candidate. Makary is a surgeon and public policy researcher at Johns Hopkins University. He's also a writer.
Makary's and RFK Jr.'s views overlap in a number of key places, including chronic diseases. Makary has noted GLP-1 drugs can lead to muscle mass decline, which has an impact on longevity.
"We think he would not necessarily be as focused on pharmaceutical innovation as the current regime (and) may be particularly unfavorable for antibiotic, vaccine, obesity and chronic disease companies," BMO Capital said in a recent client note.
This could further impact Eli Lilly stock, which is already struggling in the wake of its disastrous third-quarter report. Sales of its tirzepatide-based drugs — Mounjaro and Zepbound — brought in a combined $4.37 billion. But that missed forecasts for $5.49 billion. Lilly cut its outlook and Eli Lilly stock slumped 6.3%.
Similarly, Novo's semaglutide sales came up mixed. It sells semaglutide as a diabetes treatment called Ozempic and the weight-loss drug Wegovy. Wegovy sales beat third-quarter forecasts, but Ozempic came in light and Novo tightened its outlook for the year. Shares fell more than 4%.
Eli Lilly Stock Is Well Off Its Peak
Eli Lilly stock hit an intraday peak at 972.53 on Aug. 22, surging almost 67% to that point. Shares of Novo Nordisk were on a similar trajectory, up 43% this year through a peak at 148.15 on June 25.
Sales projections for their weight-loss drugs remain sky-high. Analysts polled by FactSet expect Zepbound alone to bring in more than $22.4 billion in 2029 sales. They also call for Wegovy to generate north of $19.4 billion in sales that year. J.P. Morgan analysts have said the market for weight-loss drugs could top $100 billion by 2030.
But Trump's second presidency could put a slight chill on the advance. The companies are also facing off with compounders that make knockoff versions of their drugs. The FDA is now reviewing whether tirzepatide is in shortage, which would mean compounders can keep making copies in the interim.
RFK Jr., though, seemingly wants to avoid all of that. In an interview with Fox News, he called out the high price tag of Novo's Ozempic. A bill called the Treat and Reduce Obesity Act would help expand reimbursement coverage for the cost of weight-loss drugs.
"That alone will cost $3 trillion a year," he said, according to Newsweek. "If we spend about one-fifth of that giving good food, three meals a day to every man, woman, and child in our country we can solve the obesity and diabetes epidemic overnight for a tiny fraction of the cost."
It's important to note, Kennedy used the assumption Ozempic costs $1,600 per month. Novo lists a wholesale acquisition cost of almost $1,000 for all three dosages. This is the cost a patient pays before insurance and rebates kick in. Kennedy is also assuming — likely incorrectly — that every person who is overweight will eventually use a weight-loss drug.
Ratings Decline For Weight-Loss Behemoths
Eli Lilly stock has declined markedly since its third-quarter report.
Shares have a low Relative Strength Rating of 27, according to IBD Digital. Novo Nordisk has a poor RS Rating of 17. This means the two stocks rank in the lowest 27% and 17%, respectively, of all stocks when it comes to 12-month performance.
Those numbers have dropped significantly from a respective 96 and 95 a year ago.
Viking Therapeutics, on the other hand, has retained its strong RS Rating of 96.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
