Two healthcare stocks in the white-hot weight-loss segment tanked on Monday as one of their rivals zoomed higher. The decliners were Novo Nordisk (NVO 0.10%), famously the company behind Wegovy, and Viking Therapeutics (VKTX +0.54%), which is far along in its development of an advanced GLP-1-based obesity treatment. The gainer was Hims & Hers Healthcare (HIMS +3.67%).
On the day, the latter company's share price rose by over 5%, while Novo Nordisk's slid by almost 3%, and Viking took a more than 7% tumble.
A very highly visible TV ad
The largest TV advertising platform in the world is American football's Super Bowl, and Hims & Hers was one of the adventurous companies parting with millions of dollars to place an ad during the event. Cleverly targeting the high-demand, weight-loss drug segment, the company dramatically pushed its obesity offerings in a cutting-edge, one-minute spot.
It's important to note here that Hims & Hers is largely a telehealth company that effectively serves only as a retailer of weight-loss drugs -- it has neither developed them nor brought them to market. It is currently utilizing a legal loophole that allows it to sell compounded semaglutide, the molecule behind Wegovy.
By contrast, Novo Nordisk is both the developer and seller of Wegovy, while Viking Therapeutics's VK2735 has posted impressive results in testing and is now in the later stages of development. Wegovy is a market leader and the current go-to drug, and VK2735 has an excellent chance at success given its performance in clinical trials.
So this is basically Hims & Hers aggressively positioning itself as the face of obesity drugs. Even if only a sliver of the Super Bowl audience accepts this, millions of people are sure to identify the company as the source of cutting-edge, weight-loss medications. On Monday, this gave Hims & Hers investors confidence and worried those who've put money in peer obesity drug stocks.
NYSE: HIMS
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The market over-reacted
Hims & Hers deserves kudos for being so bold in its marketing approach. I'm not convinced any positive effect will be long-lasting for the company, though. It's more than possible the Food and Drug Administration (FDA) will shut down the company's compounded weight-loss drug business; such are the perils of legal loopholes.
By the same token, I wouldn't sell either Novo Nordisk or Viking simply because of a rival's ad no matter how highly visible and effective it might be. Those companies are walking the walk with obesity drugs and, as such, both stand a much greater chance of benefiting from their continued popularity.
