For many struggling with obesity, new medications have been “a gift,” as Oprah Winfrey recently described it in declaring she was “done with the shaming.” Investors in drug manufacturers Novo Nordisk and Eli Lilly might use the same term for the returns they’ve realized over the past year. U.S.-listed shares of Novo Nordisk, the maker of Ozempic and Wegovy, have climbed nearly 52% year to date, while Lilly’s have gained 56% over the same period. Lilly’s Zepbound recently entered the weight loss market, and is off to a strong start. It has the same active ingredient, tirzepatide, as its Mounjaro type 2 diabetes treatment. But what’s ahead for the weight loss trade in 2024? “We’re very optimistic about that market, and we’re at the very, very early innings,” said Andy Acker, a portfolio manager on Janus Henderson’s health-care team. The firm has held positions in both stocks over the past decade, and expects that there’s room in the category for multiple companies to create “strong, profitable new franchises that can help a lot of patients around the world.” Lilly and Novo have the market to themselves at the moment. According to FactSet, the majority of Wall Street analysts maintain buy ratings on both stocks. The views are a bit more positive for Lilly, but some analysts have grown more cautious as valuations have gotten richer. Still, with an average price target of $646, Lilly shares could climb 13% from Friday’s close, the data provider said. Both companies have been investing heavily to build out manufacturing capacity, as the supply today is far short of the demand for the drugs. Investors will be eager to see how the companies manage that balance in 2024. Wall Street expects the market for these drugs will swell to more than $100 billion before the end of this decade. Beyond Ozempic In 2024, investors may want to look at several other companies, both large and small, vying to enter the category with their own versions of these drugs. The new drugs mimic incretin hormones found in the gut, like GLP-1 and GIP, to suppress appetite and regulate insulin secretion. In doing so, the drugs help patients lose between 15% to 20% — or more — of their weight. However, since the drugs work as a hormone replacement, patients can regain weight if they stop treatment. Next-generation versions might be longer acting or be able to be taken orally instead of through a once-a-week injection as is now the case. Acker also expects further innovation to occur as companies develop drugs to help manage side effects such as the loss of lean muscle mass . Regeneron and Biohaven are two companies Janus owns that are working on drugs to help with muscle preservation. “How do we lose weight while preserving muscle? How can we have better maintenance therapy that is easier for patients to take?,” Acker said. “These are all unmet medical needs that we’re investing in that can help address big challenges as we roll them out globally,” he said. Buzz has been building ahead of an expected update from Amgen on its anti-obesity drug, mari-tide (formerly AMG 133). The stock received several upgrades from analysts this month, citing this event as a potential catalyst. “New growth segments are key to the story, as longer-term drivers of value (with sights on post-2030) and the bridge to cross from the trailing legacy commercial assets to the emerging oncology, [inflammation and immunology], rare disease, and cardiometabolic/obesity platforms,” RBC Capital analyst Gregory Renza wrote in a research note upgrading Amgen to outperform from sector perform on Dec. 12. Renza expects the updated trial results to show how competitive Amgen’s product is compared to the existing treatments. Other companies working on incretin medications include Pfizer and Structure Therapeutics , which have both had some recent setbacks in their programs. AstraZeneca has jumped into the race by licensing a GLP-1 drug in development from Eccogene . Beyond weight loss One of 2023’s most pivotal events in the space was Novo Nordisk’s release of top line results from its Select trial in August . This data, along with the full results published in November, showed that taking semaglutide, the active ingredient in Wegovy and Ozempic, to address obesity gave patients more than a cosmetic benefit. It also lowered their risk of cardiovascular disease . In coming years, more will be learned about other health outcomes, which should continue to shape treatment and health insurance coverage. “Overall we see 20+ relevant trials ongoing that are set to read out over the next few years, providing a steady cadence of information on the potential broader health benefits of AOMs [anti-obesity medications],” said Goldman Sachs analyst Chris Shibutani, in a research note in mid-December. “Results from these studies are anticipated to have a material knock-on effect in terms of how obesity as a disease is contextualized and managed, and ultimately how widely these drugs are utilized and very importantly, reimbursed.” Beyond pharma stocks With each data release, there can be volatility. In 2023, the exuberance around weight loss drugs roiled markets in many unexpected ways. Since obesity and overweight are so common, many investors started to theorize about how these life-changing drugs could start to ripple through society. The result was unexpected upheaval in some sectors. Beginning with the Select study data, investors sold shares of restaurant, food and beverage stocks, expecting that these companies would lose some of their best customers . Medical device stocks of all kinds were hammered as speculation grew that people wouldn’t want to have bariatric surgery when they could take a drug instead, or they wouldn’t need to have their knees and hips replaced once they slimmed down. PODD YTD mountain Insulet shares year to date The list of affected sectors grew long. For a while, it seemed like hardly any area of the economy would escape. One day, there was speculation airlines would save fuel as they transported lighter passengers. Another day, packaging stocks would sell off on the belief that falling sales of tortilla chips, ice cream and cookies , would be a blow for the companies that make the boxes and bags these products come in. Wall Street analysts rushed to calm investors, saying these changes wouldn’t occur overnight — if they happened at all. Since November, some of the worst hit stocks have trimmed their losses, and some of the battered names are ending on up lists of stocks to buy in 2024. Leerink Partners analyst Mike Kratky, for example, named diabetes device makers Insulet and Dexcom as two of his top three picks heading into 2024. (The third was Vericel , which works in sports medicine and burn care.) “We see significant valuation dislocations remaining in MedTech following the sharp GLP-1-driven sell-off in 3Q23,” Kratky said in a research note last week. DXCM YTD mountain Dexcom shares year to date Kratky remains cautious about stocks that are exposed to “headline risk” tied to obesity medications, but sees opportunity for names that will have “upcoming catalysts that could remove the perceived GLP-1 overhang.” Insulet shares have lost nearly 27% in 2023, having dipped as low as $125.82 in October. However, Kratky expects data from Insulet will help support the use of insulin pumps even as more patients shift to GLP-1 medications. He has a $270 price target on the stock, which implies 25% upside ahead. Dexcom has clawed its way back to almost an 8% gain this year. But the shares traded as low as $74.75 in October. Leerink sees the stock rising as high as $144, or 17% above Friday’s close. The affected companies have also been very vocal in addressing how they plan to coexist with these weight loss products. For example, food companies such as Nestle have discussed how they might develop protein bars and drinks for those on incretin medications. ‘The Oprah effect’ The new year will also bring more education about obesity as a chronic disease, more discussion about how these drugs work, and hopefully more realistic expectations about their benefits. Many reports in 2023 showed how misunderstood obesity and overweight are, even among those who experience it themselves. Speaking on a panel published on Oprah Daily in September, Winfrey criticized weight loss drugs and said she needed to shed pounds on her own, adding that taking a medication was “the easy way out.” WW YTD mountain WW shares are up 143% in 2023. “I’ve got to do it the hard way. I’ve got to keep climbing the mountains. I got to keep suffering, I got to do that because otherwise I somehow cheated myself,” she said at the time. As they have in the past, Winfrey’s comments moved markets. Winfrey is an investor and sits on the board of Weight Watchers parent WW International , which runs its traditional weight management program as well as Sequence, a telehealth platform that assists its users in obtaining weight loss medicines. After Winfrey’s September comments, the stock took a hit. But WW shares surged 25% last week. The action came after People magazine published an interview with Winfrey in which she said she is using weight-loss medication as a “maintenance tool.” With those gains, WW shares are up 144% year to date, though the stock has fallen sharply in recent years. If the gains hold in the last week of 2023, it will be the first positive year for the stock since 2017, according to FactSet. In the People cover story, Winfrey said: “The fact that there’s a medically approved prescription for managing weight and staying healthier, in my lifetime, feels like relief, like redemption, like a gift, and not something to hide behind and once again be ridiculed for. I’m absolutely done with the shaming from other people and particularly myself.” – CNBC’s Michael Bloom contributed reporting.