At Top Gun Options we pay attention to domestic and foreign actors in order to stay ahead of changes in the markets. The usual focus of our attention is the acronym DRINC which stands for Democrats, Russia, Iran, North Korea, and China, all of whom have caused more than their own shares of trouble this year. However, today we would like to look at an issue close to home, obesity. The USA is experiencing an epidemic of obesity. The complications of chronic severe obesity include type 2 diabetes, high blood pressure, heart disease, stroke, joint problems, liver disease, gallstones, some types of cancer, and sleep and breathing problems, among other troubles. The good news is that there are now drugs in the pipeline that are far more effective for treating obesity than have previously been available. Besides changing lives such drugs may provide investment and trading opportunities. In this regard we look at an Eli Lilly weight loss drug in FDA trials.
Incidence of Obesity and Market for Anti-obesity Drugs
According to the National Institute of Diabetes and Digestive, Kidney Diseases and one American in three is overweight. Two out of five adults could be diagnosed as having obesity and one in eleven as having severe obesity. Nearly one in five adolescents are obese and six percent of children from age two to nineteen are severely obese. There are about 200 million Americans over the age of 20 and one in eleven of these comes to 9 million. That is the potential adult market for an effective anti-obesity drug for severe cases. About 70 million Americans are under twenty years of age and six percent of that adds 4 million to the potential market for an effective anti-obesity drug.
Eli Lilly-obesity Drug Tirzepatide
According to a press release by Eli Lilly their new anti-obesity drug in trials achieved up to fifty-two pounds of weight loss over a 72 week trial. Average weight reductions during a third stage FDA trial depended on the dose given and the drug cohort in the study lost three times as much weight as those taking a placebo. Individuals who were pre-diabetic are still being studied for weight loss efficacy as well as how the drug affects the evolution of their diabetes. This is the first drug to deliver more than twenty percent weight loss in a phase three FDA study.
Potential for Long Term Profit from Tirzepatide
Lilly has discussed their coming rollout of Tirzepatide. They say they are planning for the long term so they are planning on making the drug available to those who need it at affordable rates. Their hope is to stake out a substantial share of the market against potential competitors. That having been said they expect there to be a $5 billion market for this drug. By comparison their total sales were $24.54 billion for 2020 and $28.32 billion for 2021.
Eli Lilly Stock Price
While the market in general has had a bad year, Eli Lilly started in January at $271 and stands at $308 today. It dipped as low as $234 in February and rose to $331 in July. The promise of an effective new drug to treat obesity and prevent its complications such as diabetes is an excellent thing. It is an excellent opportunity for long term investors who get in early but it is a better opportunity for those trading options to profit from price fluctuations related to FDA trials for its new anti-obesity drug, Tirzepatide. The Food and Drug Administration requires that potential medicines go through a series of trials. First the makers must provide that the drug does not harm those who take it and then they must prove that the medicine works in treating the disease for which it was designed. There are three stages of trials and stock prices tend to go up when a drug is approved and down when it encounters problems. Lilly’s new drug has passed stage three and is now awaiting FDA approval which will act like a stage in terms of it passing or not.
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