![These stocks are trying to solve a major shortcoming of weight loss drugs: Shrinking muscle mass These stocks are trying to solve a major shortcoming of weight loss drugs: Shrinking muscle mass](https://goood-news.com/wp-content/uploads/https://image.cnbcfm.com/api/v1/image/107320405-1697748231014-gettyimages-1460807529-dsc04412.jpeg?v=1697972427&w=1920&h=1080)
One of the downsides of taking new anti-obesity medications is that patients tend to lose lean muscle mass along with body fat. What this means for patients over the long term isn’t fully known, but there are several pharmaceutical companies studying the side effect and hoping to develop therapies that might regulate the condition. In a best case scenario, these experimental drugs would not only protect against muscle loss, they could also speed up fat loss when taken alongside what are called incretin therapies, such as Ozempic and Mounjaro. “It is becoming increasingly clear that, at least with the current agents, there’s room to improve,” Piper Sandler analyst Allison Bratzel said in an interview. “This is a major shortcoming in terms of not just quality of life for the patients who have to lose lean muscle mass, but there’s actually room to improve on the weight loss and there [are] other metabolic benefits to improving your lean muscle mass … [including] you might have better durability of weight loss.” Biohaven , Regeneron and Scholar Rock are three companies working in this area, Bratzel said. Versanis Bio , a clinical-stage biotech that Eli Lilly acquired this summer is also active in the field. A huge opportunity The obesity drug market is expected to be large and lucrative, with several Wall Street firms predicting it could reach $100 billion or more in annual sales by the end of the decade. This is partly due to the number of people who are overweight or obese — some 70% of American adults are one or the other — as well as the chronic nature of the disease. Novo Nordisk’s Ozempic, or semaglutide, mimics stomach hormones like glucagon-like peptide 1, or GLP-1, to control insulin and quiet food cravings. Eli Lilly’s Mounjaro adds a second incretin, gastric inhibitory polypetide, or GIP. The drugs can help patients lose 15% to 20% of their weight, on average. However, the weight can come back when patients stop taking the drugs. “Anytime somebody loses weight, they’re going to lose adipose tissue, [body fat,] but they’re also going to lose some skeletal muscle mass,” said Dr. Lydia Alexander, president-elect of the Obesity Medicine Association. “The extent to which that happens really depends on the quality of their nutrition,” she continued. “It depends on how much they’re moving their body because that sends signals to the body that those muscles are actually very necessary and should not be dismantled.” Alexander and other obesity specialists recommend patients use a wraparound approach that incorporates medication, exercise, nutrition and other support. Patients also should be monitored to see how much lean mass is being lost, which can hurt the metabolism, movement and balance. This is especially important for people 65 and older as lean muscle is naturally lost due to aging. In the drug pipeline Piper Sandler’s Bratzel reiterated an overweight rating on Scholar Rock this week, saying it’s a “top” small- and midcap pick after the company disclosed plans to develop SRK-439, an anti-myostatin antibody, for use in treating obesity. Scholar Rock already has expertise in targeting different forms of myostatin, a protein that limits muscle growth and is thought to be involved in triggering muscle wasting. The company has been developing drugs to treat spinal muscular atrophy, a genetic disease that progressively weakens muscles. Bratzel said she expects Scholar’s approach has a good shot at achieving a “best-in-class safety profile.” A recent stock offering gives the company a cash runway through the second half of 2025, the analyst said. By then, Scholar Rock may have proof-of-concept data on SRK-439’s use in treating obesity. Last Tuesday, Bratzel raised her price target by $2 to $28 per share, about 266% above where Schollar Rock closed Friday. And that valuation doesn’t assume any upside that could come from partnering with a large pharmaceutical company. Scholar’s shares are down 15% year to date, putting its market value at $530 million. Bratzel’s price target is slightly above the average target of $22, with 88% of analysts rating it a buy or overweight, according to FactSet. SRRK YTD mountain Scholar Rock shares have fallen more than 17% since the start of the year. Bratzel said Lilly’s acquisition of Versanis backs up the idea that these drugs might one day be paired with incretins. Versanis’ top drug candidate is bimagrumab, a monoclonal antibody that binds with activin type II A and B receptors to block activin and myostatin signaling. The drug is being tested in a phase 2b study alongside semaglutide to protect against loss of muscle mass. Meanwhile, Biohaven is working on a myostatin inhibitor that it licensed from Bristol Myers Squibb . Known as taldefgrobep alfa, it was once considered a potential treatment for Duchenne muscular dystrophy. While the compound didn’t work for that disease, it did cause muscle growth, which could be helpful in metabolic diseases. Fueling up on protein Even if these studies are successful, it will take years before these drugs could be used by patients taking anti-obesity medications. Until then, patients will need to watch what they eat and focus on exercise just as they would on any other weight loss regimen. Eating extra protein and strength training will be key to stemming the loss of muscle and bone density. On Thursday, Nestle announced plans to market protein-packed products to aid those taking GLP-1 medications. “I believe we have important contributions to make,” Nestle CEO Ulf Mark Schneider said on an earnings call. “For the time that patients spend on these drugs and after, we are already developing a number of companion products. The goal will be to address the risk of malnutrition and the loss of lean muscle mass while on the GLP-1 therapy, and to avoid or limit weight rebound after the therapy,” he said. “These innovations are right in our wheelhouse, where we can bring our deep understanding of nutritional science and appropriate supplementation to the table.” Jeff Jonas, a portfolio manager at Gabelli Funds, which owns Nestle shares, said he has seen the recent losses in food stocks. Nestle’s comments are an attempt to offset some of the “near-term pressure,” but over time, he expects this could be an opportunity for the Swiss food company. “The way the drug works is that it slows down not just your appetite, but the way you process food through your stomach and digestive system, so a protein shake might be a good way to get your protein without being as impacted by that part of the drug,” Jonas said. Stephens’ decision Friday to name Simply Good Foods its “best idea” echoes this trend. The stock is down 14% since the start of the year, and is trading near its 52-week low, as part of a broad sell-off in food stocks. Analyst Jim Salera expects the company is “attractively positioned” with its Atkins and Quest brands, which sell low carb snacks and meals, and could be an acquisition target for a larger food company. SMPL 3M mountain Simply Good Foods shares are trading near 52-week lows. “As it pertains to the topic du jour, GLP-1 drugs, we believe that SMPL offers investors some insulation from this headline risk as its products are protein dense and, should widespread GLP-1 adoption occur, would be a conveient way for consumers to ensure they are still eating the correct amount of protein.” That’s likely to become a bigger issue over time. According to a Morgan Stanley survey, patients taking GLP-1 drugs now skew more male than the wider obese population. They are also younger, have a higher income and a higher body mass index than the average person with obesity. “We think this is because of discrepancies in access, education/awareness, affordability, and health care coverage of early adopters of current weight loss drugs on the market, which in many cases does not mirror the general obese population,” Morgan Stanley analysts wrote in a research report. “As weight loss drugs become more widely adopted/understood, more affordable, and more widely covered under health insurance plans, we would expect the profile of these drug users to more closely mirror the general obese population,” they said. When that occurs, muscle loss will be an even bigger issue than it is now. —CNBC’s Michael Bloom contributed to this report.