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On Wednesday, a court ruled in favor of the U.S. Food and Drug Administration (FDA), denying a motion by compounding pharmacies in a case against the removal of certain drugs from the shortage list. The decision, which concerns Mounjaro and Zepbound, two drugs previously listed as in shortage, was seen as unsurprising by analysts at Truist, who have been following the developments in the compounding and glucagon-like peptide-1 (GLP-1) space.
The court found the FDA’s evaluation process for determining drug supply and demand to be reasonable. The Orderly Free Association (OFA) had challenged the FDA’s method, arguing that it did not align with the statutory requirement to be "up-to-date." However, the court supported the FDA’s discretion in selecting the relevant time period for data review and projections, concluding that the FDA’s approach provided a comprehensive view rather than a limited snapshot.
In response to the OFA’s claim that the FDA should not make decisions on a nationwide basis, the court sided with the FDA, stating that as a national agency, it is tasked with addressing nationwide shortages. The court deemed it rational for the FDA to consider that localized shipping delays do not necessarily indicate a nationwide shortage.
The court also addressed the issue of compounded drugs, with the OFA asserting that the FDA should have included compounded volume in past demand calculations. The court supported the FDA’s decision to focus on the demand for the drugs produced by Eli Lilly and Company (NYSE:LLY), a pharmaceutical giant with a market capitalization exceeding $600 billion and strong momentum in its GLP-1 franchise. While Truist analyst Devarakonda maintains a ’Buy’ rating, InvestingPro data shows the broader analyst consensus is also bullish, with 15 out of 20 analysts recommending the stock as a Buy. This approach was deemed reasonable since compounded versions would not be available once a drug is removed from the shortage list.
Lastly, the OFA’s concern that the FDA improperly delegated authority to Lilly by allowing the company to determine what evidence to present was dismissed by the court. The coordination between the FDA and Lilly was deemed necessary, as Lilly possessed the relevant data for its products.
The insights from this ruling could also be relevant to the ongoing Wegovy/Ozempic case, as indicated by Truist analysts. Wegovy and Ozempic, also GLP-1 drugs used for chronic weight management and diabetes, respectively, have been under scrutiny in similar contexts. The court’s decisions in the current case may offer a precedent for how similar disputes could be resolved in the future. For investors interested in deeper analysis of pharmaceutical companies like Eli Lilly and their competitors, InvestingPro offers comprehensive research reports with detailed financial metrics, valuation analysis, and industry comparisons across more than 1,400 US stocks.
In other recent news, Hims & Hers Health, Inc. has issued $1 billion in convertible senior notes due in 2030, as stated in a recent SEC filing. The notes were sold in a private offering and carry a 0.00% interest rate, with provisions for conversion into Class A common stock under certain conditions. Additionally, Truist Securities has raised its price target for Hims & Hers to $45, maintaining a Hold rating. This update follows the company’s first-quarter earnings for 2025, described as a "Mixed Bag" by Truist, with a revenue beat driven by GLP-1 sales and reaffirmed revenue guidance. Hims & Hers has also announced plans to offer $450 million in convertible notes, with proceeds intended for global expansion and strategic acquisitions. Newly appointed CTO Mo Elshenawy will oversee investments in AI and diagnostics to enhance personalized healthcare services. Elshenawy, with a background in AI, is expected to lead the company’s efforts in modernizing healthcare services. These developments reflect Hims & Hers’ ongoing strategy to expand and innovate in the healthcare sector.
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