Shares and profit participation certificates plunge after study on diet medication

These days, it is once again clear how nervous Roche shareholders are – and how much investors are clinging to the topic of weight-loss injections. On Thursday morning, the pharmaceutical company’s profit participation certificates temporarily lost around five percent of their value at the start of trading. At the end of trading, the loss was still 2.2 percent.

Two disappointments in a row

This was a reaction to new study data on a weight-loss drug. At the beginning of the week, data for another potential drug had already caused disappointment among some analysts and led to significant share price losses.

Both drugs, a weight-loss injection and a pill, come from the company Carmot, which Roche bought for almost three billion dollars at the end of 2023. With the takeover, the group wants to gain a foothold in the booming business of anti-obesity drugs, which has brought competitors such as Novo Nordisk and Eli Lilly billions in sales and a multiplication of their share price.

In fact, Roche shares have recovered in recent months after a decline lasting several years – not least because the stock market sees promise for the future in the trend area of ​​obesity. Although Roche’s first drug in this area will probably not be on the market for another four years, every little piece of news about the development causes price movements.

This became clear this week. The effect of both drugs was very good. Patients lost weight more quickly than with competing products. However, there were question marks over the side effects, some of which were more severe.

A balancing act for the group

The company is also trying to put the latest data into perspective and contradicts the interpretation of individual analysts. There is no cause for concern about the side effects, nor will the program be delayed if the dosage has to be adjusted.

For Roche, the issue of slimming drugs is a balancing act. Management may think that a little imagination can’t hurt the share price. But the latest reactions also show how little it takes for this imagination to fizzle out.

The hype surrounding the purchased weight-loss drugs also has to do with the fact that important product candidates have failed in Roche’s own research in recent years. These flops have left gaps in the pipeline.

New top sellers sought

With all the fuss about the trendy topic of diet pills, it is sometimes forgotten what the big task of the new Roche CEO Thomas Schinecker is: He must ensure that the researchers from within the company bring new, profitable products onto the market in the long term.

The company continues to invest huge sums in research. This week, Roche management inaugurated a new research and development center at its headquarters in Basel in the presence of Economics Minister Guy Parmelin. The cost of the facility, which is spread across four interconnected high-rise buildings, is 1.2 billion Swiss francs. At the same time, however, Schinecker wants to keep costs under control.

But increasing productivity entails risks. On the one hand, Schinecker wants to weed out less promising projects earlier. In the past, researchers often worked too long on things that were not very promising.

On the other hand, if you sort things out more quickly, there is also the possibility of getting rid of something too quickly. This is what happened with the active ingredient orforglipron: the Japanese Roche subsidiary Chugai once licensed this to Eli Lilly because it was no longer active in the area. The drug now promises to be a blockbuster for the American company.