Investors can be forgiven if talk of a possible suicide risk related to a recent class of diabetes and weight reduction drugs led to skittishness last week. Prior attempts to treat obese or obese patients with medications were often plagued with unintended effects and drug recalls. Those earlier medications often didn’t seem to be the outcomes were well worth the risks. However the perception of the brand new GLP-1 medications, resembling Novo Nordisk’s Ozempic, Saxenda and Wegovy and Eli Lilly’s Trulicity and Mounjaro, are that the therapies are generally well-tolerated by patients and helpful in shedding kilos. Each stocks have soared on the blockbuster potential of those treatments, with Wall Street analysts estimating the category could possibly be price $100 billion, topping the dimensions of every other drug category to this point. NVO 5D mountain Novo shares have gained greater than 18% yr to this point. On Monday, nonetheless, investors learned that the European Medicines Agency is looking into reports that some patients had experienced suicidal thoughts and/or self harm after taking Saxenda and Ozempic. Then, on Tuesday, the regulator expanded the review to incorporate other GLP-1 receptor agonists, including Lilly’s Trulicity. Each stocks fell around 5% within the wake of the news, but rallied Friday. Novo’s stock stayed positive for the week and is up greater than 18% yr to this point. Lilly’s shares fell lower than 1% over the week, but are up about 23% yr to this point. Each firms have downplayed the priority, and the European regulator said the review “doesn’t necessarily mean that a medication caused the opposed event in query.” It expects to succeed in a choice by November. EMA playing catch-up? Wolfe Research analyst Tim Anderson said there are three facts that “cannot be totally dismissed.” The primary is that almost all obesity drugs, including GLP-1s, are “centrally acting,” which implies they work on a patient’s brain. In accordance with Anderson, that means there’s a likelihood of a neuropyschiatric effect. The second is that prior obesity drugs have been withdrawn due to high rates of psychiatric disorders, he said, citing Sanofi’s Acomplia as one in all the more moderen examples. Importantly, that drug wasn’t a GLP-1, but a distinct class often known as cannabinoid receptor antagonists. LLY 5D mountain Eli Lilly shares are up about 23% for the reason that start of the yr. And at last, he noted that Wegovy’s drug label in the USA already mentions “suicidal behavior and ideation” as a “warning and precaution.” “In our view, there’s a protracted history suggesting FDA is mostly a more cautious agency than EMA,” Wolfe’s Anderson said. He expects the EMA is playing catch as much as the U.S. on this issue. The analyst noted that within the FDA’s review documents of Wegovy, the agency said that each one centrally acting obesity drugs have some risk of sucide and depression. Further, he anticipates such a warning will likely be added to Lilly’s tirzepatide (Mounjaro) when it’s approved for obesity, which is anticipated by yr end. Still, Anderson said there are good reasons to imagine that is “very likely not a serious concern,” including the clinical profile of GLP-1 medications, which have been around since 2005 as diabetes treatments. Also, any comparison with Acomplia should note that the concerns about that drug’s connection to depression and anxiety were observed very early on during its clinical trials. This was not the case for the GLP-1 medications. In a research note, UBS analyst Colin Bristow said he spoke with Lilly and the corporate confirmed there have been “no safety signals” in routine monitoring of patients on Mounjaro and Trulicity. “One problem is that this kind of thing can grow to be a self-fulfilling prophecy to a certain degree, meaning when you know to search for a side effect, chances are high you will discover more of it,” Anderson said in a research note. Further, he anticipates that more safety concerns will arise for the reason that drugs are being closely watched. More risk ahead? “Investors unfortunately must brace themselves for more,” Anderson said. “While drugs like Novo’s Wegovy and LLY’s tirzepatide/Mounjaro deliver a remarkable degree of weight reduction in comparison with older therapies, which is able to likely translate into helpful effects on many other body systems (improved cardiovascular health, fewer joint replacements, less diabetes, amongst others), there are numerous ongoing layers of controversy nonetheless which means close scrutiny will proceed.” Lilly stays one in all Wolfe’s “top picks,” but Anderson warned that a “doomsday scenario” where Lilly is unable to market tirzepatide for obesity and the drug is “also tainted” for type 2 diabetes as well, would lead to the stock dropping as much as 40%. “To be clear, it is a low-probability scenario, but it surely’s still instructive to think about the impact of black-swan events like these, given the stakes and in addition the past issues with obesity drugs (not only Sanofi’s Acomplia, but in addition Wyeth’s ‘fen-phen’ before it which suffered from a distinct set of unintended effects),” he said. Other analysts echoed similar thoughts. At Citi, analyst Peter Verdult reiterated his buy rating on Novo Nordisk on Friday. He noted that he expects Wegovy to see “increased scrutiny” on condition that it stays in the general public consciousness because of widespread media attention. “Now we have a longstanding view that the GLP-1 is a ‘market creation’ vs a ‘market share’ story with NVO/LLY having fun with a structural duopoly well into the 2030s,” Verdult said. “Given 2022 global GLP-1 obesity sales reached $2.4bn despite Wegovy being supply constrained and never actively promoted, we argue that a market opportunity of > $40bn is possible…” UBS’ Bristow has a buy rating on Lilly, with a $498 price goal. On Wednesday, he called the pullback within the stock a “buying opportunity.” “… We view LLY as highly attractive on an absolute (numbers need to return up in ’24/’25) and relative basis (LLY has strongest fundamentals/event path in U.S. large cap biopharma),” he said. Deutsche Bank analyst Emmanuel Papadakis said he considered the discussion to be “a non-event.” “Given the body of trial data and extent/duration of use for semaglutide (a few years in thousands and thousands of patients), we’re relaxed about risks here,” Papadakis said, referring to the medications higher often known as Ozempic, Wegovy and Rybelsus. —CNBC’s Michael Bloom contributed to this report. For those who or someone you realize is in crisis, call the National Suicide Prevention Lifeline at 800-273-8255 within the U.S. or call or text 988.