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With growing interest in obesity treatments, Goldman Sachs just raised its market estimates from $100 billion to $130 billion.
“The estimate was revised as the firm projects the number of Americans on anti-obesity drugs could reach ~19M by 2030, up from its previous estimate of ~15M. This indicates a ~17% market penetration among U.S. adults,” as noted by Seeking Alpha.
While that’s certainly great news for obesity treatment heavyweights like Eli Lilly (LLY) and Novo Nordisk (NVO), it’s also fueling momentum in up-and-coming treatment stocks, like:
Viking Therapeutics (VKTX)
With Viking Therapeutics, the company is seeing good success with its GLP-1 obesity drug trials. It already reported that its Phase 2 VENTURE trial successfully achieved is primary endpoint and all secondary endpoints. It also said patients receiving VK-2735 demonstrated weight loss after 13 weeks, rating up to 14.7% from baseline weight.
Better, VKTX is about to start Phase 2 trials of its once-a-day weight loss pill. Viking said patients who received the pill once a day lost up to 5.3% of their weight on average, or up to 3.3% more than those who took a placebo, at 28 days, as noted by CNBC.
Altimmune (ALT)
The company’s pemvidutide treatment led to weight loss while preserving lean mass, as noted in trial data. In addition, data from a 48-week trial showed that about 74.5% of weight loss was linked to fat tissue. About 25.5% was linked to lean mass, which may give it a leg up against the competition. “We believe that pemvidutide has the potential to distinguish itself broadly from other therapies for the treatment of obesity,” ALT CEO Vipin Garg added.
The volatility makeup for a particular market is referred to in the industry as the skew. Each commodity, or group of commodities, has their own particular skew. In many markets a skew exists, meaning that the out-of-the-money calls/puts trade at a higher volatility than the at-the-money options. Some markets have a normal skew, which if you graphically plotted the implied volatilities the picture would be a “V”. This occurs because the out-of-the-money options “vega” is so low, therefore a percentage point increase in volatility in these options equates to a small price change. Other markets have a skew to only one side or the other, meaning the further you go out-of-the-money in either the calls or the puts, the higher the implied volatility of those strikes is.
In reality, volatility skews have three basic configurations. The “normal” configuration is “U” shaped. The strikes more distant from the at-the-money strike trade at higher volatility; the at-the-money having the lowest implied. If one was to plot out the different volatilities, and connect the dots, the formation would be that of a “U”. The reason that this phenomenon exists ties in with the properties of vega. The vega decreases as the strike price moves further from being at-the-money. The sensitivity to volatility changes decrease as the strike moves away from being at-the-money. Deep in-the-money or out-of-the-money options have small vega. A volatility change will not affect the price of the option that much. Currency options commonly have this configuration.
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