Blockbuster News Isn't Always Enough

Novo Nordisk's (NVO) Ozempic isn't the only game in town anymore...

It seems biotech giant Amgen (AMGN) is on the cusp of unveiling its own weight-loss drug. And investors are already on board.

MariTide is an injectable obesity treatment that's currently undergoing Phase II trials. Amgen started talking about this drug all the way back in late 2022 – although it's further behind in development than Ozempic.

This drug sent shares up more than 30% over the past year. That includes a 12% jump right after the company announced good results in early testing... adding $17 billion to its market cap overnight.

Investors are clearly excited about MariTide. Yet as we'll explain, within the biotech industry, that jump isn't as impressive as you might think...

MariTide has plenty of potential to take market share from Ozempic...

Early results suggest that it works well – and fast. Patients who received a monthly injection lost up to 15% of their body weight in 12 weeks.

If the drug is approved and sent to market, patients may prefer it to Ozempic... which requires weekly injections. No wonder investors started buying Amgen shares like crazy.

The weight-loss industry is about a $90 billion market. So Amgen's $17 billion jump represented nearly 20% of the entire industry.

That's a big move for a drug that's not even available for sale yet.

In short, Amgen stock is unlikely to rise much more unless the drug gets approved.

And because Amgen is such a big company to begin with – with a market cap of roughly $170 billion – it's in a tough position versus smaller competitors.

A double-digit jump sounds great to folks who usually invest in bigger companies...

Microcap investors, however, wouldn't bat an eye. Much smaller biotechs frequently generate triple-digit returns on the same kind of news.

Look at cancer-treatment developer Janux Therapeutics (JANX). Its market cap was just above $400 million earlier this year.

In February, Wall Street analysts increased their odds of success for one Janux drug from 40% to 60%. That was all it took to send the stock surging 230% in a day. Janux is now a $2.5 billion company.

Then there's tiny biopharma business Fusion Pharmaceuticals (FUSN). A couple months ago, industry leader AstraZeneca (AZN) announced its intention to buy Fusion. Shares soared 112% in two trading days.

That's the thing about small companies... You need a lot less good news to make them move a lot more.

Amgen was a microcap back in the 1980s. But today, even huge news like a breakthrough weight-loss drug only helps lift the stock a bit more than 10%.

It's always going to be harder for Amgen to generate high double- and triple-digit returns than smaller companies... because it's so big.

On the other hand, a major catalyst is coming for much smaller stocks next month...

The annual Russell rebalancing will take place on June 28. Hundreds of stocks will be added to and deleted from the Russell indexes. And in the month and a half leading up to rebalancing, some of the tiniest stocks could double (or more).

Wall Street is already preparing... and so are we.

We've pored over Russell's criteria and eligible stocks. And we've put together a list of our top five tiny candidates to join the Russell 2000 – setting themselves up to soar in a matter of weeks.

This event isn't a prediction. The date is set. If you miss it, you won't get another chance like this for 365 days... So if you're even remotely interested, I urge you to get familiar with the details right here.

It's not impossible to generate outsized returns in established stocks... But it's a lot harder. Amgen's 12% move is nothing compared to what we expect before June 28.

Regards,

Joel Litman
May 16, 2024