Intriguing IPOs: Metsera (MTSR) and Beta Bionics (BBNX)
Two medical companies attempting to bust down the doors on the lucrative obesity and diabetes markets.
The nail that sticks out gets hammered down — Japanese proverb
A thesis I keep refining in this newsletter is the concept of “adequate” rates of return. Businesses that can generate rates of return that exceed capital costs will likely do well over the long haul.
Deep down, we instinctively say that more is better; therefore, even higher returns should make a business more worthy of investment, right?
Unfortunately, there is a downside to incredibly high returns: Other people notice.
One market segment generating spectacular returns is the glucagon-like peptide-1 (GLP-1) inhibitor market, the suite of diabetic and obesity drugs we all know as Ozempic (or Wegovy, or Sepbound, or Mounjaro, or…you get the idea).
Both Novo Nordisk (NYSE: NVO) and Eli Lilly (NYSE: LLY) have had a first-mover advantage in these markets, resulting in jaw-dropping results. Businesses that previously had what we would call “adequate” rates of returns are now generating seemingly absurd returns.
These returns have prompted other pharmaceutical companies to develop their own GLP-1 inhibitors with higher efficacy or in pill form to replace injections.
Last week, Metsera (NASDAQ: MTSR) went public in an attempt to stake a claim in the GLP-1 gold rush. While we’re on weight loss and diabetes, another company in this space, medical device maker Beta Bionics (NASDAQ: BBNX), also went public last week.
Let’s examine both IPOs and how Metsera’s IPO is a lesson for investors in high-return markets.
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