ETFs to Capitalize on the Novo Nordisk-Septerna Deal

Novo Nordisk NVO announced a significant partnership with Septerna SEPN, a U.S.-based biotech company, valued at up to $2.2 billion, to tap the growing obesity treatment market.  

Following the announcement, SEPN shares jumped 51%, while NVO shares gained a little 1.6%. This put the spotlight on healthcare ETFs, which could be the best way for investors to tap the opportunity arising from the proposed deal. Investors should keep a close eye on the movement of ETFs like Roundhill GLP-1 & Weight Loss ETF OZEM, Amplify Weight Loss Drug & Treatment ETF THNR, Trenchless Fund ETF RVER and VanEck Vectors Pharmaceutical ETF PPH in the coming weeks.

The collaboration aims to develop oral small-molecule treatments targeting G protein-coupled receptors (GPCRs) for obesity, type 2 diabetes, and other cardiometabolic diseases. The deal includes over $200 million in upfront and near-term payments to Septerna. 

The move is part of Novo Nordisk’s broader strategy to expand its presence in the highly competitive obesity treatment market, which is widely considered the next frontier in weight-loss drug development.  Novo Nordisk is awaiting FDA approval for an oral version of its leading injectable treatment, Wegovy, with a decision expected by year’s end. NVO’s oral drug, Wegovy, is losing market share to Eli Lilly’s LLY competing drug, Zepbound. In order to maintain its position, Novo Nordisk recently announced a $1.75 billion acquisition deal with Lexicon Pharmaceuticals LXRX for an experimental oral obesity treatment.

ETFs in Focus

Let’s delve into each ETF below:

Roundhill GLP-1 & Weight Loss ETF (OZEM)

Roundhill GLP-1 & Weight Loss ETF is the world’s first GLP-1 ETF and is actively managed. Roundhill believes that weight loss drugs, including GLP-1 agonists, represent one of the most revolutionary advancements in the global pharmaceutical industry. OZEM holds 23 stocks in its basket, with NVO occupying the top position at 19.8% share. Roundhill GLP-1 & Weight Loss ETF has accumulated $34.7 million in its asset base and charges 59 bps in annual fees. It trades in an average daily volume of 14,00 shares (read: Inside Last Week's Wall Street Rally & Best-Performing ETF Areas).

Amplify Weight Loss Drug & Treatment ETF (THNR)

Amplify Weight Loss Drug & Treatment ETF provides access to global companies involved in the pharmaceutical manufacturing of GLP-1 agonist or enablers of such businesses. It tracks the VettaFi Weight Loss Drug & Treatment Index and holds 25 stocks in its basket. Eli Lilly takes the second spot, accounting for a 13.2% share. Amplify Weight Loss Drug & Treatment ETF charges 59 bps in annual fees and has AUM of $2.8 million. It trades in an average daily volume of 2,000 shares.

Trenchless Fund ETF (RVER)

Trenchless Fund ETF is an actively managed fund and seeks capital appreciation by investing in securities believed to have an above-average probability of outperforming the S&P 500 Index over all time horizons. It holds 19 stocks in its basket, with Novo Nordisk taking the third spot at 6.3% share. Trenchless Fund ETF has AUM of $73.5 million and charges 65 bps in annual fees. It trades in an average daily volume of 6,000 shares.

VanEck Vectors Pharmaceutical ETF (PPH)

VanEck Vectors Pharmaceutical ETF follows the MVIS US Listed Pharmaceutical 25 Index, which measures the performance of companies involved in pharmaceuticals, including pharmaceutical research and development as well as production, marketing and sales of pharmaceuticals. It holds 25 stocks in its basket, with Novo Nordisk among the top 10 holdings at 4.7% of assets (read: Pharma ETFs in Focus on Trump's Drug Price Overhaul). 

VanEck Vectors Pharmaceutical ETF has amassed $611.7 million in its asset base and trades in a good volume of about 496,000 shares a day. The expense ratio is 0.36%. VanEck Vectors Pharmaceutical ETF has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
 

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