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The next few months will be crucial for obesity players Eli Lilly, Novo Nordisk and Amgen

In terms of recent stock-market frenzies, the Ozempic trade nearly tops the list, second only to speculation that artificial intelligence will soon be writing this column.

Powerful weight-loss drugs like Wegovy and Zepbound have driven nearly $1 trillion in market-capitalization gains, with most of those gains flowing to Eli Lilly LLY -1.30%decrease; red down pointing triangle and Novo Nordisk NOVO.B -1.11%decrease; red down pointing triangle, the dominant players in the obesity-drug market. Would-be challengers such as Amgen AMGN -0.29%decrease; red down pointing triangle and Viking Therapeutics VKTX 0.47%increase; green up pointing triangle have also seen their shares surge on promising data.

Two major factors have powered these gains. First, the health benefits seem genuine: Clinical trial data for GLP-1 drugs have shown not only impressive weight loss but also potential reduced risk of heart attacks and sleep apnea. Second, there is exploding consumer demand, being driven in part by the psychological gratification that many people experience as their weight drops. That has fueled huge patient demand that, until very recently, has outstripped supply while creating a booming industry for compounders and telehealth companies.

But with so much optimism now priced into these stocks, further growth will be more challenging. Already, Lilly and Novo stocks have begun to lose momentum. It isn’t that Wall Street doubts the massive opportunity to treat hundreds of millions of people with obesity worldwide; rather, investors are anticipating several pivotal commercial and clinical developments that could either keep the party going at nosebleed valuations or lead many to take a breather.

All eyes will be on Novo Nordisk when the Danish company prepares to report quarterly results on Wednesday. The fear on Wall Street right now is that after Eli Lilly reported a shocking sales miss with Mounjaro and Zepbound, a poor showing for Novo’s Ozempic and Wegovy—which are both based on the active ingredient semaglutide—could signal a broader slowdown for the industry.

Investors are also anxiously awaiting late-stage data from Novo’s experimental drug CagriSema, a combination of semaglutide and cagrilintide, which has shown greater blood-sugar control and weight-loss benefits in diabetic patients. Investor skittishness has sent Novo Nordisk’s U.S.-traded shares down 13% over the past six months. But if Novo can clear these coming hurdles, as well as close its controversial acquisition of a U.S.-based contract manufacturing firm, it could set the stage for a significant relief rally.

Amgen is also facing a critical moment that could help position the biotech as the most serious contender to join the current duopoly. Much is riding on midstage trial data expected by year-end. If all goes well for Amgen, it could have a drug in the market in about two years. The drug currently undergoing testing, while effective, is known to cause side effects like vomiting and investors will be eager to see how prevalent such symptoms are. A key advantage for Amgen could be convenience: The drug is being tested as a once-monthly injection, compared with weekly for the current drugs.

Amgen’s reputation as a skilled manufacturer strengthens its prospects, especially given the complexity of producing these weight-loss injections, says Evan Seigerman, an analyst at BMO Capital Markets. With current supply shortages, a treatment that requires only 12 injections a year could also offer a manufacturing edge, he adds.

In many ways, Eli Lilly still controls its own destiny as the largest player in this space. Its drug Zepbound is more potent than Wegovy and its pipeline of injectables and pills looks more promising, with late-stage results from orforglipron, its non-peptide GLP-1 pill, expected next year. Over the coming months, investors will be watching closely to see if Lilly can deliver commercially.

While Novo’s Ozempic has wide name recognition, Lilly’s Zepbound is less known. The company last week announced it will start advertising the drug to consumers. It will also need to step up its work with wholesalers and the entire medical apparatus, from insurers to doctors, to make sure people are able to access its drugs. Right now, many employers don’t want to cover them for obesity and doctors are still hesitant to prescribe them. If the company delivers another disappointing report early next year, the GLP-1 thesis could start to face some real cracks.

The roster of companies vying for a place in this lucrative market is extensive. In the next few months, investors are anticipating updates from several other big players—AstraZeneca, Roche and Pfizer—as well as from smaller biotechs like Structure Therapeutics, Viking and Zealand Pharma. And investors are still waiting for Merck, which needs to find a way to replace the expected decline of its cancer blockbuster Keytruda, to write a big check to get in on the action.

Tim Opler, a managing director of investment banking at Stifel, argues that the challenge for a Big Pharma acquirer is that they don’t just want to buy an asset with similar efficacy to Wegovy and are instead hunting for next-generation technologies. With Wegovy’s patent expiring early next decade, generics will follow, so to compete in obesity treatments long term, companies must push the frontier of innovation, much of which is being driven by early-stage firms.

While still in its early days, the obesity-drug boom has already generated substantial fortunes on Wall Street. The pressure is now on for reality to match those sky-high expectations.

France pushes Brussels to delay looming fines on carmakers

Mark Zuckerberg is continuing to explore energy deals amid a Big Tech arms race over artificial intelligence

Plans by Mark Zuckerberg’s Meta to build an AI data centre in the US that runs on nuclear power were thwarted in part because a rare species of bee was discovered on land earmarked for the project, according to people familiar with the matter.

Zuckerberg had planned to strike a deal with an existing nuclear power plant operator to provide emissions-free electricity for a new data centre supporting his artificial intelligence ambitions. 

However, the potential deal faced multiple complications including environmental and regulatory challenges, these people said.

The discovery of the rare bee species on a location next to the plant where the data centre was to be built would have complicated the project, Zuckerberg told a Meta all-hands meeting last week, according to two people familiar with the meeting. 

The blow comes as rivals Amazon, Google and Microsoft have all struck deals recently with nuclear power plant operators to fulfil rising energy demands from data centres as they race to train and maintain power-hungry AI models. One AI query consumes up to 10 times the energy of a standard Google search. 

Meta is continuing to explore various deals for carbon-free energy, including nuclear, one of the people said. Meta declined to comment.

Nuclear is increasingly viewed as a way to get stable, round-the-clock power during the AI wars between Big Tech groups.

However, it also has high upfront costs and takes a long time to build. The industry in the west has historically relied on Russia for nuclear fuel.

Critics also caution about the risks of the build-up of toxic radioactive waste, which has to be stored safely or it could severely harm both humans and the environment. 

In September, Microsoft announced it would revive the mothballed nuclear plant at Three Mile Island, Pennsylvania.

Amazon paid $650mn in March to put a data centre next to the Susquehanna Steam Electric nuclear plant, also in Pennsylvania.

Google, meanwhile, said last month that it had ordered six to seven small modular nuclear reactors from US start-up Kairos Power, becoming the first tech company to commission new nuclear power plants.

Zuckerberg is under pressure to prove to investors that his all-in bet on AI will bear fruit, as the company’s capital expenditures continue to rise given its investments in running servers and data centres to develop the cutting-edge technology. 

Zuckerberg told staffers at the all-hands that, had the deal gone ahead, Meta would have been the first Big Tech group to wield nuclear-powered AI, and would have had the largest nuclear plant available to power data centres, two people said.

One person familiar with the matter said that Zuckerberg has been frustrated with the lack of nuclear options in the US, while China has been embracing nuclear power. China appears to be building nuclear reactors at a fast clip, whereas only a handful of reactors have been brought online over the past two decades in the US. 

Meta said it had already hit “net zero” emissions in its operations since 2020.

Energy, tech and finance executives in discussion over how to fuel artificial intelligence

The rapid rise of artificial intelligence gives the world’s largest oil companies a major incentive to increase their investments in renewable energy, according to Sultan al-Jaber, the chief executive of Abu Dhabi’s national oil company.

“The size of this opportunity only became very apparent about 18 months ago when ChatGPT took off,” said Jaber in an interview with the Financial Times.

He spoke as the chief executives of oil groups Shell, BP and TotalEnergies met tech companies including Microsoft, financiers including Mark Carney, the chair of Brookfield Asset Management, and the heads of power suppliers RWE and EDF in Abu Dhabi to discuss how to meet the growing energy needs of AI and how the technology could be applied across the energy sector.

Both Shell and BP have pulled back from renewables in the past two years to refocus on their core oil and gas businesses. But Jaber said the huge growth of AI would prompt oil groups to look again at their renewables businesses. The big tech companies have pledged to use green energy for their AI data centres to meet their net zero targets.

“This specific topic was very much discussed,” he said. “We need a model that will integrate all forms of energy together. We will need more renewable energy and we need to advance battery storage technology to turn renewables from intermittent power to baseload. We need gas as a bridge and we will need, in some locations, nuclear power.” 

Jonathan Ross, chief executive of AI chip company Groq, said he had met the heads of BP and Shell and that renewable energy had been “a huge topic”.

“Because AI is going to require huge amounts of energy we need to get ahead of this,” he said, adding that he hoped to provide more computing power for energy companies going forward.

Adnoc, one of the world’s largest oil companies, is also planning to roll out the next iteration of generative AI, so-called AI agents designed to act autonomously, across all of its operations.

In a speech on Monday, Jaber said Adnoc’s technology arm, AIQ, had worked with Microsoft and the United Arab Emirates’ AI group G42 to develop software called EnergyAI. He said it would be the first time that a major energy company had integrated AI agents across its entire value chain.

“It is the first of its kind,” said Jaber. “It will analyse petabytes of data. It will proactively and autonomously identify operational improvements.”

Adnoc said its software could autonomously produce seismic analysis or detailed models of underground reservoirs to decide whether they could be suitable for trapping and storing carbon dioxide emissions.

Jaber said Adnoc had allocated $23bn to develop low-carbon technology using AI and that he was “very optimistic” the company could achieve its carbon reduction targets ahead of schedule because of the new technology.

Adnoc has said it wants to reduce its emissions per barrel by 25 per cent by 2030. It also has a target to be net zero by 2045 for scope-one emissions from sources the organisation owns or controls and for scope-two emissions that the company causes indirectly, but not for scope three, other emissions not covered in the categories.

“We reduced our emissions by 1mn tonnes between 2022 and 2023 and that was through the application of AI on top of the advanced digital infrastructure we have been investing in across our operations,” he said.

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Regulator brings in new measures after launching criminal insider dealing case against Segantii Capital Management

Hong Kong authorities are cracking down on how banks discuss block trades with hedge funds after a criminal case against Segantii Capital Management and its founder Simon Sadler threw a spotlight on the practice.

The Securities and Futures Commission, the territory’s financial watchdog, announced new guidelines on Thursday that cover so-called market sounding, a grey area in which banks discuss upcoming or potential block trades with hedge funds in order to gauge their interest in buying the stock.

Block trades are privately negotiated sales of a large chunk of a company’s shares, which can depress the price. If hedge funds or other investors bet against a company in the belief that a block trade is likely to happen, they stand to make money if the transaction materialises and pushes down the shares.

“The guidelines aim to address market integrity issues related to the abuse of confidential information entrusted by a client in the course of market sounding, resulting in an unfair playing field,” said Julia Leung, chief executive of the SFC. They are due to take effect next year.

The SFC’s move comes after it announced in May a criminal insider trading case against hedge fund Segantii, Sadler and former trader Daniel La Rocca. Segantii, once one of the dominant players in block trading in Asia, has said it plans to defend itself “vigorously”.

Block trades can be a lucrative corner of the market for banks and hedge funds but have attracted the attention of regulators, including in the US and UK.

The SFC’s guidance says that when a bank is sounding out a hedge fund about its interest in buying shares in a possible block trade, it can only give details that are so “broad, limited, vague and anonymised” that the fund cannot guess the identity of the issuer — unless the fund has agreed to treat it as confidential.

It says that if a bank or hedge fund abuses so-called market-sounding information, it could be in breach of the regulator’s guidelines, even if what is discussed is not deemed to be price-sensitive or to constitute inside information. Banks should record market-sounding conversations and use authorised communication channels, it says.

Hedge funds will be required to make a “reasonable effort” to find out whether information from a bank counts as market sounding if the bank does not specify it, the guidance adds.

The SFC’s guidelines do not have the force of law, but the watchdog said failure to comply could lead them to consider whether a person should remain licensed or not.

Segantii is in the process of closing operations and returning investors’ cash in the wake of the court case, which relates to trades in retailer Esprit that took place in 2017.

Separately in January, Morgan Stanley agreed to pay $249mn to settle federal investigations into misconduct on block trades. The Securities and Exchange Commission found that Pawan Passi, the former head of the bank’s US equity syndicate, had shared non-public information about impending block trades with investors.

The SEC handed Passi a $250,000 civil penalty and barred him from working in the industry. He admitted to misconduct and agreed a deferred prosecution agreement.