This weight-loss ETF has performed well in its -2-

   Edwards Lifesciences Corp.          EW            6,005                 6,520                 7,163                                        9.2% 
   Medtronic PLC                       MDT          32,198                33,185                34,712                                        3.8% 
   Chugai Pharmaceutical Co. Ltd.    JP:4519     1,111,367             1,093,997             1,141,071                                        1.3% 
   Ascendis Pharma ADR                ASND             288                   465                   801                                       66.6% 
                                                                                                                                   Source: FactSet 

And here are earnings-per-share numbers, estimates and expected EPS CAGR:

   Company                           Ticker     2023 EPS  2024 estimated EPS  2025 estimated EPS  Two-year estimated EPS CAGR through 2025 
   Vertex Pharmaceuticals Inc.        VRTX         13.89               16.88               18.46                                     15.3% 
   Eli Lilly and Co.                   LLY          5.80               12.48               18.19                                     77.1% 
   Novo Nordisk A/S Class B         DK:NOVO.B      18.67               23.33               28.26                                     23.0% 
   Amgen Inc.                         AMGN         12.49               19.55               21.05                                     29.9% 
   DexCom Inc.                        DXCM          1.30                1.75                2.23                                     30.8% 
   Cytokinetics, Inc                  CYTK         -5.45               -4.46               -3.20                                       N/A 
   Edwards Lifesciences Corp.          EW           2.30                2.76                3.10                                     16.1% 
   Medtronic PLC                       MDT          3.13                5.38                5.72                                     35.2% 
   Chugai Pharmaceutical Co. Ltd.    JP:4519      197.83              208.24              225.38                                      6.7% 
   Ascendis Pharma ADR                ASND         -9.25               -4.57               -0.13                                       N/A 
                                                                                                                           Source: FactSet 

Click the tickers for more about each company.

Click here for Tomi Kilgore's detailed guide to the wealth of information available for free on the MarketWatch quote page.

Among the fund's largest 10 holdings, eight of the companies have expected sales CAGR exceeding those of the industry groups and S&P 500, as shown above. The earnings growth expectations are also impressive, but so are those for the industry groups and the index.

Commentary about stock selection and the largest holdings

Pot and Khodjamirian believe that even with all the coverage of the GLP-1 space - especially Novo Nordisk and Elli Lilly & Co. (LLY) - the potential market for these medications to treat Type 2 diabetes and for weight loss, remains mostly untapped.

Beyond those immediate uses, Pot said there was potential to attack "the root cause" not only for cardiovascular disease, but even neurodegenerative diseases. The biotechnology industry is "slowly proving that these GLP-1 drugs and other anti-obesity medications work" to prevent or limit the effects of a variety of diseases, he said.

In a presentation on March 4, Novo Nordisk cited data from the International Diabetes Foundation when saying that only 15% of 537 million people around the world with diabetes had the disease under "good control." The company said that among 813 million obese people, only about 2% were receiving medical treatment, according to World Obesity Atlas data.

Pot emphasized the need to capture the potential growth as an increasing number of people make use of GLP-1 medications to treat obesity, because "demand outstrips supply." But he also said it was important to look ahead at new medications that may have fewer side affects and even other approaches to improving cardiovascular health over the long term. Here are comments from him and from Khodjamirian about six of the fund's largest holdings:

Vertex Pharmaceuticals Inc. VRTX is developing what Pot called "potentially a revolutionary solution" for Type 1 diabetes patients, based on gene therapy.Elli Lilly followed up on the success of its Mounjaro GLP-1 medication for Type 2 diabetes by introducing Zepbound, for weight loss, in December. "Following behind this is a rich pipeline," including "their triple G drug Retatrutide that boasts 24% weight loss at 48 weeks as well as an oral GLP-1 drug" called Orforglipron, Pot said. Novo Nordisk is part of the current GLP-1 duopoly with Lilly. Pot said the company was on the cusp of expanding beyond Ozempic and Wegovy. Khodjamirian said the company's success in Denmark pointed to a tremendous potential for expansion. Novo Nordisk said that as of November, 18.5% of the Danish population was considered obese, and that 7.5% of these people were on Wegovy. That would be 1.3% of the total population, with most paying out-of-pocket because government health insurance didn't cover weight-loss medication. MarketWatch's Eleanor Laise covered new research pointing to Wegovy's benefits for patients suffering from heart failure.Pot described Amgen Inc. AMGN as "a well-established biotechnology company focused on a multitude of disorders, including cardiovascular disease, bone metabolic disorders, and a novel approach to obesity using an antibody."Khodjamirian named DexCom Inc. DXCM as an example of a company "achieving things through behavioral change," by making automatic glucose monitoring devices. Cytokinetics Inc. CYTK is, essentially, a pre-revenue company that HRTS is holding because of the positive results from the company's Phase 3 clinical trials of its treatment for obstructive hypertrophic cardiomyopathy.

The Tema Obesity & Cardiometabolic ETF held 45 stocks as of the close on April 8.

Khodjamirian said that David Song, the fund's portfolio manager, an MD with 25 years experience managing investment portfolios, was focused on selecting companies with a "solid foundation," even if they were at pre-revenue phases.

Song also looks for "an edge," which can be "informational, behavioral or analytical," Khodjamirian said.

For an early-stage example, Khodjamirian named Viking Therapeutics (VKTX), which made up 1.9% of the portfolio at the close on April 8. He said the company's management team had long experience and was "thoughtful in its R&D process," taking a long-term approach to "building a platform for development."

Following positive clinical trial indications for its weight-loss medication, Viking raised $550 million through a discounted offering of shares late in February. Khodjamirian said that with the cash infusion, the company was "well-placed to seek a partner or go it alone."

More: Viking Therapeutics posts positive results for oral weight-loss drug. Analysts remain unanimous the stock's a buy.

-Philip van Doorn

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04-13-24 0623ET

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