Jim Cramer on rising GLP-1 weight loss drugs and their market impact

CNBC’s Jim Cramer on Wednesday explained how GLP-1 drugs are influencing market action. He observed that Wall Street is already anticipating their effect on certain companies.

“An institution’s goal is to anticipate, not the action itself, but that there’ll be others reacting soon,” he said. “And they have to get out ahead of those late reactors.”

GLP-1 drugs were initially approved to treat diabetes, but many found off-label use to help with weight loss. Popular GLP-1 drugs include Eli Lilly‘s Mounjaro and Novo Nordisk‘s Wegovy, the latter of which has been approved by the Food and Drug Administration for weight loss management.

Even though it seems early to asses the impact of these drugs, they are already affecting stocks, Cramer said. He noted, for example, that companies with products that help treat diabetes — like DexCom and Abbott Labs — have seen their stock fall. Intuitive Surgical also saw shares slide when executives noted slowed growth in bariatric surgeries last quarter, potentially due to increased use of GLP-1 drugs.

According to Cramer, many investors don’t wait to see how the new drugs will ding companies’ earnings reports. Instead, they anticipate negative action and sell off stocks, Cramer said.

“I know it seems superficial, knee jerk even, but money managers are knee-jerk and superficial people. And in the wild cases of Wegovy and Lilly’s Mounjaro, the more superficial and the more knee jerk they were, the more money they saved,” he said.

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Disclaimer The CNBC Investing Club Charitable Trust holds shares of Eli Lilly.