Why Structure Therapeutics Stock Was Stumbling This Week

The past few days haven't been kind to most stocks in the white-hot obesity drugs space. One developer of a weight loss medication, clinical-stage biotech Structure Therapeutics (NASDAQ: GPCR), was a victim of a general rout in the segment. According to data compiled by S&P Global Market Intelligence the company's share price had eroded by 11%, largely because of a single TV commercial.

A big move during the big game

On Sunday, telehealth company and pharmaceutical retailer Hims & Hers Health splurged with a multimillion-dollar ad buy during the Super Bowl.

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The somewhat alarmist commercial -- "obesity is America's deadliest epidemic," intoned the narrator -- touted one of the higher-potential Hims & Hers' offerings, its compounded semaglutide weight loss treatment.

Such a highly watched spot instantly turned the spotlight on the ambitious company, at the same time making investors nervous about other obesity drug developers. Novo Nordisk and Eli Lilly are obvious targets, as both have such treatments already on the market, but clinical-stage players also took it on the chin -- hence the whack absorbed by Structure.

The relatively small biotech has made strides in developing its investigational GS-1290 obesity treatment. This has attracted attention because of its performance in a phase 2a clinical trial, in which it seemed to produce better results than Novo Nordisk's leading Wegovy.

It's a huge addressable market, but...

It's hard for any capital-conserving, early-stage drug developer to beat a Super Bowl ad, which is surely why Hims & Hers invested in its spot.

Investors shouldn't, of course, give up on Structure (and other obesity treatment hopefuls) purely on this basis. However, there are many companies competing in this space, and precious few so far have successfully commercialized their products.

Should you invest $1,000 in Structure Therapeutics right now?

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.