Investors would be forgiven if talk of a potential suicide risk associated with a new class of diabetes and weight loss drugs led to skittishness last week. Prior attempts to treat overweight or obese patients with medications were often plagued with side effects and drug recalls. Those earlier medications often didn’t seem like the results were worth the risks. But the perception of the new GLP-1 medications, such as Novo Nordisk’s Ozempic, Saxenda and Wegovy and Eli Lilly’s Trulicity and Mounjaro, are that the therapies are generally well-tolerated by patients and helpful in shedding pounds. Both stocks have soared on the blockbuster potential of these treatments, with Wall Street analysts estimating the category could be worth $100 billion, topping the size of any other drug category to date. NVO 5D mountain Novo shares have gained more than 18% year to date. On Monday, however, investors learned that the European Medicines Agency is looking into reports that some patients had experienced suicidal thoughts and/or self harm after taking Saxenda and Ozempic. Then, on Tuesday, the regulator expanded the review to include other GLP-1 receptor agonists, including Lilly’s Trulicity. Both stocks fell around 5% in the wake of the news, but rallied Friday. Novo’s stock stayed positive for the week and is up more than 18% year to date. Lilly’s shares fell less than 1% over the week, but are up about 23% year to date. Both companies have downplayed the concern, and the European regulator said the review “does not necessarily mean that a medicine caused the adverse event in question.” It expects to reach a decision by November. EMA playing catch-up? Wolfe Research analyst Tim Anderson said there are three facts that “can’t be totally dismissed.” The first is that most obesity drugs, including GLP-1s, are “centrally acting,” which means they work on a patient’s brain. According to Anderson, that implies there is a chance of a neuropyschiatric effect. The second is that prior obesity drugs have been withdrawn because of high rates of psychiatric disorders, he said, citing Sanofi’s Acomplia as one of the more recent examples. Importantly, that drug wasn’t a GLP-1, but a different class known as cannabinoid receptor antagonists. LLY 5D mountain Eli Lilly shares are up about 23% since the start of the year. And finally, he noted that Wegovy’s drug label in the United States already mentions “suicidal behavior and ideation” as a “warning and precaution.” “In our view, there is a long history suggesting FDA is generally a more cautious agency than EMA,” Wolfe’s Anderson said. He expects the EMA is playing catch up to the U.S. on this issue. The analyst noted that in the FDA’s review documents of Wegovy, the agency said that all centrally acting obesity drugs have some risk of sucide and depression. Further, he anticipates such a warning will be added to Lilly’s tirzepatide (Mounjaro) when it is approved for obesity, which is anticipated by year end. Still, Anderson said there are good reasons to believe this is “very likely not a major concern,” including the clinical profile of GLP-1 medications, which have been around since 2005 as diabetes treatments. Also, any comparison with Acomplia should note that the concerns about that drug’s connection to depression and anxiety were observed very early on during its clinical trials. This was not the case for the GLP-1 medications. In a research note, UBS analyst Colin Bristow said he spoke with Lilly and the company confirmed there have been “no safety signals” in routine monitoring of patients on Mounjaro and Trulicity. “One problem is that this sort of thing can become a self-fulfilling prophecy to a certain degree, meaning if you know to look for a side effect, chances are you will find more of it,” Anderson said in a research note. Further, he anticipates that more safety concerns will arise since the drugs are being closely watched. More risk ahead? “Investors unfortunately need to brace themselves for more,” Anderson said. “While drugs like Novo’s Wegovy and LLY’s tirzepatide/Mounjaro deliver a remarkable degree of weight loss compared to older therapies, which will likely translate into beneficial effects on many other body systems (improved cardiovascular health, fewer joint replacements, less diabetes, among others), there are various ongoing layers of controversy nonetheless that means close scrutiny will continue.” Lilly remains one of Wolfe’s “top picks,” but Anderson warned that a “doomsday scenario” where Lilly is unable to market tirzepatide for obesity and the drug is “also tainted” for type 2 diabetes as well, would result in the stock dropping as much as 40%. “To be clear, this is a low-probability scenario, but it’s still instructive to consider the impact of black-swan events like these, given the stakes and also the past issues with obesity drugs (not just Sanofi’s Acomplia, but also Wyeth’s ‘fen-phen’ before it which suffered from a different set of side effects),” he said. Other analysts echoed similar thoughts. At Citi, analyst Peter Verdult reiterated his buy rating on Novo Nordisk on Friday. He noted that he expects Wegovy to see “increased scrutiny” given that it remains in the public consciousness thanks to widespread media attention. “We have a longstanding view that the GLP-1 is a ‘market creation’ vs a ‘market share’ story with NVO/LLY enjoying a structural duopoly well into the 2030s,” Verdult said. “Given 2022 global GLP-1 obesity sales reached $2.4bn despite Wegovy being supply constrained and not actively promoted, we argue that a market opportunity of > $40bn is feasible…” UBS’ Bristow has a buy rating on Lilly, with a $498 price target. On Wednesday, he called the pullback in the stock a “buying opportunity.” “… We view LLY as highly attractive on an absolute (numbers need to come up in ’24/’25) and relative basis (LLY has strongest fundamentals/event path in U.S. large cap biopharma),” he said. Deutsche Bank analyst Emmanuel Papadakis said he considered the discussion to be “a non-event.” “Given the body of trial data and extent/duration of use for semaglutide (many years in millions of patients), we are relaxed about risks here,” Papadakis said, referring to the medications better known as Ozempic, Wegovy and Rybelsus. —CNBC’s Michael Bloom contributed to this report. If you or someone you know is in crisis, call the National Suicide Prevention Lifeline at 800-273-8255 in the U.S. or call or text 988.