The disruptive effect of weight loss drugs like Ozempic could have surprising impacts on the stock market. Here are potential winners and losers.
- The potential ripple effects of GLP-1 weight loss drugs like Ozempic and Wegovy are far-reaching.
- There could be reduced demand for junk food and increased demand for athletic brands.
The rise of GLP-1 weight loss drugs like Ozempic, Wegovy, and Mounjaro are poised to send shock waves through the stock market.
Tens of millions of Americans could collectively shed billions of pounds as indications for these drugs are potentially expanded from only diabetes and overweight patients to those who suffer from sleep apnea, heart conditions, or even addictions.
Already, a handful of companies have seen big stock price moves due to the drugs' stunning success at helping overweight people lose upwards of 20% of their body weight.
Insider reviewed research reports and talked to Wall Street analysts to get a better idea of which companies could benefit from — and which companies are at risk of — the rise of GLP-1 weight loss drugs.
The stock market has spoken, and Novo Nordisk and Eli Lilly obviously stand to benefit the most from the GLP-1 drugs they developed. The stock prices of both companies surged 85% over the past year as sales for their drugs ramped higher.
JPMorgan estimates that the GLP-1 drug market could be worth $100 billion in the long run, with Eli Lilly and Novo Nordisk each generating annual revenues of $50 billion by 2030.
Drug suppliers and distributors
Novo Nordisk and Eli Lilly will also have to lean heavily on suppliers and distributors. Contract drug manufacturer Catalent has a deal with Novo Nordisk to help fill weekly GLP-1 injections, and Thermo Fisher has been tapped to help out as well.
Meanwhile, McKesson and Cencora will be largely responsible for distributing the drugs to pharmacies across the country. Both companies recently raised their guidance as sales of the weight loss drugs surge, and both companies derive about 20% of their revenues directly from Eli Lilly, according to data from Bloomberg.
Fitness and athletic brands
The success of these GLP-1 drugs in helping patients lose weight increases significantly when paired with exercise and a healthy lifestyle. If more and more Americans are getting fit, they could become prime target customers of athletic brands, including but not limited to Nike and Lululemon.
One side effect of GLP-1 drugs is that patients lose about 50% fat and 50% muscle as they shed the pounds, which makes lifting weights crucial for many patients. By contrast, typical weight loss without GLP-1 drugs is mostly driven by a reduction in fat, not muscle. That's where Planet Fitness could benefit if more Americans are looking to pump iron.
Medical device companies
The hardest hit sector from the success of GLP-1 drugs has by far been the medical device sector, as many of these companies serve patients who suffer from chronic conditions related to obesity.
In addition to increasing insulin production, the drugs slow the time it takes for food to empty out of your stomach and reduce your appetite, Baird analyst Jeff Johnson told Insider.
"And so when you go on GLP-1, you eat significantly less and you feel fuller. So you lose the weight," he explained.
Early data also suggests that patients on GLP-1 drugs suffer less sleep apnea-related issues, which could lower demand for CPAP machines. Inspire Medical and ResMed both sell CPAP machines and have seen their stock prices plunge by more than 40% this summer.
Meanwhile, some type 2 diabetes patient could go into a form of remission as long as they stay on the GLP-1 drugs. Manufacturers of insulin delivery systems like Insulet and Tandem Diabetes Care have seen their stock prices plunge more than 50% from their 52-week high.
"The size of the type 2 [diabetes] market could either stagnate, or even decline," Johnson said. "If you don't need to take insulin, then you don't need an insulin pump. So that's why you've seen companies like Tandem and Insulet hit the hardest this year."
Fast-food chains and junk-food companies
Morgan Stanley surveyed 300 patients taking GLP-1 drugs and found that calorie intake dropped 20%-30% on a daily basis. Participants said they cut back the most on foods high in sugar and fat, as well as sugary drinks.
In fact, 77% said they visited fast-food restaurants less frequently, and 74% said they visited pizza restaurants less. That could be bad news for companies including but not limited to Domino's Pizza, Krispy Kreme, and KFC-parent Yum Brands.
"Chains that mainly sell foods regarded as unhealthy face a longer-term risk... But some fast casual chains are already adapting by offering healthier menus, while others, such as pizza, doughnut or fried-chicken chains have less flexibility," Morgan Stanley said in the report.
Beer and tobacco companies
Anecdotes from patients taking GLP-1 drugs indicate that the drug helps curb certain addictive behaviors like smoking cigarettes or drinking alcohol. That could be bad news for beer manufacturers and tobacco companies, including but not limited to Anheuser-Busch, Molson Coors, and Altria.
Morgan Stanley's survey showed 62% said they consumed less alcohol while taking the drug, and nearly 25% said they stopped drinking alcohol entirely.
And a recent study published in The Lancet found that GLP-1 drugs were found to "abolish nicotine reward and to decrease nicotine intake" in a study with mice. That could be bad news for major tobacco manufacturers like Altria and Phillip Morris if enough people start taking the GLP-1 drugs.
What's clear is that the long-term ramifications of GLP-1 drugs could be far reaching across various industries, but the changes won't happen overnight. The drugs are still expensive, supply is limited, and health insurance companies are not providing wide coverage for the drugs. But as more and more Americans start to take these drugs, investors should pay close attention to how these businesses adapt to the changes.
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