December 6, 2023

By Bhanvi Satija and Savyata Mishra

(Reuters) – Weight loss has been the talk of the town this earnings season, with names like Vegovy, Ozempic and Monzaro making water-cooler buzz that companies around the world couldn’t ignore.

Analysts attended third-quarter earnings calls with questions from health care and consumer companies about the potential impact on their sales from the growing popularity of these drugs, known as GLP-1 agonists.

Reuters analysis of third-quarter earnings transcripts showed that options such as “GLP-1” or “obesity” or “weight-loss drugs” were mentioned 256 times across 29 US and European healthcare and consumer companies.

That’s more than double the mentions from the second quarter, when those phrases appeared 127 times.

“It’s definitely a hot topic,” said Jeff Jonas, portfolio manager at Gabelli Funds. “They (companies) have to respond to whether it’s positive for their business or try to argue why it’s not negative.”

This class of drugs, which includes Eli Lilly’s Zepbound and Novo Nordisk’s Vegovy, has proven effective in treating diabetes and weight loss and may also help reduce the risk of stroke or heart attack, making them the world’s Could potentially be life changing for people across the world.

Investor interest in this topic has been growing for some time, but it gained momentum on October 4 when Walmart, America’s largest retailer, noted a slight decline in demand for food from customers taking weight loss treatments. .

However, Walmart US CEO John Ferner told analysts last week that it was too early to tell what impact the treatments would have on his customers and business.

Most other major consumer products makers, such as Hershey and Mondelez, raised questions about the drug, with some analysts specifically targeting sellers of sugary foods.

Truist Securities downgraded Krispy Kreme in late October, citing pressure on such stocks due to the impact of weight-loss drugs.

Krispy Kreme shares have fallen 15% since Aug. 1, a period that coincides with a 31% rally at Eli Lilly, though the donut chain’s stock still has a 20% upside in 2023.

While some consumer companies have talked about factors like lower calorie consumption, such big extrapolations “seem to be a bit of a stretch,” said BMO Capital analyst Evan Segerman.

GLP-1 Winners and Losers

Novo Nordisk deposed LVMH as Europe’s most valuable listed company in September, and shares in the Danish drugmaker have risen 48% this year.

Eli Lilly’s stock has surged nearly 63%, making it the world’s most valuable healthcare company with a market cap of nearly $560 billion.

Drug manufacturers have faced a variety of questions about these treatments. For big pharma makers like Pfizer and Amgen, analysts’ questions were targeted at their obesity drug candidates. Health insurers, including UnitedHealth and Cigna, focused on pricing these drugs.

Lilly has benefited from the use of Monjaro, which was prescribed for diabetes. Its weight loss counterpart, called Zepbound, was approved in the United States on November 8.

At the other end of the spectrum, medical device manufacturers and dialysis service providers who profit from treating obese patients have had to address investor concerns about the impact of these highly effective drugs on their markets.

Investor concerns have led to a selloff among medical device makers, sending the iShares US Medical Devices exchange-traded fund down 7% this year. HSBC analyst Rajesh Kumar said fund managers may still be wary of investing in stocks considered among the “GLP-1 losers”.

The high prices of these drugs, potential lack of insurance coverage, and uncertainty about long-term use are among the common arguments used by companies to allay concerns.

Still, investors are only beginning to take notice of the fact that these drugs could potentially be the most used in the pharmaceutical industry ever.

“I think this will probably be the best-selling drug category ever. But it will take a few years to develop,” Jonas said.

(Reporting by Bhanvi Satija and Savyata Mishra in Bengaluru; Editing by Arpan Varghese, David Gaffen and Shaunak Dasgupta)


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