Analysts raised questions about the potential impact of these GLP-1 agonist drugs on companies’ sales. A Reuters analysis of earnings transcripts revealed that mentions of “GLP-1” or related terms like “obesity” or “weight-loss medications” doubled from the second to the third quarter, with 256 mentions across 29 U.S. and European companies. These drugs, known for their effectiveness in treating diabetes and promoting weight loss, have generated substantial interest among investors and the pharmaceutical industry.
During the third-quarter earnings season, weight loss medications took center stage, with drugs like Wegovy, Ozempic, and Mounjaro becoming prominent topics of discussion among healthcare and consumer companies. Analysts closely examined the potential impact of these drugs, known as GLP-1 agonists, on the financial performance of various companies. A Reuters analysis of earnings transcripts for the third quarter uncovered a remarkable surge in references to “GLP-1” and related terms such as “obesity” or “weight-loss medications.” These terms were mentioned a total of 256 times across 29 healthcare and consumer companies in the United States and Europe during the quarter, more than doubling the 127 mentions recorded in the previous quarter.
The growing prominence of GLP-1 agonists and their impact on various industries have made them a hot topic of discussion among investors and corporate leaders alike. These medications, which include Eli Lilly’s Zepbound and Novo Nordisk’s Wegovy, have demonstrated their effectiveness not only in treating diabetes but also in promoting weight loss. Furthermore, they may help reduce the risk of stroke or heart attack, potentially offering life-changing benefits to individuals worldwide.
The surge in investor interest in these medications began gaining momentum even before the recent earnings season. However, it reached new heights on October 4 when Walmart, the largest retailer in the United States, noted a slight decline in food demand from customers using weight-loss treatments. Although Walmart’s U.S. CEO, John Furner, indicated that it was too early to determine the full impact of these treatments on customers and business, the disclosure drew significant attention.
Many other major consumer product manufacturers, including Hershey and Mondelez, faced questions related to these medications during their earnings calls. Some analysts specifically focused on companies known for selling sugary foods, expressing concerns about potential repercussions on their stocks.
One example of the ripple effect is the late-October downgrade of Krispy Kreme by Truist Securities. The downgrade cited concerns about the impact of weight-loss medicines on companies associated with sugary foods. Since August 1, Krispy Kreme shares have declined by 15%, while Eli Lilly’s stock has surged by 31% during the same period. Nevertheless, Krispy Kreme’s stock has still seen a 20% gain in 2023.
While some consumer companies have discussed factors like reduced calorie consumption, analysts have cautioned against making overly optimistic assumptions, considering the complexities of dietary habits and consumer behavior.
The winners in the GLP-1 market include Novo Nordisk, which surpassed LVMH as Europe’s most valuable listed company in September, with its shares rising by 48% this year. Eli Lilly, with a stock increase of approximately 63%, now holds the title of the world’s most valuable healthcare company, boasting a market capitalization of nearly $560 billion.
Pharmaceutical companies have faced a range of questions related to these medications. For major pharmaceutical manufacturers like Pfizer and Amgen, analysts inquired about their obesity drug candidates. Health insurers, including UnitedHealth and Cigna, focused on drug pricing.
Eli Lilly has particularly benefited from the use of Mounjaro, which was initially prescribed for diabetes. Its weight-loss counterpart, known as Zepbound, received approval in the United States on November 8.
Conversely, medical device manufacturers and dialysis service providers, which profit from treating obese patients, have had to address investor concerns about the potential impact of these highly effective drugs on their markets. This has led to a decline in medical device maker stocks, resulting in a 7% drop in the iShares US Medical Devices exchange-traded fund’s performance this year. HSBC analyst Rajesh Kumar suggested that fund managers might still be hesitant to invest in stocks perceived as “GLP-1 losers.”
Companies have sought to address investor worries by highlighting factors such as the high cost of these drugs, concerns about insurance coverage, and uncertainties regarding long-term usage. Despite these challenges, investors are only beginning to grasp the potential of these drugs, which could become the most widely used class of medications in the pharmaceutical industry. However, it may take several years for this potential to fully materialize. “I just think these are probably going to be the best-selling drug class of all time. But it is going to take a few years to develop,” said Jeff Jonas, portfolio manager at Gabelli Funds.