Novo Nordisk’s “miracle” drugs Ozempic and Wegovy have quickly soared in popularity, after all, they offer a safe way to lose weight while actually reducing some health risks.
Now, major U.K. bank Barclays is predicting the impact and potential use of such drugs will be huge, advising investors to short stocks targeted by the weight-loss drug industry, including junk food and cigarette companies.
The bank highlighted in a report on Tuesday that the popularity of such drugs could weaken demand for companies such as PepsiCo, which makes PepsiCo drinks, Cheetos and Doritos.
“The impact of GLP-1 could disrupt many industries,” Barclays strategists wrote. According to Bloomberg.
GLP-1 drugs, such as Ozempic, used to treat type 2 diabetes, and Wegovy, used to treat obesity, mimic the hormone produced in the gut after a meal and help suppress appetite, thereby aiding weight loss.
The possible negative impact such drugs can have on consumer brands is already starting to be reflected in stock prices. For example, according to Bloomberg, the packaged food index has fallen about 14% so far in 2023, while the S&P 500 has gained 20% during the same period.
Novo Nordisk and Barclays not returning immediately wealthRequest for comment.
The market for Novo’s dual-drug treatment for weight loss is expected to soar to $100 billion by 2035, according to BMO Capital Markets. Now that these drugs have shown what they can accomplish and received informal endorsements from the likes of Elon Musk, Wall Street is trying to gauge how far their ripple effects can reach.
Investment bank Jefferies said last week If consumers adopt healthier diets to supplement their use of drugs like Ozempic, it could harm restaurants and other players in the food and beverage industry. The high cost of medications may prompt customers to spend less on non-essential items such as furniture.
Is there a winner?
While diet pills may hurt business in some industries, they are not without winners.
Barclays expects companies such as CVS Health to be among the beneficiaries of the fast-growing weight-loss drug industry as more patients get prescriptions for such drugs.
Banks also expect companies to benefit indirectly from the trend.
For example, United Airlines, the leading U.S. airline, could save as much as $80 million a year if passengers lost 10 pounds, Jeffries said, as part of a study assessing the broader ripple effects of the weight-loss drug epidemic.
Jefferies analysts wrote: “Weight is a key factor in fuel efficiency…Airlines’ largest expense is fuel, which has been further exacerbated as jet fuel prices have rebounded.” According to people familiar with the matter.
The rise of Novo Nordisk
Novo briefly became Europe’s most valuable company last month, overtaking luxury brand LVMH, thanks to rapid advances in weight loss and diabetes drugs. At the same time, the company made its debut in the UK, its fifth global market, and Wegovy was hailed as a “game changer” by British Prime Minister Rishi Sunak.
The Danish company, which is about 100 years old, has risen rapidly in recent years. The FDA approved Ozempic in 2017, and Wegovy was approved in 2021, making it the first weight-loss drug approved by the agency in eight years.
As the company begins to expand outside the United States, which remains a key market, Novo’s Market value overtakes The size of the Danish economy in 2022. The sheer scale of the company’s operations has even insulated Denmark from recessions.
Demand for Novo’s blockbuster drug quickly outstripped supply, leading the company to limit starting doses. In the UK, Wegovy’s launch is being done in a “limited and controlled manner,” with a large number of customers expected.All the discussion surrounding these drugs has led to Lots of fake medicines was sold to desperate consumers as unauthorized semaglutide, the active ingredient in Wegovy and Ozempic.
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