by Bhanvi Satija and Savyata Mishra
Weight loss was the talk of earnings season, making names like Wegovy, Ozempic and Mounjaro topics of conversation that companies around the world couldn’t ignore.
Analysts attended third-quarter earnings conference calls armed with questions aimed at health care and consumer product companies about the potential effect on their sales of the growing popularity of these drugs, known as GLP-1 agonists.
A Reuters analysis of third-quarter earnings transcripts showed that the term “GLP-1” or other terms such as “obesity” or “weight-loss drugs” were mentioned 256 times by 29 U.S. and European health care companies. health and consumer goods.
This is more than double the mentions from the second quarter, during which these phrases were mentioned 127 times.
“It’s definitely a hot topic,” said Jeff Jonas, portfolio manager at Gabelli Funds. “Companies () all have to answer the question of whether this is a positive for their business or try to explain why it is not a negative
This class of drugs, which includes Eli Lilly’s LLY.N Zepbound and Novo Nordisk’s NOVOb.CO Wegovy, has been shown to be effective in treating diabetes and weight loss and may also help reduce the risk of stroke or heart attack, which could change the lives of many people around the world.
Investor interest in this topic has been growing for some time, but it took off on October 4 when Walmart
WMT.N, the largest US retailer, has seen a slight decline in demand for food products from customers undergoing weight-loss treatments.
Walmart US Chief Executive John Furner told analysts last week, however, that it was too early to say how the treatments would affect their customers and businesses.
Most other major consumer product makers, such as Hershey HSY.N and Mondelez MDLZ.N , responded to questions about the drug, with some analysts focusing specifically on sellers of sugary foods.
Truist Securities lowered its rating on Krispy Kreme in late October, citing the stock’s overhang due to the effects of weight-loss drugs.
Krispy Kreme shares are down 15% since Aug. 1, a period that coincides with a 31% rise in Eli Lilly, although the donut chain’s stock is up another 20% in 2023.
Although some consumer companies have talked about factors such as fewer calories consumed, “those kinds of big extrapolations” seem a bit far-fetched, said Evan Seigerman, an analyst at BMO Capital.
THE WINNERS AND LOSERS OF GLP-1
Novo Nordisk dethroned LVMH LVMH.PA as Europe’s most valuable listed company in September, and shares of the Danish drugmaker have risen 48% this year.
Eli Lilly shares are up about 63%, making it the world’s most valuable healthcare company, with a market capitalization of nearly $560 billion.
Drug makers have faced different types of questions regarding these treatments. For large pharmaceutical manufacturers like Pfizer PFE.N and Amgen
AMGN.O , analysts’ questions focused on their obesity drug candidates. Health insurers, including UnitedHealth UNH.N and Cigna CI.N , have focused on pricing these drugs.
Lilly benefited from the use of Mounjaro, which was prescribed for diabetes. Its weight loss equivalent, called Zepbound, was approved in the United States on November 8.
On the other side of the spectrum, medical device makers and dialysis providers who profit from treating obese patients have had to assuage investors’ concerns about the impact of these highly effective drugs on their markets.
Investor concerns have led to a drop in medical device makers, sending the iShares US Medical Devices exchange-traded fund IHI.N down 7% this year. According to Rajesh Kumar, an analyst at HSBC, fund managers may still be nervous about investing in stocks perceived to be among the “GLP-1 losers”.
The high prices of these drugs, the potential lack of insurance coverage and the uncertainty about their long-term use are among the arguments commonly used by companies to allay concerns.
Yet investors are only just beginning to realize that these drugs could be the most widely used drugs in the history of the pharmaceutical industry.
“I think these drugs will probably be the best-selling class of drugs ever. But it will take a few years to develop them,” Mr. Jonas said.