- The rapid rise of GLP-1 weight loss drugs will cause major fluctuations in the stock market.
- The long-term ramifications of these drugs will impact stocks and sectors across the economy.
- These are areas to watch as drugs such as Ozempic, Wegovy, and Mounjaro become more popular.
With the popularity of GLP-1 weight loss drugs soaring, millions of Americans are poised to lose a combined hundreds of millions of pounds over the next decade, and save trillions of dollars in the process. It will be redistributed.
In other words, the stock market is becoming Ozempicized.
That accelerating trend was on full display last week when Novo Nordisk announced that drug trials suggested that semaglutide, the active ingredient in Ozempic and Wigovy, may help patients with kidney failure.
Shares of DaVita and Fresenius Medical Care, the world’s largest kidney dialysis providers, both plunged by double digits. Meanwhile, Novo Nordisk and Eli Lilly, I jumped at both because they make similar drugs.
This is just the latest in a series of examples of how the widespread health impacts of these blockbuster GLP-1 drugs are redefining entire markets. Some of the ways these medical developments are changing things are straightforward. One is that people will eat less and, as a result, will require less treatment for obesity-related symptoms.
However, other effects are less clear.
stock market leadership
Companies that make weight-loss drugs are already gaining new leadership in the stock market as they become more well-known.
Novo Nordisk, which manufactures the weight loss drug Wegoby and the type 2 diabetes treatment Ozempic, is currently Europe’s largest company with a market capitalization of $433 billion, and its rapid growth has a direct impact on its own currency and interest rates. is giving.
Eli Lilly, the maker of the GLP-1 drug Mounjaro and many other drugs, is now the ninth largest company in the S&P 500 with a market value of $568 billion.
Punit Mehta, managing director at Guggenheim Partners, said the drug boom could also cause industry consolidation, particularly affecting biotech and pharmaceutical companies.
“I think that’s ultimately going to spur us on even more.” [M&A] Activities,” he told CNBC on tuesday. “I think the market is literally taking shape as we speak.”
And that’s just a hint of what’s at stake. According to the latest estimates, US healthcare spending totals $4.4 trillion In 2022.
Ozempic effect expansion
Unsurprisingly, investors initially focused on the healthcare sector when considering which companies would be hit the hardest, as there are many drugs and devices that treat chronic diseases related to obesity and diabetes. .
For example, the stock prices of CPAP manufacturers have plummeted by more than 40% in just a few months because weight loss can help people with sleep apnea become less dependent on their CPAP machines while they sleep. Companies that make insulin delivery systems and diabetes monitoring devices have also been accused of: initial data This suggests that GLP-1 drugs may put diabetes into remission in patients with type 2 diabetes.
“When concentration type 2 disappears, [diabetes] If a patient does not need to take insulin, they do not need an insulin pump to pump insulin into their body. That’s why companies like Tandem Diabetes Care and Insulet are among the hardest hit here. This is because there is a direct correlation between fewer patients taking insulin and the need for pumps to deliver insulin. It’s a dead body,” Baird analyst Jeff Johnson told Insider last month.
And GLP-1 drugs reduce chance of heart attack This is putting a strain on manufacturers of heart valve devices that target various forms of heart disease.
Recently, the Ozempic effect has spread to food companies as well. That’s because GLP-1 drugs help patients lose weight by making them feel full faster.
“When you take GLP-1, you eat much less and feel fuller, so you lose weight,” Johnson said.
A Morgan Stanley study of 300 patients taking the drug showed a 20 to 30 percent reduction in daily calorie consumption. And Walmart’s recent comments suggest customers who are already on drugs are buying less food.
These comments also caused stock prices to fall for food retailers such as Costco and Walmart, as well as junk food companies such as Coca-Cola, PepsiCo and McDonald’s.
The economy is likely to fall into Ozempic.
What is clear is that the ripple effects that the widespread use of GLP-1 drugs will have on stock markets and the economy are numerous, and investors are scrambling to make sense of them.
Productivity could soar, the healthcare industry could realize significant cost savings, and even airlines could see efficiency gains that could lead to fuel savings with lighter customers.
Goldman Sachs estimates Obesity will reduce global GDP by $4 trillion in 2035. But things could change if enough people start taking these drugs.
According to an analysis by Trilliant Health, 9 million Americans were taking GLP-1 drugs at the end of 2022, and that number is expected to skyrocket, with Bank of America predicting that by 2030, 48 million Americans will be taking GLP-1 drugs. of Americans are estimated to take GLP-1 drugs.
How will GLP-1 drugs grow in the future?
Eli Lilly’s GLP-1 drug Mounjaro has been approved for type 2 diabetes, but is still awaiting FDA approval for its widely anticipated expanded obesity indication.Potential expansion of indications for these drugs in the treatment of kidney disease, heart disease, and sleep apnea syndrome Even addictive behaviorwhich will help expand the patient population targeted by these drugs.
Novo Nordisk and Eli Lilly are also developing new pill forms of the drug that could appeal to patients scared of current injectable drugs.
But insurance companies may be the biggest catalyst for rapid uptake of these drugs. Currently, the cost of the drug can exceed $1,000 per month without insurance coverage. Coverage is wider for diabetics, but Many insurance companies are reluctant To cover drugs for weight loss.
As this drug continues to show additional health benefits beyond weight loss, health insurance companies may be more inclined to expand coverage of these drugs and significantly reduce costs for patients.
Goldman Sachs announced in August that “clinical trials show this drug reduces the risk of heart attack and stroke.” “By fighting obesity, these drugs appear to be fighting heart disease, the leading cause of death. This puts an obligation on insurers to reconsider their approach.”
Ultimately, JPMorgan predicts that GLP-1 drugs will become one of the best-selling drug classes in history, with annual sales of $100 billion by 2030.
If these sales estimates are accurate, they should have far-reaching short- and long-term effects on the stock market and the economy as a whole.
This brings us to perhaps the biggest question about the Ozempic effect. The question is, what will happen to an economy that is primarily driven by consumption if a significant portion of the population starts taking drugs that reduce consumption?
