Novo Nordisk weight-loss drugs like Ozempic have promise

Now, main British financial institution Barclays is predicting the affect and potential uptake of such medicine to be so substantial that it’s recommending that buyers quick shares which are focused by the weight-loss drug trade—together with junk meals and cigarette firms. 

In a Tuesday report, the financial institution highlighted that the recognition of such medicine might put a dent within the demand for firms comparable to Pepsi Co., which makes Pepsi drinks, Cheetos and Doritos. 

“The impacts of GLP-1s probably introduce disruption into numerous industries,” Barclays’s strategists wrote, according to Bloomberg. 

GLP-1 medications like Ozempic, used to deal with Kind 2 diabetes, and Wegovy, used as an weight problems therapy, mimic a hormone produced within the intestines after meals which helps curb urge for food, thus aiding weight-loss. 

A potential unfavorable affect of such medicine on client manufacturers has already begun reflecting in inventory costs. As an illustration, an index of packaged meals is down by about 14% to date in 2023 in opposition to a 20% rise within the S&P 500 index for a similar interval, Bloomberg reported. 

Novo Nordisk and Barclays didn’t instantly return Fortune’s request for remark. 

The marketplace for Novo’s twin medicine used to assist weight-loss is predicted to skyrocket to $100 billion by 2035, in response to BMO Capital Markets. And as these medicine have already proven promise for what they’ll obtain and have been unofficially endorsed by the likes of Elon Musk, Wall Avenue is attempting to gauge how far their ripple results might attain. 

Funding financial institution Jefferies mentioned last week that if customers undertake more healthy diets to enhance using medicine like Ozempic, that might damage eating places in addition to different gamers within the meals and beverage sector. And due to the excessive price of the medicine, the medicine might immediate clients to carry again on spending on discretionary items like furnishings. 

Are there any winners?

Whereas weight-loss medicine may hurt enterprise in some sectors, they aren’t with out their justifiable share of winners.

Barclays expects gamers like American pharmacy chain CVS Health to be among the many beneficiaries of the fast-growing weight-loss medicine trade as extra sufferers get prescriptions for such medicine.

Banks additionally anticipate there to be firms that not directly acquire from this pattern.

As an illustration, Jefferies mentioned that United Airlines, a number one American provider, might save as a lot as $80 million a 12 months if passengers’ weight fell by 10 kilos as a part of a examine assessing the broader ripple-effects of recognition of weight-loss drugs. 

“Weight is a vital factor for gasoline effectivity… Airways’ greatest expense is gasoline, which has been exacerbated as jet gasoline costs have rebounded,” Jefferies analysts wrote, according to Insider.

The rise of Novo Nordisk

Aided by the stratospheric rise of weight-loss and diabetes medicine, Novo briefly grew to become Europe’s Most worthy firm last month, dethroning luxurious model LVMH. That’s additionally when the corporate debuted within the U.Okay., its fifth market globally, the place Wegovy was hailed as a “game-changer” by Prime Minister Rishi Sunak. 

The Danish firm, which has been round for about 100 years, has seen a meteoric rise lately. The U.S. Meals and Drug Administration permitted Ozempic in 2017, whereas Wegovy was permitted in 2021—making it the primary weight-loss drug to be permitted by the physique in eight years. 

As the corporate started to broaden past the U.S., which nonetheless stays a key market, Novo’s market value overtook the scale of Denmark’s economic system in 2022. The sheer scale of the corporate’s enterprise has even safeguarded Denmark from a recession. 

Demand for Novo’s blockbuster medicine have rapidly outpaced provide, main it to curb its starter doses. In Britain, Wegovy’s launch has been in a “restricted and managed method” anticipating a deluge of consumers. All the thrill surrounding these medicine have resulted in a crop of fake drugs being peddled to determined customers as unauthorized variations of semaglutide, the energetic ingredient in Wegovy and Ozempic.