When it comes to GLP-1 weight loss drugs, the biggest winners are the pharmaceutical companies behind them.
The Danish company Novo Nordisk makes Ozempic and Wegovy based on semaglutide, and has seen the biggest benefits (so far) as a result.
Between 2020 – when Ozempic was still available as a diabetes drug – and 2023, its revenue rose 83%, while its profits doubled.
If you were smart or lucky enough to buy shares in Novo Nordisk in 2021, the value of your investment will be 3.5 times today.
Another pharma company benefiting from the trend is Eli Lily.
Behind Novo Nordisk in the development of its own products, but the drug Zepbound was approved in the United States late last year, and it is expected to enjoy a significant increase in sales as a result.
Eli Lily shares are up 112% in the past year just on that prospect.
And that’s because this market is poised for rapid growth in the future.
The market for weight loss drugs is predicted to be worth $100 billion by 2030 – and $150 billion by 2033.
As a result, it is not surprising to see other companies scrambling to get on this train.
AstraZeneca has entered into a $2 billion deal to acquire a Chinese oral drug license that is in development.
Meanwhile, Roche has announced that its own drug has shown promising results in early trials.
So what companies might see Ozempic and Wegovy as bad news?
The reality is that most – if not all – of this money going towards weight loss drugs is not 'new', so to speak. It is likely to be diverted from spending elsewhere.
Today the 'health' industry is huge – with food companies taking a huge chunk of that spending every year.
But if you can take an injection (or, in the not-too-distant future, a pill) instead of having to follow a specific diet plan, the food industry might start to look like it’s missing out.
WeightWatchers – or WW International as it’s officially known – is probably the hardest hit company so far.
Of course, it has been the head and center of the food industry for more than 60 years, but now questions are being asked about its future.
Its shares are down 94% since the start of 2021.
Oprah Winfrey – who has been a member of the WeightWatchers board for many years – bought a 10% stake in the company in 2015.
But late last year, she said in an interview that she started taking Ozempic to manage her weight.
This had little effect on WeightWatchers' image; but it was also against his contract with them, which stated that he would not do any other weight loss for weight management purposes.
And that ended with him announcing that he would not seek re-election to the company’s board – and that he would donate his remaining stake to the National Museum of African American History and Culture.
The stock price dropped 20% on that announcement alone.
WeightWatchers tried to change their business model to match the growth of weight loss drugs.
Last year it bought a company called Sequence – which connects patients with doctors who can prescribe weight loss drugs.
This is important because part of the FDA approval of these drugs in the United States requires that they be taken in conjunction with a broader diet and exercise program.
As an intermediary discipline, they hope that they can encourage people to continue their diet as well.
What other food companies are suffering?
The Jenny Craig name is not very popular in Ireland, but it has been a staple of the American food industry for forty years.
But that ended last year when the company went bankrupt – with 1,000 jobs lost and 500 of its 'centres' closing.
It can’t be entirely blamed on weight loss drugs – Jenny Craig has changed hands several times in recent years and had other problems – but it certainly helped put the last nail in her body.
A more modern victim is a weight-loss app called Noom – which has become very popular in recent years, at one point reaching $3.7 billion.
But it is currently struggling to operate – and has been sacked three times in the past year alone.
Are conventional food companies also at risk?
Maybe to a lesser extent – but yes.
Walmart said it analyzed its customer data, and those who fill Ozempic or Wegovy prescriptions buy less food than regular customers.
And of course it makes sense, because it’s an addiction treatment. If you don’t eat a lot, you probably won’t buy a lot of food.
Analysis by JP Morgan suggests that drug users reduce food purchases by 8%
There is nothing spectacular, but there are still many products available from retailers and food producers.
Spy companies are considered the most vulnerable – and those who specialize in high-quality and unhealthy food.
So should the big food brands be worried?
Food and beverage companies like these are familiar with food and fashion trends that influence the types of products people want; but the feeling in the industry is different.
At first, you’re moving faster than normal weight loss trends – and most people think it’s here, not something that will fade away in a year or two and be replaced by something else.
A study by Goldman Sachs and JP Morgan suggests that anywhere between 15 million and 30 million Americans will be using GLP-1 drugs by 2030.
That’s just the US – so the global numbers will be much higher.
Therefore, it will represent a large segment of consumers, who will have different shopping habits than what is considered 'normal' today.
And as a result, we have seen the share prices of big companies like Nestle, Mondelez – which owns Cadburys – Coca-Cola, PepsiCo, have gone down or stagnated in the last two or three years.
And when they hold quarterly and annual press conferences, they are constantly asked about Ozempic, and what they will do with their company.
Publicly, many of these companies are pretty calm about everything.
Mondelez’s CEO says he’s not worried about sales – and that it will have little impact on his business.
He said that they are in the process of developing their products to make them healthier; or at least smaller and less caloric.
Part of that is responding to customer demand – but part of that is about discounting and reducing product portions.
Coca-Cola also gives off a no-fuss vibe – it says it’s been expanding its portfolio over the years, no longer focusing on sugar-heavy sodas.
There are now juice and smoothie brands, coffee brands like Costa, protein drinks and so on.
And it’s giving more value to sugar-free options – in part because of sugar taxes here and in other countries.
But all that said, it’s likely that – behind the scenes – they’re a bit more relaxed about it.
Product development and design experts in the food industry say there’s a lot of talk going on right now – and companies are trying to figure out how to those who adjust to value drug users.
So what are companies doing to fix it?
The first company to really announce their plan is Nestlé, which is preparing a frozen meal called Vital Pursuit.
They say it’s meant to be a 'companion' for those using GLP-1 drugs; and the emphasis will be on smaller portion sizes, and more nutritious elements, such as protein and fiber.
The idea is that people want to eat less of these drugs – but they also need to ensure that they don’t lose all the vitamins and minerals that their diet may have provided in the past.
On the one hand, vitamin and supplement companies are seen as potentially benefiting from all of this – the US chain GNC has now dedicated a section in its stores to those on GLP-1 drugs.
In the United States, brands such as Biocare and Herbalife have started selling drinks designed for drug users.
Is this just a small bandwagon by these companies?
In a sense, yes.
Food companies are always happy to jump on a trend if they think it will increase – or protect – sales.
And there is particular criticism of what Nestlé is doing with its frozen food line – because the bottom line is easily processed food.
It’s not healthy, and it doesn’t help people correct their habits, so when they get off the drug, it’s better to keep the weight off.
Brands must also be careful, because even if they want to match their products with weight loss drugs – they cannot give the impression that they are officially related. Nor can they claim that their products are medicinal in some way.
Industry experts have suggested that what the likes of Nestlé are doing represents the first generation of products catering to these drug users.
They only do things that are easy for them to do, such as reducing portions and adding food.
The market for these drugs is still new – so it’s not clear what consumers want.
Some users experience nausea or stomach problems – but others do not.
Some have reported that sweetened foods are sweeter – to an unbearable degree – which may lead to changes in the way certain products are formulated.
The first sign is that people tend to slowly regain their weight when they stop using the drug as well.
And all these things present challenges – but also opportunities – for food companies in creating new products.
Those in the industry say they have the technology to improve productivity in any way, once they know the end goal.
But if the change is to be science-based and reliable, it will take time and research.
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