(News Bulletin 247) – Several companies have communicated or have been questioned on the impact of the rapid adoption of these treatments. Analysts have discussed the implications of this phenomenon for many sectors on the stock market.

After ChatGPT in the first part of the year, these are the big surprise guests in the latest communications from listed companies: anti-obesity drugs.

In early October, Walmart boss John Furner told Bloomberg that some of these treatments were leading consumers to reduce their food shopping baskets “with fewer items and a little less calories.” This observation, however, led him not to draw too hasty conclusions. The CEO of Conagra, an American agri-food group, explained during a conference call with analysts that his company would adjust if the needs of households were to evolve with the growing adoption of these drugs, reports CNN.

Surprisingly, during a conference call organized by Publicis on the occasion of its third quarter activity, an analyst asked the chairman of the management board, Arthur Sadoun, if he observed “a negative reaction” from his customers in the consumer goods and catering sector due to the rise of these drugs. The manager responded in the negative.

The market is therefore wondering about the repercussions of these drugs which concern a wide audience, obesity remaining a scourge which affects 42% of American adults, according to the Center for Disease Prevention and Control in the United States. In a study released earlier this month, Bank of America projected that 48 million Americans could have taken an anti-obesity drug by 2030, up from 1 million today according to their data.

This is because the craze for these treatments remains recent. The American health authority, the Food and Drug Administration, only authorized drugs using semaglutide in 2017 to treat type 2 diabetes, often linked to obesity. Semaglutide is a molecule that “mimics” GLP-1, a physiological hormone that has several effects on the regulation of glucose and appetite and provides a feeling of satiety.

“It was only when semaglutide was approved in 2017, with an indication for weight loss specifically approved in 2021, and a subsequent study showing an improvement in cardiovascular risk, that (these drugs, Editor’s note) truly attracted the attention of the crowds”, underlines Jefferies.

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A huge market for pharmacy

If Novo Nordisk’s ozempic only has an indication in type 2 diabetes, another drug with semaglutide, Wegovy (still from Novo Nordisk), has been approved since 2021 in the United States (and since 2022 in the European Union) for the treatment of obesity. Eli Lilly’s Mounjaro is also indicated for type 2 diabetes but could be approved to treat obesity at the end of this year, Bank of America anticipates.

Although adoption of these drugs is still in its early stages, prescriptions are starting to take off. “These increasingly popular drugs generally work by reducing patients’ appetite. With 1.7% of the US population being prescribed a semaglutide drug in 2023, a 40-fold increase over the last five years, the food industry could experience serious problems”, noted John Plassard, investment advisor at Mirabaud, in a recent note.

Obviously these medications can have side effects and their prices are not accessible to everyone. Jérôme Berton, manager at Cité gestion, explained Friday on News Bulletin 247 “that between 20% to 40% of people suffer from nausea, vomiting, diarrhea” and that the costs of these medications can exceed $1,000 per month in the States. -United. But analysts anticipate, on this last point, that the proliferation of treatments based on semaglutide should push their prices downward in the coming years.

Several research firms have questioned the repercussions that the potential growth of their adoption could have on groups listed on the stock exchange. Jefferies recently compiled a very detailed study where the American bank identified the long-term consequences with around 80 losing groups and 80 winners. Bank of America engaged in a similar exercise. We will not list all the possible implications but summarize those that caught our attention.

The first sector concerned obviously remains pharmacy. Jefferies estimates that “GLP-1” medical products will represent a global market of more than $150 billion by 2031 with more than $100 billion for the treatment of obesity. Novo Nordisk and Eli Lilly would between them concentrate 80% of this market, according to the bank’s forecasts, the rest being shared by other players, such as Pfizer or Amgen. Bank of America, for its part, estimates that Eli Lilly’s revenues from obesity treatments could exceed $40 billion in 2030.

Towards “a wave of replacement” of wardrobes

Beyond pharmaceuticals, analysts have studied the impacts in several other industries. In the food sector, Jefferies notes that, according to a survey, 70% of people who have taken a treatment replicating GLP-1 eat less and have a feeling of satiety more quickly, which could penalize certain food groups. Particularly those producing appetite suppressants or high-calorie products, such as Mondelez or Hershey, or Nestlé, even though the impact on volumes is impossible to quantify, according to Jefferies.

Producers of sugary drinks, such as Pepsico or Coca-Cola, may also be penalized by the drop in calorie consumption, notes Bank of America.

Conversely, groups specializing in healthy food products have something to do well. Barclays estimated on Monday that Danone could benefit from the rise of “GLP-1” drugs because consumers would turn more towards healthy products. and proteins such as yogurts or plant-based foods. However, the French group has “the healthiest portfolio of products among the food groups in our coverage”, argued the British bank.

In the same logic as for food, patients prescribed anti-obesity drugs tend to reduce their alcohol consumption, which leads Bank of America to consider that alcoholics could see their activity be penalized. Jefferies, for its part, estimates a potential impact of 4% on alcohol consumption by 2031 but explains that it has actually obtained a sensitivity range, ranging from -1% to -10%. “It is too early to draw definitive conclusions on whether this is a step change in consumption, but we believe the debate is more focused on the United States than the rest of the world “, consider the bank’s analysts.

As for distributors, Walmart and Costco could benefit from increased traffic in their pharmacies (supermarkets in the United States have a pharmacy section) thanks to the increase in sales of these drugs, which, however, Bank of America warns, have low margins. Other effects come into play for Walmart: a drop in food sales but also an increase in products such as yoga mattresses or sports clothing…

Let’s talk about the clothing sector. Bank of America estimates that while short-term impacts must be ruled out, weight losses induced by the adoption of anti-obesity drugs could in the longer term “trigger a cycle of wardrobe replacement”, with 50 billion dollars of additional spending in the United States by 2030, representing an average annual growth gain of 2%. This estimate is based in particular on the fact that consumers change clothes after having lost or gained two (American) sizes. Drawing a similar observation, Jefferies cites Abercrombie & Fitch or Urban Outfitters among the potential winners of this “supercycle” of cabinet renovation. Sports equipment manufacturers like Nike can also benefit from this, while also benefiting from increased demand for their sports shoes.

Less fuel for airlines

Jefferies also considers that the weight loss of people undergoing treatment will be positive for…. airlines. To simplify, the loss of weight of the population in the United States would be synonymous with a lower mass for aircraft and therefore less fuel consumption, the largest item of expenditure in the sector. “Efforts to make planes lighter have covered all aspects: reducing the amount of water carried, removing olives from salads, using lighter beverage carts and lighter plates and utensils,” recalls Jefferies on this point. By reducing the average weight of 4 kilograms per passenger, the bank calculates that United Airlines could save the equivalent of $80 million in fuel bills.

More broadly, the decline in obesity, a disease which represents a barrier to certain trips, “could make more people inclined to travel” and would thus constitute a positive wind for leisure activities in the long term.

Labor-intensive sectors, such as collective catering and therefore Compass and Sodexo, could see their gross margin be supported by a reduction in costs linked to health expenses and the illness of their employees, which would represent 5% of the cost total labor for them according to Jefferies.

Bank of America sees a “modest” negative impact on tobacco companies (such as Philip Morris), because nicotine is seen among certain smokers (young people and mostly women) as helping to reduce their appetite and lose weight. Anti-obesity drugs would therefore penalize cigarette sales, according to this logic. But the American bank explains that the population in question does not have easy access to these treatments…

Let us cite a final example: insurers. “On the one hand, improved health would likely lead to lower premiums, as more life insurance buyers would qualify for better underwriting categories (this is (i.e. at lower costs), but this impact would only be felt on new business,” explains Jefferies.

But “for ongoing contracts, costs would benefit from deferred mortality, which would allow life insurers to earn higher investment income on reserves for longer periods,” the bank continues. The latter also “expects that a healthier population will lead to improved morbidity, which could reduce claims costs in products such as disability and long-term care.”