LONDON: The emergence of groundbreaking anti-obesity drugs developed by pharmaceutical giants Novo Nordisk and Eli Lilly has the potential to revolutionize public health while simultaneously disrupting multiple industries. These innovative medications, designed to target receptors in the brain that reduce appetite and prolong the feeling of fullness, are gaining prominence as effective treatments for obesity.
Originally formulated to address diabetes, these drugs have exhibited substantial efficacy in combating obesity during clinical trials. In one such trial, patients administered Eli Lilly’s upcoming weight-loss drug experienced an average weight loss of approximately 50 pounds (23 kilograms). The implications for public health are profound. In August, Novo Nordisk reported that its obesity drug, Wegovy, had reduced the occurrence of serious cardiovascular events, such as strokes and heart attacks, by 20% in overweight patients with a history of heart disease but without diabetes.
The sales of these medications have already witnessed substantial growth. Novo Nordisk, with its offerings of Wegovy and Ozempic for diabetes treatment, generated nearly $2.5 billion in sales last year. Analysts project this figure to surge to $16 billion by 2027. The demand for these drugs, collectively referred to as GLP-1 drugs, significantly outpaces current production capacity. Consequently, Novo Nordisk has achieved a market capitalization of $420 billion, making it the most valuable company in Europe. Eli Lilly, the manufacturer of the diabetes treatment Mounjaro, has seen its market value nearly double to over $500 billion in less than 18 months.
However, the transformative impact of these drugs on public health and individual habits may lead to unintended consequences for various sectors. The drugs, which effectively suppress appetite and mimic gut hormones released after eating, could potentially affect major players in the food industry, such as Nestlé, Mondelez International (maker of Cadbury and Oreo), and Kraft Heinz. These companies currently dominate a global snack market with annual revenues exceeding half a trillion dollars, a figure anticipated to grow to nearly $840 billion by 2029.
Fast-food chains like McDonald’s, Burger King, and Yum Brands, the parent company of KFC, could also experience changes in demand as consumers’ appetites are suppressed or altered.
Impact of Anti-Obesity Drugs
The impact may be even more profound in the medical industry. With over 40% of Americans classified as obese, healthcare costs associated with obesity in the United States were estimated to be nearly $500 billion annually in 2016, according to the Milken Institute. A 2021 study projected a 50% increase in costs due to reduced health and higher absenteeism globally by 2060.
The adoption of these anti-obesity drugs remains uncertain due to their high monthly cost of around $1,000 and harsh side effects, leading to a one-year retention rate of only about a third of those who initiated treatment.
While any potential disruption is expected to occur gradually, investors are expressing concerns. Transcripts of corporate earnings calls, presentations, and other events tracked by LSEG indicate a growing number of mentions of Wegovy, Ozempic, and Mounjaro during 2023, excluding those hosted by Novo Nordisk and Eli Lilly.
Industries such as sleep apnea treatment and joint replacements may also be affected. Firms like ResMed and Inspire Medical Systems, specializing in sleep apnea solutions, are likely to face repercussions, as approximately 70% of sleep apnea sufferers are obese.
Similarly, companies focused on joint replacements, including Zimmer Biomet and Smith+Nephew, which generate significant revenue from hip and knee implants, may experience a decline in demand if obesity-related cases decrease.
Rival weight management treatments, such as WW International (formerly Weight Watchers), have already encountered market challenges. WW International’s shares have fallen approximately 70% since June 2021, despite the company’s efforts to distribute weight-loss drugs.
