In 2023, the enthusiasm surrounding weight-loss drugs, particularly Novo Nordisk’s Wegovy (also known as Ozempic) and Eli Lilly’s Zepbound, has triggered market speculation and impacted various industries. While these drugs are hailed as the first effective treatments for obesity, the market may have overstated the immediate impact on businesses related to fast food and medical services.
GLP-1 drugs, initially developed for diabetes treatment but later found to induce weight loss, have garnered attention from users and investors. However, the current user base remains relatively small, with less than 1 million Americans reported to be taking Wegovy. This number is expected to grow, and analysts estimate potential weight-loss drug sales to reach $77 billion by 2030, with a significant portion in the United States.
Despite the promising outlook, the total number of obese Americans in 2030 is likely to be higher than today, given historical growth rates. The harsh side effects and the anticipated reluctance of insurers and governments to bear the high treatment costs may hinder a swift resolution to the obesity epidemic.
The market response has led to a sell-off in stocks of companies involved in the production of snacks, fast food, and medical services. Kraft Heinz, Yum Brands (operator of KFC and Taco Bell), and Resmed (a sleep apnea device manufacturer) experienced declines in 2023. Notably, these declines occurred despite analysts increasing revenue estimates for 2025.
Interestingly, the market dynamics may present opportunities for selective stock-pickers. While some industries face challenges, such as medical device makers like Zimmer Biomet and Smith & Nephew experiencing stock declines due to their dependence on joint implants, the demand for joint replacement surgeries is unlikely to diminish rapidly. The cumulative nature of arthritis damage means that even individuals who are no longer obese may still require knee surgery, potentially leading to growth in the patient population.
In summary, the 2023 excitement surrounding weight-loss drugs has generated market shifts, but the impact on related industries may be more nuanced than initially anticipated. Investors keen on selective opportunities may find potential gains amid the evolving landscape.