More than 40% of adults in the U.S. are obese. That’s a big number, which makes the group a force to be reckoned with if their habits start to change suddenly. That’s why we’ve seen so many Wall Street analysts exploring the potential fallout from new weight loss medications like Novo Nordisk’s Wegovy and Ozempic on different industries from real estate to medical devices to food and beverage companies . Many of these exercises have been theoretical and have come with warnings that it might take a while for them to play out in the market. But maybe not. Bank of America’s trading desk recounted a recent meeting with Walmart chief financial officer John David Rainey on Tuesday where the retailer disclosed that it is already seeing a drop-off in food consumption among customers who are using GLP-1 medicines. It’s also seeing a pick-up in sales in health and fitness items like yoga mats and athletic apparel. Still early days These comments come as more than 9 million prescriptions have been written for this class of drugs, which also treat type 2 diabetes, according to Trilliant Health. While there has been a huge gain, it is barely scratching the surface of the potential market. NVO YTD mountain Novo Nordisk shares are up 34% in since the start of 2023. Manufacturing constraints have limited supply and led to periodic shortages. Some potential patients don’t have coverage of the pricey medicines through their health insurance plans yet. (For example, those seeking to use GLP-1 drugs for obesity can’t receive coverage if they are insured by Medicare as the federal health plan is not allowed to cover weight loss drugs.) Also, Eli Lilly’s Mounjaro, which has been shown to help patients in clinical trials lose as much as 20% of their weight, hasn’t yet received Food and Drug Administration approval for weight loss. That could come by the year’s end, analysts predict. The drug is on the market as a type 2 diabetes treatment at the moment. Walmart told Bank of America that fiscal second-quarter sales benefited roughly 1% from GLP-1 drug sales volumes. “While it is a lower margin business, there could be some improvements in profitability early next year when long-term contracts are revisited,” Bank of America wrote in an email. All this means that the knock-on effects from taking the drug will only grow over time. Walmart’s comments are significant since the retailer is able to use its internal data to link customers who are taking the drugs to their actual shopping patterns. LLY YTD mountain Eli Lilly shares have risen nearly 49% year to date. Fewer calories in In August, Morgan Stanley predicted that GLP-1 medications could lead to a 1.3% drop in calorie consumption in the U.S. by 2035. The analysts drew on survey data that suggested those taking the drugs reduce their calorie intake by 20% to 30% as they eat fewer meals and snacks. They also assumed that these same consumers were more likely to buy indulgent foods and beverages. The firm’s analysts have since dug in deeper, using data from market researcher Numerator Insights, to show that packaged food, typically found in the center of the store, does over-index with shoppers who have obesity. And these are exactly the types of foods that are eliminated when people try to lose weight. The trend has implications for investors as can clearly be seen in the stocks of medical device companies such as Insulet , a maker of insulin pumps. Its stock has fallen 45% year to date on fears that these drugs will shrink the company’s market potential. Other stocks in the sector have followed a similar pattern. “Consensus estimates for new GLP-1s imply a small headwind to U.S. obesity and diabetes prevalence [compound annual growth rates,] which is important because these are key risk factors for device-intensive diseases such as osteoarthritis, coronary disease and sleep apnea,” Wells Fargo analyst Larry Biegelsen wrote in a research note Tuesday. However, he said, the impact isn’t as big as one might suspect. PODD YTD mountain Insulet shares have fall more than 45% since the start of the year. According to Biegelsen, consensus estimates suggest that 8.3 million people will be on GLP-1 drugs for obesity and diabetes in 2030, or a 5.1% penetration of the potential market for the drug. About half would be taking the drug for obesity, he said. “If all obese patients on a GLP-1 were no longer obese, the 2023-2030 CAGR of obese patients in the US would decline by 40 [basis points] to 1.9% from 2.3%,” Biegelsen said. Daniel Lyons, a portfolio manager and health-care industry research analyst at Janus Henderson Investors, told CNBC, that he expects it will take “many years for the downstream implications to go through the system.” Lyons cited the use of statins, which are used to lower cholesterol, as example of how things could play out over time. “Did heart disease completely go away?” he asked, explaining that although these drugs are widely prescribed and helpful, not everyone who can benefit is on the therapy. —CNBC’s Michael Bloom contributed to this report.
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