Background
It may be too late to chase the weight-loss drug rally, but a frenzy of executive and media commentary suggests trading on second-order effects has only just begun.
Novo Nordisk A/S briefly surpassed LVMH as Europe’s largest stock, while Eli Lilly & Co. entered the U.S. top 10 by market cap. The market for drugs that mimic the glucagon-like peptide (GLP-1) hormone could reach $100 billion by 2030, according to Goldman Sachs Group Inc. estimates. As with executive discussions of ChatGPT, which took off in late 2022 and sparked a rally in artificial intelligence stocks, companies across sectors are weighing the opportunities and threats of GLP-1.
The issue
Bloomberg’s Document Search tool searches 200 million company documents using the latest natural language processing and intelligent synonyms. Document Search for GLP and AI-derived synonyms shows transcript mentions almost doubled in the third quarter from a year earlier, with financials, materials and consumer staples sectors trending up.
The leading drugs — Ozempic, Wegovy and Mounjaro — were originally introduced to treat diabetes because GLP-1 stimulates the release of insulin. Their application expanded to obesity because the hormone also turns off hunger signals in the brain. This development spooked investors in consumer plays whose products benefit from weak impulse control.
Consumer company responses to the drugs range from a refusal to speculate to emphasizing opportunities to develop companion products, as Nestle SA has done.
Health insurers are also paying close attention. UnitedHealth Group Inc., which covers about 47 million Americans in medical plans, noted that monthly U.S. prices for GLP-1 treatments are about 10 times higher than those in Western Europe.
That said, recent analyst calls suggest optimism that insurers, employers and drug companies will compromise given the mutual benefits. UnitedHealth Group stock is up 8% in the past three months, while rival Cigna Group gained 10%.
James van Geelen of Citrinitas Capital explained on the Odd Lots podcast how GLP-1 drugs could transform economies and businesses in a similar way to AI. He said Document Search was his “favorite feature” on the terminal during earnings season, naming stomach staple maker Intuitive Surgical Inc. and CPAP machine maker ResMed Inc. as companies addressing analyst concerns.
Tracking
Use Bloomberg’s DS, WATC, NCAT and SPLC tools to analyze the potential impact of obesity drugs.
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