As Wall Street tunes into the third-quarter corporate earnings calls, a curious topic is recurring with increasing frequency: the impact of weight loss drugs on significant consumer industries. The scene is one of cautious speculation as executives from companies like Delta Air Lines, PepsiCo, Philip Morris International, and Darden Restaurants respond to analysts’ queries regarding the financial influence of these drugs. Their collective stance is one of watchful waiting, with many agreeing it’s premature to ascertain any substantial impacts on their profits.
The market’s interest is piqued by the GLP-1 class of drugs, initially approved for diabetes but now gaining traction for obesity treatment. A production lag by Novo Nordisk for its drug Wegovy has underscored the soaring demand. However, Goldman Sachs analyst Chris Shibutani notes that only a minority of those eligible are currently being medicated. Shibutani forecasts a potential surge, with sales possibly hitting $100 billion if 13% of Americans with obesity opt for the treatment by 2030.
However, the long-term market size and the ripple effects on related sectors hinge on a critical unknown: the duration of patient adherence to these medications. The cost, which can reach $1,400 for a month’s supply of Wegovy, and the unpleasant side effects are significant deterrents. RBC Capital Markets reveals a stark statistic — only a third of patients maintain the regimen after a year, suggesting that the anticipated transformation across industries may not materialize to the extent some have predicted.
Amidst the scrutiny, the narrative remains nascent. Wegovy’s approval is just two years old, and the pharmaceutical horizon is brimming with potential as dozens of new weight loss drugs are under development. With Eli Lilly’s tirzepatide on the cusp of approval, the narrative around obesity management is evolving.
The weight loss drug sector stands at a crossroads, with its future influence on consumer behaviours and industry profits still uncertain. As analysts like Shibutani suggest, this theme will likely persist, warranting close observation as new drugs emerge and payer decisions evolve. Only time will tell how these medical advancements will reshape the consumer landscape.
