Wegovy craze was all the rage on Q3 earnings calls

Coca-Cola Consolidated

20/11/2023 06:00

By Bhanvi Satija and Savyata  Mishra
       Nov 20 (Reuters) - Weight loss was the talk of this
earnings season, making names such as Wegovy, Ozempic and
Mounjaro the water-cooler discussion that companies across the
globe could not ignore.
    Analysts attended earnings calls in the third quarter armed
with questions for healthcare and consumer companies about the
potential effect on their sales from the growing popularity of
these drugs, known as GLP-1 agonists.
    A Reuters analysis of earnings transcripts for the third
quarter showed "GLP-1" or alternatives like "obesity" or
"weight-loss medications" were mentioned 256 times across 29
U.S. and European healthcare and consumer companies.
    That's more than double the mentions for the second quarter,
when those phrases came up 127 times.
    "It's definitely a hot topic," said Jeff Jonas, portfolio
manager at Gabelli Funds. "They (companies) are all having to
respond to this to whether it's a positive for their business or
trying to argue why it's not a negative."
    This class of medicines, which includes Eli Lilly's  LLY.N 
Zepbound and Novo Nordisk's  NOVOb.CO  Wegovy, have proved
effective in treating diabetes and weight loss and may also help
cut the risk of stroke or heart attack, making them potentially
life-changing for people around the world.
    Investor interest in the topic has been growing for some
time, but took off on Oct. 4 when Walmart  WMT.N , the largest
U.S. retailer, noted that there had been a slight pullback in
food demand from customers taking weight-loss treatments.
    
    
    Walmart U.S. CEO John Furner, however, told analysts last
week that it was too early to tell how the treatments will
affect their customers and business.
    Most other major consumer products makers such as Hershey
 HSY.N  and Mondelez  MDLZ.N  fielded questions about the drug,
with some analysts homing in specifically on sellers of sugary
foods.
    Truist Securities downgraded Krispy Kreme in late October,
citing the overhang on such stocks due to the effect from
weight-loss medicines.
    Krispy Kreme shares are down 15% since August 1, a period
that coincides with a 31% rally in Eli Lilly, though the
doughnut chain's stock has still gained 20% in 2023.
    While some consumer companies have talked about factors such
as fewer calories being consumed, "these kind of large
extrapolations" seem to be a bit of a stretch, said BMO Capital
analyst Evan Seigerman.
    
    GLP-1 WINNERS AND LOSERS
    Novo Nordisk unseated LVMH  LVMH.PA  as Europe's most
valuable listed company in September, and the Danish drugmaker's
shares have risen 48% this year.
    Eli Lilly's stock has risen about 63% making it the world's
most valuable healthcare company with a market cap of nearly
$560 billion.
    Drugmakers have faced various types of questions about these
treatments. For big pharma manufacturers like Pfizer  PFE.N  and
Amgen  AMGN.O , analyst questions were aimed at their obesity
drug candidates. Health insurers including UnitedHealth  UNH.N 
and Cigna  CI.N  focused on the pricing of these drugs.
    Lilly has benefited from the use of Mounjaro, which was
prescribed for diabetes. Its weight-loss counterpart, called
Zepbound, was approved in the United States on Nov. 8.
    On the other end of the spectrum, medical device makers and
dialysis services providers which profit from treating obese
patients have had to allay investor concerns about the impact of
these highly effective drugs on their markets.
    
    
    Investor worries have led to a selloff in medical device
makers, sending iShares US Medical Devices exchange-traded fund
 IHI.N  down 7% this year. Fund managers might still be worried
about investing in stocks perceived to be among the "GLP-1
losers," said HSBC analyst Rajesh Kumar.
    The high prices of these drugs, potential lack of insurance
coverage and uncertainty around long-term use are among common
arguments used by companies to allay concerns.
    Still, investors are only beginning to wrap their heads
around the fact that these drugs could possibly be the most used
ever in the pharmaceutical industry.
    "I just think these are probably going to be the
best-selling drug class of all time. But it is going to take a
few years to develop," Jonas said.

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Medtech ETFs slide on weight-loss drug frenzy    https://tmsnrt.rs/3sGaDiW
Consumer companies stock performance    https://tmsnrt.rs/40QL4Iz
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 (Reporting by Bhanvi Satija and Savyata Mishra in Bengaluru;
Editing by Arpan Varghese, David Gaffen and Shounak Dasgupta)
 ((Bhanvi.Satija@thomsonreuters.com; Outside U.S. +91
9873062788))