I am sure you've heard of the new weight loss drugs Ozempic and Wegovy. Many celebrities are touting their virtues and it's hard to watch a televised sporting event that is not riddled with commercials selling their product. There is no doubt that the drugs are gaining mass adoption. Just look at the stock prices below of Novo Nordisk and Eli Lilly over the past six months. Almost all of that upside can be attributed to the demand of these weight loss drugs.

 

Source: Thomson One as of Oct 12, 2023

 

The drugs were originally designed to help lower blood sugar levels but one of the side effects happened to be a loss of appetite. As a result, people in the trials ended up losing anywhere from 10 to 20% of their body weight. The massive uptake of these drugs and their associated effects correlate with all kinds of disruptions in different industries. Last month, Walmart reported that the average calories-per-customer at the till had dropped over the past three months. Loss of appetite also has an effect on companies that produce junk food and fast food. As you can see from the chart below, both McDonald’s Corp. and Coca-Cola are dropping because of the expected slowdown in their business from the effect of these trends.

 

Source Thomson One as of Oct 12, 2023

 

The effects don't end there, just this week Novo Nordisk stopped a kidney trial early because of the positive results. The trial halt was recommended by an independent data-monitoring committee after an interim analysis met preset criteria for efficacy ahead of expectations. The immediate effect was significant drops in kidney dialysis and diabetes supply companies as per the chart below.

 

Source Thomson One as of Oct 12, 2023

 

On the surface, it appears these weight loss drugs are some kind of magic elixir. I guess the benefits of losing weight ripples through all markets. Even knee and hip replacement companies are seeing their stocks drop as it’s anticipated less surgeries will be needed. There are still some risks, however, the drugs are very expensive and it's hard to believe that governments will continue to pay up to a $1000 per month/ user if the drugs end up penetrating 30% of the population. No matter how you look at it, these new medications are going to create plenty of opportunity and plenty of disruption. Sounds an awful lot like the note we put out a few months ago about artificial intelligence, exciting times!!!

 

I've also included a piece from our CIBC Economics team entitled "A broken record".

 

As always, if you have any questions, please feel free to give us a call at any time.

 

Have a great weekend.

 

Milan