As the summer sun shone and Americans flocked to the beaches, publicly traded companies unveiled their second-quarter results, but this year’s timing held a unique significance. Throughout August, chief executives took to earnings calls to reassure investors that the Ozempic revolution had not left them in the shadows, offering a glimpse into how the rise of new diabetes and weight loss drugs might impact various industries.
“We are poised to provide a solution for those on these drugs,” said Dan R. Chard, CEO of Medifast, a manufacturer of diet products such as shakes and protein bars. Chard added, “They’re seeking guidance.” Remarkably, he shared this sentiment even as he explained that earnings had taken a 34.7 percent year-on-year hit due to the advent of new-generation drugs.
“We will continue to examine this,” remarked Michael Johnson, CEO of Herbalife, a nutritional supplement maker. “And when we spot an opportunity to capitalize on it, we will.”
In theory, this opportunity, laden with potential for both profit and loss, extends far beyond the pharmaceutical companies producing these groundbreaking medications.
Known as GLP-1 drugs, these medications are already proving highly lucrative. Novo Nordisk, the manufacturer of both Ozempic (approved for Type 2 diabetes) and Wegovy (approved for weight loss), has witnessed remarkable success. These drugs mimic a glucagon-like peptide that regulates appetite in the brain, providing a lasting sense of fullness. They have catapulted Novo’s earnings upward by 32 percent in the first half of this year, propelling Novo’s market value beyond that of the entire Danish economy. Eli Lilly, too, reported a 28 percent sales surge in the second quarter, largely attributable to Mounjaro, a diabetes drug that the Food and Drug Administration may approve for weight loss later this year.
The full extent of their potential is not yet clear. The market for weight loss drugs is colossal, with approximately 750 million obese individuals worldwide, including about 42 percent of U.S. adults. Obesity-related illnesses incur billions of dollars in healthcare costs annually in the United States alone. Novo suggests that GLP-1 drugs may find additional applications, such as preventing cardiovascular disease among obese adults, or even addressing addiction and Alzheimer’s disease.
“The market potential is very, very significant,” asserted Karsten Knudsen, Novo’s chief financial officer. “We’re operating in kind of unusual territory.”
Diet companies are bracing for disruption. Traditionally, weight loss companies have relied on branded, prepackaged meals and lifestyle programs. Some, like WeightWatchers and Noom, have moved swiftly to offer GLP-1 drugs themselves, while others are banking on their products surviving the Ozempic era. In May, Jenny Craig closed its weight loss centers after four decades, and Simply Good Foods, the distributor of Atkins diet products, is positioning Atkins as “a perfect complement to people considering the use of these drugs.”
The ripple effects extend further. Retail giants such as Walmart, Kroger, and Rite Aid report that GLP-1 prescriptions are driving more customers into their stores, leading to increased purchases across various product categories. Walmart’s CEO, Doug McMillon, stated in August that the company anticipates consumables and health and wellness products, largely due to the popularity of GLP-1 drugs, to grow as a percentage of total sales.
Medtronic’s CEO, Geoff Martha, observed a “modest” decline in bariatric surgery, presumably as people opt for weight loss drugs instead. Some analysts even speculate that these drugs could transform the American diet.
James van Geelen of Citrinas Capital Management explained on Bloomberg’s “Odd Lots” podcast, “If you’re eating fast food every day, you’ll probably continue to eat fast food every day, but you will just eat a lot less of it.”
Nonetheless, alternative approaches to combat obesity still hold their place. “These drugs are game changers, but with an asterisk,” cautioned David Ludwig, an obesity specialist and pediatrics professor at Harvard Medical School. He pointed out the long list of side effects associated with these drugs and added, “Even if you can reduce weight across the population with drugs, it’s not going to eliminate the risks of a poor diet.”
Flush with resources, Novo Nordisk agrees. “We need to be looking at what’s the next thing,” said Camilla Sylvest, Novo’s executive vice president for commercial strategy. In June, the company launched an obesity prevention unit near Copenhagen, dedicated to researching methods to combat the disease before resorting to weight loss drugs.
