The impact of Novo Nordisk A/S’s new diabetes drug is having a broad impact on equity markets. Late Tuesday, Norvo Nordisk A/s, Europe’s largest company by market value, said it was halting a study that looked at the impact of its diabetes drug Ozempic drug on kidney failure after it showed effectiveness surprisingly early. The news sent global kidney dialysis providers tumbling today, just one sector to feel the effects of the new diabetes drug.
Novo Nordisk A/S’s Ozempic and Wegovy injectable drugs are a class of weight-loss medicines known as GLP-1s. The impact of these drugs has expanded beyond obesity and diabetes. Another recent study showed Wegovy cut the risk of heart attacks and strokes. Citigroup said, “The body of evidence to support GLP-1 use, over and above weight loss and blood glucose control, continues to grow.” These GLP-1 drugs have caused wide effects across the stock market for the makers of everything from snacks to liquor.
Last week, Walmart said it is seeing an impact on demand for food products from people taking Ozempic, Wegovy, and other appetite-suppressing medications. That weighed on shares of food and beverage companies. Also, a recent survey conducted by Morgan Stanley found that patients tended to cut back on meals and snacks while taking weight loss drugs and consumed less alcohol and carbonated drinks.
There are concerns about changes to consumer spending habits due to the popularity of the new weight-loss medications. Last Friday, Bank of America said that in the food and beverage space, alcohol, snacking, and non-alcoholic drink companies are most at risk with broad adoption of GLP-1 drugs, a category that includes Ozempic. Also, weight management products could be at risk if their function is no longer relevant, although it’s too early to clearly understand the long-term impact on consumption for patients who use the drugs.
However, there is some skepticism among analysts about whether these new weight-loss medicines will actually cause major changes to consumer spending habits. Aviva Investors cautions against reading too much into the recent stock market swings, saying, “While we know that these drugs do tend to result in suppressed appetite, we think the moves in the share prices do feel somewhat overdone. It is far too early to make sweeping conclusions on what this might mean for consumer habits.” Interactive Brokers expects analysts will now be questioning food and beverage companies in earnings calls this quarter about the potential impact of weight loss drugs on their businesses.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
