Opportunities Seen in Growing Demand for Anti-Obesity Drugs, Investors Say

The initial market reaction to the growth in demand for appetite suppressing anti-obesity drugs such as Novo Nordisk’s Wegovy may be overdone, according to investors. The sell-off in shares of companies like Nestle, prompted by Walmart’s mention of a slight pullback in food consumption when people took the medication, seems like an overreaction. Wegovy has already seen success in the United States and is now being introduced in some European markets. While concerns have been raised about the impact on food sales, investors believe the “miracle drugs” will not have a long-term negative effect on the industry. Food and beverage companies, as well as health-related stocks within the obesity industry, may be affected by Novo’s breakthrough drug. However, it is noted that more attention should be given to the impact on supermarkets, where margins are thinner and the potential for profitability impact is greater. Nestle has already begun working on products that complement weight loss drugs like Wegovy, and limited drug availability has convinced some investors that these medications will not harm the industry in the long run. The uptake in appetite suppressing drugs appears to be led by the United States, while wealthier, more mobile middle classes in emerging countries may continue to fuel trends towards snacking and convenience foods. The perception that weight loss drugs will have a negative impact on the industry may be hard to break, but some investors are looking to take advantage of any discount in stocks related to Wegovy. Overall, the market’s reaction to these drugs is reminiscent of early hype over the metaverse, as the realization that behavior is slow to change sets in. Lower socioeconomic groups may face limitations in accessing these medications due to their cost, which could slow down the positive downstream impacts. Despite some concerns, not all food manufacturers are expected to be heavily impacted, especially those offering alternatives to “junk food.”