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- Analysts have been focused on how Ozempic might affect CSL and ResMed’s businesses.
- In the US, fast food and snack stocks have been hit on speculation weight-loss drugs will impact demand.
- Supplies of Ozempic are still constrained, with its manufacturer Novo Nordisk pointing to shortages.
Ozempic has been catapulted to global fame thanks to its powers as a weight-loss drug, but this month the product was partly responsible for slimming down the share price of one of Australia’s largest companies.
CSL, a giant on the nation’s sharemarket, was forced to defend the competitive edge of its kidney disease treatments portfolio after Novo Nordisk, which makes the diabetes-turned-weight-management injection, released positive news about a study into the effects of the drug on patients with kidney disease.
Novo Nordisk’s production facility in Denmark, where it makes weight-loss drugs Ozempic and Wegovy.Credit: Bloomberg
CSL was quick to play down concerns about the competitive threat of Ozempic, telling investors that obesity was not the only factor that influenced the conditions of patients it treated. Even so, the company’s share price declined by 4.75 per cent between October 9 and October 13.
There are several factors at play with CSL’s share price movements, including investor concerns about the group’s margins and the competitive threat of generic products. But the wobble served as a reminder to Australian shareholders about one of the hottest debates playing out on global markets right now: will Ozempic, and products like it, end up reshaping sectors, or entire economies?
Researchers and investment analysts are starting to try and forecast the long-term implications of Ozempic and similar products in a class of drugs commonly called glucagon-like peptide 1 (GLP-1) agonists. These drugs have been used to treat type 2 diabetes, but have also been in headlines recently because of their impact on weight loss.
Stock watchers are asking if industries from healthcare to fashion and fast food will be impacted if these products become an entrenched part of our daily lives.
Before CSL’s brush with the drug, sleep and respiratory group ResMed felt the blowtorch of investor angst over what would happen if its customers embraced the weight-loss benefits of these products.
In September, Macquarie cited Ozempic-style drugs for the 26 per cent plunge in ResMed’s share price over the previous three months to $23.83. The stock was trading at about $22.65 this past week.
Macquarie says about 60 per cent of moderate to severe adult Obstructive sleep apnea (OSA) cases are attributable to obesity.
“As such, the uptake of GLP-1 RA has the potential to reduce the number of patients with OSA, impacting growth for ResMed,” said Macquarie, which downgraded its growth estimates for ResMed on this basis.
So did UBS analysts led by Laura Sutcliffe.
“The GLP-1/weight loss thesis has now become firmly rooted in the ResMed story,” she said.
“Our analysis of existing data for GLP-1s concludes that there is a good chance that newer GLP-1s will be able to offer enough weight loss that some patients will be able to stop using CPAP [breathing assistance] machines. In time, we think 14 per cent of ResMed’s volume could be lost.”
ResMed tried to placate the market last month with a presentation at a US healthcare conference.
“When you look at our patient population, you’ll see a significant factor of obesity, but it’s not a single all-linear relationship between obesity and sleep apnoea,” said ResMed’s chief operating officer, Rob Douglas.
Healthcare hasn’t been the only sector to experience Ozempic-fuelled turbulence.
Alcohol and snack-related stocks have dropped on US markets over the past couple of months as analysts try to work out the impact of the drugs on demand for processed food, given their role in reducing the appetite of users.
Shares in Kellanova, the company that makes snacks such as Pringles, hit year-lows in the US this month. The group’s chief executive, Steve Cahillane, said the company was watching the popularity of Ozempic. “We’re by no means complacent,” he told Bloomberg.
Closer to home, ASX-listed pizza maker Domino’s says it’s also watching the rise of appetite-suppressing drugs, and says it will “adjust our products and services accordingly” if needed. But chief executive Don Meij is upbeat about the enduring appeal of his company’s products.
“From what we have observed, consumers may be eating less but they still want to enjoy a treat throughout the week. Not only is Domino’s the ultimate treat, but pizza is also the meal of choice for many group gatherings and celebrations, and we don’t see that changing anytime soon,” he said.
And while Ozempic has captured the imagination of sharemarket analysts in recent months, there are several unknowns about the future of these types of products, particularly in the Australian context.
The potential for Ozempic and other weight loss drugs to reduce demand for sleep apnoea is being hotly debated by investors.Credit: Sipa USA
It’s not yet known how many consumers will choose or be able to afford to buy this group of drugs for the long term, or whether the use will be enough to change trends in sectors such as food production. Manufacturer Novo Nordisk told Australia’s Therapeutic Goods Administration (TGA) last month that supply of the drug would be limited for 2023 and into 2024.
Shares in Novo Nordisk are up by 51 per cent year-to-date, while Eli Lilly, which makes a similar product called Mounjaro, are up 66.4 per cent.
Portfolio manager at Platinum Asset Management’s International Health Sciences Fund, Dr Bianca Ogden, urges caution around the flurry of enthusiasm about these products, and the companies behind them.
“I think you always have to keep a level head – these hypes can go for a while, but they can quickly move on to the next thing,” she said.
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