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- The rise of GLP-1 drugs like Ozempic, Wegovy, and Mounjaro could have wide-ranging impacts on the economy.
- Now, Wall Street is highlighting stocks that could be potential winners and losers from the rise of the drugs.
- Analysts suggested restaurants will lose and airlines will win if tens of millions of Americans shed billions of pounds.
The rise of diabetes drugs like Ozempic, Wegovy, and Mounjaro could have far-reaching impacts on a variety of sectors, and investors are scrambling to identify the potential winners and losers.
The GLP-1 drugs have a side effect of helping overweight patients lose as much as 20% of their body weight. And if tens of millions of Americans take these drugs, then billions of pounds could be shed across the country.
Already some losers have been identified, as seen by their plunging stock prices. Medical device companies that focus their treatments on ailments stemming from obesity have been hit the hardest, including companies that make sleep apnea machines, insulin delivery systems, and diabetes monitoring devices.
Meanwhile, potential winners of the GLP-1 craze include fitness and athletic brands, as more Americans get into shape, as well as drug suppliers and distributors.
Recently, Wall Street has identified another potential winner and loser — for surprising reasons.
Potential Winner: Airlines
Jefferies highlighted that because two-thirds of adults are overweight and one-third of adults are obese, there could be significant uptake of the GLP-1 drugs through the end of this decade. And if enough people take them, airlines could see significant savings from fuel costs.
"Weight is a crucial element for fuel efficiency... Airlines' biggest expense is fuel, which has been exacerbated as jet fuel prices have rebounded," Jefferies analysts wrote in a Friday note.
"Airlines have been famous for looking for ways to eliminate weight and costs given the correlation of the weight of an aircraft and the required fuel to support flights. Efforts to take weight out of an aircraft have included everything from carrying less water, to cutting olives from salad, to moving to lower weight beverage carts and shifting to lower weight plates and utensils."
A recent cost-cutting example was undertook by United Airlines in 2018, when it shifted its Hemisphere magazine to light paper, cutting an ounce of weight from each magazine. The collective weight savings of this move was expected to save the company about $300,000 in fuel costs per year, according to the note.
Jefferies said that if the average United passenger loses 10 pounds, it would equate to savings of 1,790 pounds per flight. That would lead to annual fuel cost savings of $80 million based on the average 2023 price of $2.89 per gallon.
Potential Loser: Restaurants
Baird analyst Jeff Johnson told Insider last month that GLP-1 drugs help patients eat significantly less and feel fuller.
And if tens of millions of Americans are eating less, that could be bad news for restaurants. In a Monday note, Mizuho downgraded Toast to Neutral from Buy and lowered its price target to $16 from $30. Toast is a restaurant-tech company that provides point of sale systems to all types of food establishments.
"Longer-term, we believe the rise of GLP-1 drugs like Ozempic for the over ~100 million Americans with Type-2 diabetes and/or obesity could weigh on Toast's volumes. Our base case [price target] of $16 assumes no meaningful impact from GLP-1. Our bear case of $14 assumes double-digit penetration of GLP-1 drugs," Mizuho said.
A recent survey from Morgan Stanley showed that patients who are taking GLP-1 drugs reduced their calorie intake by 20% to 30% on a daily basis, and 77% of respondents said they visited fast-food restaurants less frequently.
"The GLP-1 threat to the restaurant industry and by implication, Toast, is real, in our view," Mizuho said.