In recent times, significant corporations have witnessed a concerning trend in their stock prices, a phenomenon caused by a most unexpected catalyst: Ozempic, the groundbreaking weight-loss drug.
Notable cases of this financial turbulence include the 6.3 percent decline in CSL shares just last week, and an even more dramatic 36 percent drop in ResMed shares throughout August and September.
The common thread? Ozempic.
CSL, an Australian biotechnology giant, acquired Swiss pharmaceutical company Vifor for a staggering $18.2 billion last year. A part of Vifor’s focus is on treating kidney disease. However, when Novo Nordisk, the developer of Ozempic, announced the discontinuation of a trial testing Ozempic’s efficacy in treating kidney failure in diabetes patients due to its imminent success, CSL lost a staggering $7.7 billion in market value the very next day.
ResMed’s situation is more straightforward. Sleep apnea is more prevalent among overweight individuals, leading to higher demand for their sleep apnea treatment products. Consequently, the surge in Ozempic sales is poised to dent ResMed’s profits, leading to a loss of over $6 billion in market value since the beginning of August.
These concerns extend far beyond the Australian market, with various companies now apprehensive about the impact of semaglutide, the active ingredient in Ozempic, also known as GLP-1.
Semaglutide, developed by a team of researchers at Novo Nordisk in 2012, is a peptide akin to GLP-1, a hormone that regulates insulin production, reduces appetite, and slows digestion. Novo Nordisk markets semaglutide under various brand names, including Ozempic, Rybelsus, and Wegovy.
Walmart’s US CEO, John Furner, recently revealed that data analysis from their pharmacies and grocery lines demonstrated that Ozempic users buy less food, aligning with the drug’s weight loss objectives.
Even snack food giant, Kellanova’s CEO, Steve Cahillane, expressed vigilance, stating they would evaluate the impact of Ozempic on their business and take mitigating measures if necessary.
A Wall Street Journal report highlighted that food manufacturers like Campbell Soup and Conagra Brands are fielding inquiries from investors about the potential influence of these drugs, and they are actively studying consumer behavior to formulate responses.
The repercussions of Ozempic’s popularity extend beyond food. A recent study with mice subjects found that GLP-1 drugs, such as Ozempic, reduce nicotine intake and rewards. This, in turn, could potentially threaten sales for major alcohol brands like Anheuser-Busch and tobacco manufacturers like Altria and Philip Morris.
Nevertheless, it raises questions about whether large shareholders of food, alcohol, and tobacco companies, who often overlap with drug company investors, may eventually request a slowdown in the development and marketing of drugs that reduce the consumption of their products.
On the flip side, the booming success of Ozempic may offset the losses experienced by ResMed, CSL, Walmart, and Anheuser-Busch. Novo Nordisk’s major shareholders include BlackRock, Fidelity, Capital Research, and Vanguard, mirroring the ownership structure of other major US companies.
Novo Nordisk’s shares have surged by an impressive 400 percent over the past five years, resulting in the company’s market capitalization soaring to 2.46 trillion krone, or $514 billion, equivalent to the combined value of Australia’s top four banks and CSL.
This phenomenon raises broader questions about the economic and societal implications of a drug that reduces consumption. Food companies invest significant sums in advertising to promote overconsumption, which has contributed to the obesity crisis in the Western world. Consumption forms the bedrock of the economy, with economists meticulously tracking it and celebrating its growth.
Ozempic, administered via a weekly injection, curtails calorie intake by around 20 percent. Projections suggest that by 2035, approximately 24 million Americans will be using it, potentially impacting consumption habits significantly.
However, the chief obstacle lies in Novo Nordisk’s ability to meet the surging demand. Severe shortages are already prevalent, not just in the United States but also in Australia. The Therapeutic Goods Administration has disclosed that Novo Nordisk has cautioned them about limited supply throughout 2023 and 2024, with high demand stemming from off-label use prescriptions.
Despite these shortages, the influence of social media influencers has propelled Ozempic’s popularity, particularly because it aids in weight loss, thus circumventing the need for advertising – unlike the food industry, which relies heavily on calorie-laden promotions.