As they do every summer, publicly traded companies posted their second-quarter results while Americans were baring their bodies on the beach. But this year, the timing was apt. On several earnings calls in August, chief executives reassured investors that the Ozempic revolution had not left them in the dust, and that they could somehow share in the blazing success of new diabetes and weight loss drugs.
“It puts us in a good position to be a solution for those who are on the drugs,” said Dan R. Chard, the chief executive of Medifast, which makes diet products like shakes and protein bars, adding: “They’re looking for guidance.” He told analysts this even while explaining that new-generation drugs had helped pummel earnings, down 34.7 percent year on year.
“We will continue to study this,” Michael Johnson, the chief executive of the nutritional supplement maker Herbalife, told investors. “And when we see an opportunity to capitalize on it, we will.”
In theory, that opportunity — both for making profits and for losing fortunes — could be vast not only for the companies behind these drugs but also for some in completely different industries.
Known as GLP-1 drugs, the medications are already driving big profits. Novo Nordisk makes both Ozempic, which has been approved only for Type 2 diabetes, and its close relative Wegovy, which has been approved for weight loss. They mimic a glucagon-like peptide that regulates appetite in the brain, leaving people feeling sated for hours. Together, they helped send Novo’s earnings rocketing up 32 percent in the first half of this year, and Novo’s market value is now larger than the entire Danish economy. Eli Lilly’s sales surged 28 percent in the second quarter, thanks to another diabetes drug, Mounjaro, which the Food and Drug Administration may approve for weight loss this year.
And the full potential isn’t even clear yet. The market for weight loss drugs is huge: There are roughly 750 million obese people worldwide, including about 42 percent of adults in the United States, where obesity-related illnesses incur billions of dollars in health care costs each year. But Novo says GLP-1 drugs could eventually have other uses, like helping prevent cardiovascular disease among obese adults. There are signs they could treat addiction and even Alzheimer’s, too.
“The market potential is very, very significant,” Novo’s chief financial officer, Karsten Knudsen, told me when I visited the company in June. “We’re operating in kind of unusual territory.”
Diet companies are bracing for disruption. For decades, weight loss companies have relied on branded, prepackaged meals and lifestyle programs.
The ripple effects are widening. Retailers like Walmart, Kroger and Rite Aid say GLP-1 prescriptions are bringing more people into stores, where they make other purchases. Walmart’s chief executive, Doug McMillon, told analysts in August that its executives “expect consumables, and health and wellness, primarily due to the popularity of some GLP-1 drugs, to grow as a percent of total.”
Medtronic’s chief executive, Geoff Martha, said the company had seen a “modest” dip in bariatric surgery, presumably as people opted for weight loss drugs instead. And some analysts believe the drugs could disrupt the American diet.
Still, there is room for other approaches to fighting obesity. “These drugs are game changers, but with an asterisk,” said David Ludwig, an obesity specialist and pediatrics professor at Harvard Medical School. (The drugs come with a long list of side effects.) “Even if you can reduce weight across the population with drugs, it’s not going to eliminate the risks of a poor diet.”
Flush with cash, Novo agrees. “We need to be looking at what’s the next thing,” its executive vice president for commercial strategy Camilla Sylvest, told me. In June, the company launched an obesity prevention unit near Copenhagen, to research how to stop the disease before people need to take drugs to lose weight.