The trend of 'drug-induced weight loss' is sweeping the globe, causing a major shock in the stock market.

With the increasing popularity of GLP-1 weight loss drugs, millions of people in the United States are expected to collectively shed billions of pounds in the next decade, leading to a reshuffling of trillions of dollars in stock market funds.

In other words, the stock market is being disrupted by "miracle weight loss drugs".

Under the "miracle drug" effect, Novo Nordisk, holding Wegovy and Ozempic, and Eli Lilly, which produces Mounjaro, both in the GLP-1 drug track, are considered the biggest winners. Insulin, heart valves, food, and many other pharmaceutical companies and manufacturers need to be cautious.

Weight loss drugs leading the stock market

With the increasing influence of GLP-1 weight loss drug companies, they have become the new leaders in the stock market.

Novo Nordisk, which holds Wegovy and Ozempic, is now the largest company in Europe, with a market value of up to $433 billion. The rapid growth of this Danish pharmaceutical giant has even directly affected the exchange rate and interest rate of the Danish krone.

At the same time, Eli Lilly, which produces the GLP-1 drug Mounjaro, is now the ninth largest company in the S&P 500 index, with a market value of $568 billion.

According to Punit Mehta, Senior Managing Director of Guggenheim Partners, a financial services group, this weight loss drug frenzy may trigger more consolidation in the industry, especially in biotechnology and pharmaceutical companies.

He said to the media on Tuesday:

I believe this will ultimately lead to more (merger and acquisition) activity, and I think this market is almost forming right in front of us.

How big is this market? According to the latest estimates, total healthcare spending in the United States is expected to reach $4.4 trillion in 2022.

"Miracle drug" effect, some rejoice while others worry

Originally used as a treatment for diabetes, GLP-1 drugs have not only become legendary in the field of weight loss but also have proven effective in treating heart disease, kidney disease, dementia, and addiction to smoking and alcohol. Therefore, they are hailed as "miracle drugs" by the public.

There is no doubt that GLP-1 will have an impact on the existing companies in these fields.

For example, the results of a drug trial announced by Novo Nordisk on Tuesday showed that Semaglutide (the active ingredient in Ozempic and Wegovy, the type 2 diabetes drug and "miracle weight loss drug") may be very helpful in treating kidney failure in diabetic patients.

After the news was announced, the shares of the world's largest kidney dialysis providers, DaVita and Fresenius Medical Care, both plummeted by more than 10% on the same day. Meanwhile, the stock prices of Novo Nordisk and Eli Lilly soared.The stock prices of non-invasive ventilator manufacturers have plummeted by over 40% in just a few months, as research suggests that weight loss can help reduce the reliance of sleep apnea patients on non-invasive ventilators during sleep.

Preliminary data shows that GLP-1 drugs can alleviate the condition of type 2 diabetes patients, leading to a sharp decline in the stock prices of companies producing insulin delivery systems and diabetes monitoring devices.

Among them, insulin pump giants Tandem Diabetes Care and Insulet have suffered the most significant drops, with cumulative declines of 61% and 54% respectively since the beginning of this year.

In addition, drug trial data shows that GLP-1 drugs can reduce the probability of heart attacks, which has also dragged down the stock prices of manufacturers of heart valve-related devices.

The impact of Ozempic has also spread to food and beverage companies, as data suggests that GLP-1 drugs help patients feel full faster, aiding in weight loss.

A survey conducted by Morgan Stanley on 300 patients using these weight loss drugs showed a 20% to 30% reduction in daily calorie intake. Retail giant Walmart recently issued a warning, stating that consumers taking Ozempic, Wegovy, and other weight loss drugs have reduced shopping demands.

The resulting negative sentiment has dragged down the stock prices of food retailers such as Walmart and Costco, as well as food companies like Coca-Cola, PepsiCo, and McDonald's.

Will Ozempic also shake the economy?

It is evident that the rise of GLP-1 drugs will have a significant chain reaction on the stock market and the economy.

Some analysts believe that productivity may increase significantly as a result, and the healthcare industry may save a substantial amount of costs. Even airlines may become more efficient due to fuel savings from lighter passengers.

Goldman Sachs estimates that by 2035, obesity will cause a global GDP reduction of $4 trillion. However, if enough people start taking these drugs, the situation may change.

According to Trilliant Health's analysis, as of the end of 2022, 9 million people in the United States are taking GLP-1 drugs, and this number is expected to soar. Bank of America Merrill Lynch estimates that by 2030, 48 million Americans will be taking GLP-1 drugs.The Future of GLP-1 Drugs

Eli Lilly's GLP-1 drug, Mounjaro, has been approved for type 2 diabetes and is still awaiting FDA approval to expand its indications to obesity. Analysts widely believe that the drug will be successfully approved.

Novo Nordisk and Eli Lilly are also developing oral GLP-1 drugs (currently only available through injections), which may attract patients who are afraid of injections.

It is worth mentioning that insurance may be the biggest catalyst for the rapid promotion of these drugs. Currently, the cost of these drugs can be as high as $1,000 per month without insurance. Although the reimbursement scope for diabetes patients is wider, many insurance companies are unwilling to reimburse for such weight-loss drugs.

As GLP-1 drugs continue to demonstrate more potential beyond weight loss, health insurance companies may be more inclined to start providing expanded reimbursement for these drugs, greatly reducing the cost for patients.

Goldman Sachs stated in August:

"Clinical trials have shown that these drugs can reduce the risk of heart attacks and strokes. These drugs also appear to be treating heart disease by combating obesity, which is a leading cause of death. This suggests that insurance companies need to reconsider their practices."

JPMorgan Chase predicts that GLP-1 drugs will become one of the best-selling drugs in history, with annual sales reaching $100 billion by 2030.

If these sales estimates are accurate, the stock market and the economy will experience profound impacts in the short and long term.