The (Exaggerated?) Far-Reaching Effect of Miracle Weight-Loss Drugs

Suddenly, it’s as if everybody can have their cake and eat it too….

But can they, really?

The ripple effect of the potential impact of the new miracle weight loss drugs is reaching a point of – to be blunt – absurdity.

Just yesterday Bloomberg quoted a Walmart (WMT) executive as saying the new miracle weight-loss drugs are having an effect on how people shop for food.

Citing "anonymized data" from the company's grocery and pharmacy operations, an executive was quoted as saying...

We definitely do see a slight change compared to the total population, we do see a slight pullback in overall basket. Just less units, slightly less calories.

My first reaction when I saw this was that it was a convenient excuse for a sales decline.

But the reality is that Walmart and other food retailers that also have pharmacies can track what kind of food people buy.

There are already reports and studies on how the weight-loss drugs, originally devised to treat diabetes, will impact the food industry...

Salty snacks, soft drinks, and baked goods are all, in theory, at risk. As recent report by Morgan Stanley predicted...

As more people in the U.S. use obesity drugs, overall consumption of carbonated soft drinks, baked goods, and salty snacks may fall up to 3% by 2035.

It's impossible to say what will happen 12 years from now, of course. And as my friend Paul Kedrosky of SK Ventures put it on X, formerly Twitter...

This is gonna be like Spy vs. Spy, caloric density edition. Just watch as food companies spend zillions searching for caloric packaging to end-run GLP-1s.

The reality of the situation was summed up in a CNBC article, which quoted a consultant from Accenture as saying...

My prediction is, before the end of the decade, we will have a healthy Oreo that can be put on a plate with an old one, and consumers won't be able to tell them apart – and that will be a good thing.

Except, there will never be such a thing...

I'm old enough to remember when Nabisco's SnackWell's cookies would save the day. They were fat-free and lower-calorie and, as I recall, the Vanilla Cremes were quite tasty. But American consumers being American consumers, the fact that each cookie was fat-free and lower calorie meant they simply ate more... and they felt it wouldn't hurt them because the cookies were fat-free. (Note that SnackWell's have been discontinued.)

That's because there's no such thing as a healthy cookie, let alone a healthy Oreo. And there will never be one.

That's the thing with the sudden, almost out-of-nowhere success of these weight-loss drugs...

Originally designed as an insulin alternative for diabetics, Ozempic and the rest of them may very well be the most successful new drug launch since statins...

Their surge and popularity have created the ultimate fat tail of predictions, as analysts of all sorts of are jumping on the bandwagon to forecast what the ultimate impact of these drugs will be... not on the manufacturers, but other industries.

One analyst has gone so far as to predict that United Airlines (UAL) could save as much as $80 million per year as people get skinnier.

And that's just for starters...

Exercise equipment, gyms, fitness – all forecast to fumble if not fail.

Worse, suddenly seemingly the stocks of virtually every med-tech company – no matter what it makes – appears to have received a GLP-1 penalty...

After all, if everybody will take a pill and be skinny, there won't be any more of these kinds of health issues (barring something genetic, of course)...

As a result, so many people supposedly will be cured of heart disease and high blood pressure that companies tied to their treatment will see sales collapse. Fewer heart valves will need to be replaced. (There is no conclusive study on that, but the stocks of the heart valve manufacturers look as though there is.)

The truth is, this is classic Wall Street going all-in on a theme, like AI – with investors selling now, asking questions later.

In this case, we don't even know what the full risks of GLP-1s will be... or how many people who are taking GLP-1s for weight loss will agree to be on the drugs (forever?)... or risk stopping and becoming fatter, faster.

As Nature Medicine recently cautioned (emphasis added)...

The longest studies reported to date have less than 2 years of follow-up. Longer-term studies are needed to understand the full spectrum of benefits and ultimately to determine whether use of these drugs improves quality of life and longevity... It is equally important that we understand and learn to manage the full range of potential drug-related or weight-loss-related side effects.

And by the way in case you think I’m overly cynical: I hope these drugs are a sustainable success.

In the inaugural issue my Empire Real Wealth newsletter last September, I recommended buying shares of drugmaker Novo Nordisk (NVO) – in large part because of the potential of the weight-loss drugs.

The stock is up 80% since then... and I continue to be bullish on Novo because the long-term potential, barring any unforeseen issues, remains exceptional. Americans, after all, want to be skinny, and a miracle pill beats exercise, even if exercise has residual health benefits unrelated to weight control.

But I'm also a realist, and this situation with the weight-loss drugs fits in the too far, too fast bucket...

These stocks are priced and viewed as if nothing can go wrong... yet plenty can – especially given how little is known about the long-term impact.

You just know that one day there's a good chance some medical journal will come out with some story about some study that spells out the reality that nobody wants to hear.

After all, anything that sounds too good to be true probably is, right?

With that in mind, since everybody else is making a prediction about these drugs, I will too...

The battering many of many of these med-tech stocks because of the potential of these drugs – at some point in the distant future, mind you – has created the perfect setup for a revival of the best of them.

Selling down these stocks as if their fates is sealed is like saying every company involved in internal combustion engines is headed for the junk heap due to the shift to electric vehicles. They're not... certainly not yet.

The same goes for the med-tech space.

There's no question the weight-loss drugs will have profound impact, but that's assuming everything goes according to plan.

News flash: It never does, and certainly not this early in this game or any game.

There’s no question these drugs work. It’s just that there are still lots of questions to be answered.

In the meantime, cake anyone?

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DISCLAIMER: This is solely my opinion based on my observations and interpretations of events, based on published facts and filings, and should not be construed as personal investment advice. (Because it isn’t!)

Feel free to contact me at herbgreenberg@substack.com. You can follow me on Twitter (X) and Threads @herbgreenberg.