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Why the GLP-1 impact on other industries 'will take years'

The impact of type 2 diabetes and weight loss drugs like Novo Nordisk's (NVO) Ozempic and Wegovy and Eli Lilly's (LLY) Mounjaro and Zepbound are expected to drastically impact demand in a number of industries from food and beverage to health insurance.

An analyst note from Bank of America last year set such expectations, and sent stocks plummeting in those categories. But not so fast, Wall Street: The outlook isn't so dire, according to a new Moody's Ratings report.

"The exposure, which will take years to play out, primarily results from lower demand for various products and services," Moody's said in a statement accompanying the report.

The report follows the tone of an analyst note from JPMorgan earlier this year, which highlighted a more muted outlook for the impact on industries from GLP-1s.


Moody's senior vice president Michael Levesque noted that companies are already taking steps to minimize impact from these injectable drugs — known as GLP-1s due to the hormone in the body they mimic, which helps regulate insulin production and keeps people feeling fuller for longer.

"The rising use of GLP-1 drugs for type 2 diabetes and weight loss contributes to our positive outlook for the global pharmaceuticals sector, helping drive solid 4% to 6% industry earnings growth." But, he added, "the potential widespread use of these drugs by 2030 has negative implications for other industries— including medical devices, food and beverage, restaurants, food packaging and health insurers — but companies are taking steps to limit their exposure."

FOTO DE ARCHIVO. Una imagen combinada muestra una pluma inyectable de Zepbound, el medicamento para bajar de peso de Eli Lilly, y cajas de Wegovy, fabricado por Novo Nordisk. REUTERS/Hollie Adams/Brendan McDermid/Combinación
Future shock? It is unclear how diabetes and weight-loss drugs will impact industries over time. (REUTERS/Hollie Adams/Brendan McDermid/Combinación) (Reuters / Reuters)

The key factor differentiating these newer GLP-1s from prior versions by both companies is the amount of weight loss achieved. Between 15% and 24% of body mass is lost, compared to single-digit percentages in previous formulas. That has been a reason for the increase in uptake and Wall Street’s previous worries about the impact on industries.

The Moody's report, written by a number of analysts from various industries, analyzed two separate potential scenarios.

The first is one in which up to 20 million US adults are using GLP-1s by 2030, a number that includes 12 million diabetes patients and 8 million weight loss patients. That represents 7% of the projected US population. In this scenario, insurance coverage is about as limited as it is today.

The second scenario envisions 30 million adults, or about 11% of the population, is on GLP-1s — split evenly between diabetes and obesity patients. Obesity patients are on the drugs for longer periods of time than in the first scenario and there is greater insurance coverage — currently, patients are on the drugs roughly 12 months at a time, which has been viewed as a major limiting factor, alongside supply constraints.

This larger population scenario assumes more cost and impact to the system and to industries.

But Moody's noted the scenarios also have their limits.

"Our simplistic uptake scenarios have some limitations. In addition to uncertainty around the key variables discussed above, such as insurance and Medicare coverage, the ongoing emergence of data, and competition and pricing, other factors will come into play that cannot be precisely specified at this time," according to the report.

In addition, for businesses like restaurants, it is hard to predict to what degree adults will significantly alter their lifestyles.

The report's authors added, "The degree of lifestyle changes accompanying the use of the weight loss drugs is also unknown. The drug labels generally stipulate the approved indications and dosages are to be in tandem with a reduced diet and increased physical activity. But until greater usage occurs over time, the degree to which these factors occur is not certain."

Anjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBMs, and health policy and politics. Follow Anjalee on all social media platforms @AnjKhem.

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