Initially launched in 2005 to treat type 2 diabetes, GLP-1 drugs such as Ozempic, Wegovy and Mounjaro have evolved into pioneering treatments in the battle against obesity and metabolic disorders. Pioneered by companies such as Novo Nordisk and Eli Lilly, this segment of the pharmaceuticals market with $22.5 billion of annualised sales is revolutionising industries well beyond healthcare, with dramatic consequences.
The increased uptake of GLP-1 is changing the size, shape and lifestyles of millions of people across the globe. With it, a discernible ripple effect across multiple sectors, from technology, sport and leisure to food and beverages, is taking place. For some companies, there are unforeseen economic benefits but others face significant disruption. Before this ripple becomes a tsunami, businesses and investors must be ready to capitalise on all the second-order repercussions. This is a fertile hunting ground for disruptive investing – the polarisation of winners and losers will be multi-fold.
What is GLP-1 and how does it work?
GLP-1 drugs mimic the natural GLP-1 hormone released after eating, helping regulate blood sugar and appetite. By stimulating insulin release, slowing digestion and reducing hunger signals, they address both diabetes management and chronic weight issues.
GLP-1's economic impact – greater than AI?
Morgan Stanley estimates that 24 million Americans could be taking GLP-1 drugs by 2035. Scott Galloway, professor of marketing at the NYU Stern Business School, suggests this health phenomenon could have a bigger economic impact on the US than AI. The statistics speak for themselves, with GLP-1 drugs potentially reducing the $1.7 trillion annual cost of treating obesity-related illnesses by 50-90%. Within the workforce, Goldman Sachs suggests reduced obesity-related absenteeism could unlock $1.2-$2.4 trillion in annual GDP gains by 2035 and save healthcare systems an estimated $200 billion annually. At a micro level, users' changed behaviours and increased participation in social/leisure activities (for example, 5km park runs or circuit racing such as HYROX) have the potential to stimulate local economies.
Winners and losers in the GLP-1 revolution
The rise of GLP-1 is expected to significantly affect many industries ranging from fast food to healthcare. Big pharma and telemedicine clearly benefit from this, while the second order benefits create more nuanced opportunities and challenges for investors. For example, the wave of healthier lifestyles fuelled by GLP-1 drugs is poised to propel the sports and leisure industry into a new era. As more people lose weight, gain confidence and embrace physical activity, their appetite for activewear and subscriptions to gyms, fitness studios and health spas is likely to increase.
In the same vein, the rapid weight loss experienced by GLP-1 users and the issue of the so-called 'Ozempic face’ are likely to prompt increased interest in cosmetic and medical aesthetics, from body sculpting to skin tightening procedures and beyond. For clothing manufacturers, the rise of the body-conscious consumer may result in a major shift in spending from accessories to clothing, with purchasers choosing clothes that fit better and make them feel good.
Life insurance companies that cover mortality risk could benefit from their clients' longer life spans and a reduction in healthcare claims and costs associated with obesity-related illnesses.
While traditional weight loss programmes, bariatric surgery procedures and diabetes treatment providers are the obvious losers, the medical device sector faces major challenges. Forecasts indicate a decrease in the need for surgical procedures such as knee replacements, often caused by complications related to obesity. One post-surgery study in the UK showed there was a 43% reduction in knee replacement revisions where GLP-1’s led to a greater than 10% reduction in weight.
Food and beverage industry set for significant second order disruption
One sector under significant future pressure will be food and beverages, with increasing numbers of GLP-1 users changing their habits of a lifetime. Research from Cornell University and Numerator showed that households with at least one GLP-1 user reduces grocery spending by 5.5% after six months. Looking to improve their food choices, 62% of users prioritise nutrient-dense foods over highly processed and sugary snacks and the annual calorie intake per user has dropped by 8% to 12%. Companies such as Kellogg and Pepsico are already experiencing revenue declines, and US grocery behemoth Walmart has reported a surge in noticeably smaller grocery baskets. The industry will almost certainly need to innovate and adapt, offering increased lines of healthier, low-calorie products and focusing on premium and functional beverages. By the same token, restaurants will also be impacted, with many looking to revamp their menus to include healthier options and small-plate dishes.
The sugar market is preparing for significant changes. Doon Insights forecast a 65% reduction in the consumption of sugary drinks by those taking GLP-1s, and Morgan Stanley forecast an overall reduction in US sugar consumption of 3% by 2035 in the US, reversing the long-term trend of increased use. With GLP-1 also causing the suppression of alcohol cravings, manufacturers are already responding to a shift in consumer behaviour by increasing investment in no and low-alcohol beverages.
Conclusion
The impressive success of GLP-1 drugs marks a significant advancement in healthcare, presenting numerous opportunities for businesses to adapt and thrive in this changing environment. These drugs have the potential to be a transformative force for good in healthcare, the economy and society as a whole.
Businesses that promote healthier, active lifestyles and personalised wellness are more likely to succeed, while those that rely on high-calorie consumption or sedentary habits may encounter challenges.
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