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— tyler

Fat chance

The last drug investors (and users) were this excited about came with a warning about boners lasting more than 4 hours…

Novo Nordisk's Ozempic and Wegovy are changing the game. The drugs were originally introduced in the US in 2017 as type 2 diabeetus treatments (RIP Wilford Brimley).

But, it turns out, they’re more effective than a steady diet of cocaine and online fat shaming for dropping lbs fast. So, in 2021, the FDA approved the drugs for weight loss.

And that’s approximately the time Ozempic became harder to score than Adderall…

Just how popular is it? Welp, according to one study, 22% of Americans have requested Ozempic prescriptions specifically for weight loss. Which isn’t entirely surprising considering like 40% of Americans are obese…

Novo Nordisk is putting up Pfizer ‘rona virus vaccine numbies. The pharma giant is expecting a 23% increase in sales in 2023. And since Ozempic got FDA approval in June 2021, shares of Novo Nordisk are up 150%.

And nobody is safe (including patients potentially if you look at the laundry list of side effects)…

Entire industries have been getting rekt thanks to the promise of a magic weight loss drug for the masses (er, massives).

RIP fast food

Some investors are convinced that the drugs will be able to suppress American’s insatiable appetite for fast-food and packaged foods. And I would argue that they’ve never actually met the average American who has the self-control of Elon Musk around literally any female of childbearing age.

How convinced are investors that it’s the end times for eating out? Enough to bet against the stocks of giants like McDonald's, Chipotle, and Darden. And I’ve got receipts. Traders added $815M to short positions on restaurant stocks in October.

“Bullsh*t” - people with a brain

Before we go all “Mission Accomplished” on the war against obesity and get our last supper on at McDonald’s, let’s pump the brakes, shall we?

The whole “restaurants are dead” narrative might be a bit overblown. And maybe, just maybe, restaurants and food sellers have been using this as an excuse for their shortcomings.

Walmart’s US CEO warned earlier this year that shoppers using the drugs are purchasing “less units, fewer calories.” This, obviously, had investors Depends in a bunch. But, allow me to poke a hole in that narrative: less than 1% of the population of the US is actually prescribed one of these drugs.

Plus, you know, there might be another reason restaurants are taking their lumps: inflation. Perhaps you’ve heard of it?

High-interest rates and tightening of consumer spending are currently making the restaurant industry their b*tch. So, blaming it all on weight-loss drugs might (read: is) be a bit of an overreach.

Ok, but the healthcare industry is definitely going to be impacted, right?

Novo Nordisk’s R&D team is putting up scientific discovery stats that the Nobel Committee can’t ignore. This week alone they found the active ingredient in Ozempic helps prevent heart attack and stroke.

For those of you keeping score at home, that means Ozempic can treat diabetes, assist with weight loss, and prevent heart attack and stroke. Oh and did I mention that there are reports it can counteract Alzheimer’s, Parkinson’s, addiction, alcohol use disorder, liver disease, and possibly cancer?

So, it probably shouldn’t come as a shock that the only thing that scares healthcare investors more than Ozempic and Wegovy is ambulance chasers bringing malpractice suits.

Case in point: last month dialysis service provider DaVita got rekt on news that Ozempic could fight off kidney disease caused by diabetes. It closed down nearly 17% on the day the report dropped.

But not unlike investors’ fears about the premature death of fast food, this too appears to be an overreaction. DaVita clapped back soon after with its own data indicating that only 10% of chronic kidney disease patients would be eligible to use the Novo drugs.

As for the fitness industry…

Peloton has 99 problems (literally killing people and the end of stay-at-home orders comes to mind)... but it turns out Ozempic might not be one of them. You see, analysts think that in the short term gyms and fitness equipment makers could take their lumps. But longer term, Planet Fitness, and the like will actually benefit... mostly because humans are narcissists. The expectation is that Ozempic will be the gateway drug to users giving a damn about their body.

The thesis is that Ozempic users will head to the gym to get their sculpt on/find other hard-bodied gym rats to bump uglies with. In fact, a Morgan Stanley survey showed that weight loss drug users showed a two-fold increase in hitting the gym.

FFS, Life Time Fitness even said the gym is piloting a program that would allow certified staff to administer the injectables and create a customized workout program. Steroid users gotta be big mad that their “injectables” are banned from the locker room.

There could be another winner…

Weight loss platforms like Weight Watchers and Noom have said f*ck it and traded counting calories for slinging Ozempic. Define “pivot.”

Back in March Weight Watchers, er, WW, bought telehealth service Sequence, which, spoiler, can prescribe Ozempic and Wegovy. WW was not about to be Blockbuster in the Blockbuster vs. Netflix story.

You’re not going to believe this but WW is up 66% YTD.

Of course, there’s one thing that can’t be denied…

And that is Novo Nordisk’s glow-up.

The little pharma that could has gone from humble insulin manufacturer to the belle of the ball. Did I mention Novo Nordisk briefly became Europe's most valuable company? Sucks to suck, Bernard Arnault…

Ya’ll got any more of that drug money?

Eli Lilly has entered the arena. Last week Eli Lilly got approval for its own blockbuster diabetes drug to be marketed for weight loss.

Interestingly enough, shares are actually down more than 4% since the announcement. Which is probably because the weight loss wonder drug approval was “baked in.” The stock is up more than 60% YTD.

Tyler’s take…

There’s a fat chance that Ozempic and Wegovy are going to erase anything besides stubborn belly fat that prevents users from seeing their genitals in a standing position.

Humans are gonna human. People are going to eat fast food and buy packaged goods. Because let’s be honest, washing down Cheetos with a Mtn. Dew tastes a lot better than skinny feels. And short of everyone spending $2M a year to drink the blood of their younger relatives, humans will face medical issues that require healthcare providers to turn to expensive medical devices.

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Analyst takes….

Don’t take my word for it. Here’s what some of the smartest guys in the room have to say…

• Ikram Triki (Drugs Intelligence Analyst at GlobalData) on the growth of Ozempic in the US: “It is forecast that Ozempic will sustain its sales growth over the next five years, with an expected annual sales figure of $17 billion in 2029. This represents a significant 83% increase in sales during 2022–29, demonstrating a compound annual growth rate (CAGR) of 9%."

• Brian Abrahams (Senior analyst in equity research at RBC Capital Markets) on weight loss drugs’ societal impact: "I'm not saying that these drugs aren't going to be really important. But I think that concerns around the impact that they're going to have on societal consumption and lifestyle dynamics are probably completely predicated on the most optimal clinical trial results and in the real world that's probably something that would be exaggerated."

• Mike Matson (Needham) on medical device demand: "If GLP-1s lead to a decline in obesity rates, we think it could eventually result in decreased demand for procedures involving medical devices." Keyword: “eventually”

The watch list…

Stocks you might want to keep an eye on…

Big pharma

• Novo Nordisk (+48.06% YTD): All gas. No brakes.

• Eli Lilly (+62.12% YTD): A new challenger is approaching…

• Pfizer (-41.63% YTD): Imagine being the biggest big pharma and not having a blockbuster weight loss drug on your roster. Expect that to change…

• Astra Zeneca (-7.50% YTD): If at first you don’t succeed… (Astra Zeneca has had issues developing a weight loss drug)

Medical devices

• Dexcom (-8.51% YTD) and DaVita (+28.49% YTD): Dialysis is the SaaS business of the healthcare industry.

• Intuitive Surgical (+14.93% YTD): These guys make robotic surgery systems (think: Flippy but for bariatric surgery).

• Abbott (-9.15% YTD): The medical device maker promised that their sales won’t be impacted by weight loss drugs. Do with that information what you will…

Restaurants (which seems like a stretch for McDonald’s)

• McDonald’s (+4.32% YTD), Chipotle Mexican Grill (+57.70% YTD), and Starbucks (+4.70% YTD): Shorts about to get rekt worse than Michael Burry did on his latest bearish bet.

Sleep apnea treatment

• Zimmer Biomet (-12.26% YTD) and ResMed (-28.77% YTD): Turns out you might not snore as much after losing a few lbs…

Fitness and gyms

• Planet Fitness (-17.20% YTD) and Life Time Group Holdings (+26.87% YTD): Ozempic makes it a lot harder to say “I need to lose a few pounds before I hit the gym.”

• Weight Watchers (+77.30% YTD): Two words: pick and shovel.

The catalysts…

Here’s what’s driving the market…

• Clinical trial results & regulatory approval: If you’ve ever invested in a penny stock biotech, you know that there are three things that move the needle: 1) clinical trial results 2) FDA approval 3) a big pharma kicking the tires

• Insurance: Fun fact: America’s healthcare system is a complete sh*tshow. And these drugs are expensive af. That means insurance coverage will impact demand and usage of these drugs.

• Innovation and new product launches: Allow me to teach you about supply and demand. New drugs hitting the market could wreak havoc on the current players. Remember the race to build a ‘rona vaccine?

• Technological advances: AI and personalized meds could lead to more effective or tailored weight loss treatments. Did you really think I wasn’t going to mention AI once?

Water Cooler Talking Points…

Today, I’ll leave you with one thing NOT to say at the Thanksgiving dinner table…

• “Have you considered Ozempic, [insert relatives name here]?”

Recommended reading…

Enjoy the rabbit hole…

• Selloffs on Weight Loss Drug Fears Are an ‘Overreaction,’ Novo CEO Says (Read on Barron’s)

• AstraZeneca Is Trying to Make an Ozempic Competitor (Again), but Don't Rush to Buy the Stock (Read on Motley Fool)

• Why Is It Ozempic? What’s a Zepbound? A lot goes into naming new drugs. Rule No. 1: Don’t be “promotional.” (Read on Slate)

• Forget gym memberships. Employees want Ozempic in their benefits packages (Read on LA Times)

• How WeightWatchers is joining the cultural shift on obesity (Read on Axios)

Does this look like the face of a guy you should take financial advice from?

No, it’s the face of a God-fearing family man with sh*t-for-brains. So, act accordingly...

This is not financial advice. Nothing in this newsletter is an investment recommendation. All content is created for entertainment, educational, or informational purposes only. Do your own research, or do yourself a favor and hire a professional.