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The GLP-1 weight loss drug phenomenon has graduated from a largely theoretical solution to the obesity pandemic to a hardcore economic reality with real-world ramifications. Gone are the days when these drugs were posited as merely a single vector in dealing with the worldwide obesity crisis. Instead, the accelerating adoption of GLP-1 drugs is now giving rise to critical commercial tailwinds that are transforming entire economies.
For the benefit of those who might not be aware, GLP-1 drugs can induce significant weight loss by suppressing hunger and regulating the production of insulin and glucose.
Novo Nordisk uses Semaglutide as its proprietary GLP-1 agonist in drugs that are marketed under Ozempic and Wegovy labels, with the former geared toward type-2 diabetes and the latter marketed as a treatment for obesity.
Novo Nordisk’s GLP-1 Drugs Are Transforming the Danish Economy
Ozempic and Wegovy continue to power the Danish economy
In 2023, Danish GDP grew 1.8% (blue). Were it not for the pharmaceutical industry (orange), GDP would have shrunk 0.1% (green)
Since Q4 2022, Pharmaceuticals contributed 1.8% to growth versus 1.4% from all other industries pic.twitter.com/wSUCgm9eVI
— Joey Politano 🏳️🌈 (@JosephPolitano) February 20, 2024
This brings us to the crux of the matter. Denmark’s pharmaceutical industry single-handedly prevented the country’s economy from shrinking in 2023.
What’s more, Danish industrial production is currently at record highs courtesy of the unprecedented boom in pharmaceutical production. Much of this growth is a result of the sharply increasing demand for Novo Nordisk’s GLP-1 drugs, particularly in the US.
The demand for these drugs is so strong at the moment that Novo Nordisk has had to flag supply constraints in its earnings call. Moreover, the company has already earmarked $9.5 billion for new production sites and capacity enhancements, with around $7 billion allocated for various investments in Denmark and a further $2.5 billion tagged for France.
GLP-1 Weight Loss Drugs and the Fast Food Industry
We had noted a while back that the prevailing euphoria around GLP-1 drugs has prompted some financial analysts to start downgrading the long-term demand outlook for fast food giants such as McDonald’s, based on assumptions that 7 percent of the total population in the US would be using such drugs in the next 10 years, with the average caloric consumption of those users declining by around 20 percent.
High end Restaurants seeing less buying as well. Client in the space said check sizes are down as people order less stuff…. Sounds like money to be spent elsewhere https://t.co/5fvb7A25Cz
— Allbullnobear (@allbullnobear8) February 20, 2024
Now, we are getting increasing confirmatory signs. For instance, high-end restaurants are already feeling a pinch. This is not surprising given the high ex-insurance retail price of these drugs, which means that the affluent are currently much more likely to adopt these drugs.
Wall Street is losing faith in Fat Americans.
Truist Securities downgraded Krispy Kreme saying it has a difficult time recommending the stock until the impact of GLP-1 weight-loss drugs becomes more apparent.
— zerohedge (@zerohedge) October 30, 2023
Additionally, Trust Securities analysts have now downgraded the Krispy Kreme stock after factoring in the likely headwinds from these GLP-1 weight loss drugs.