Will GLP-1 Weight Loss Drugs Allow Airlines to Save Millions of Dollars and Tank the Fast Food Industry? Here are the Numbers So Far

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GLP-1 weight loss drugs and the ongoing advances in the AI sphere are currently two of the biggest thematic plays that Wall Street is relentlessly championing, facilitating a phenomenal influx of capital in companies that are seen as beneficiaries of the upheaval that the proponents of these nascent technologies argue is just around the proverbial corner. Recently, GLP-1 drugs from the likes of Novo Nordisk (NVO) and Eli Lilly and Company (LLY) have been billed as a blessing in disguise for the airline industry and a harbinger of doom for the fast food sector. Can a single drug really induce such epochal trends? Let’s look at the underlying numbers.

Glucagon-Like Peptide-1, or GLP-1 for short, plays an important role in regulating hunger. Novo Nordisk sells its Semaglutide GLP-1 drugs under the Ozempic and Wegovy labels. Eli Lilly and Company, on the other hand, sells its Tirzepatide GLP-1 cocktail under the Mounjaro and Zepbound labels. Do note that in addition to the GLP-1 hormone, Eli Lilly and Company’s Tirzepatide offering also leverages Glucose-dependent Insulinotropic Polypeptide (GIP) hormone to better regulate blood sugar levels. Novo Nordisk’s monthly course of Semaglutide GLP-1 cocktail retails at around $1,300 in the US. On the other hand, Eli Lilly and Company sells its Zepbound weight loss drug at around $1,060 per monthly dose.

So, how do these GLP-1 drugs induce weight loss? Well, these drugs stimulate the release of insulin in the pancreas, block the unhelpful release of glucagon after meals to prevent excess glucose from entering the bloodstream, and slow gastric emptying to reduce the overall food intake. Concurrently, GLP-1 receptors also suppress the brain’s stress response and reward/reinforcement mechanism to increase the feeling of satiation. As second-order effects, these drugs also purportedly reduce alcohol and substance abuse disorders.

As for the supposed efficacy of GLP-1 drugs, Nono Nordisk cited the results of a study a few weeks back to claim that its Semaglutide-based offerings reduce the risk of death from heart-related complications by 20 percent while also inducing significant weight loss. In response, Eli Lilly and Company recently touted another study that showed increased efficacy of its Tirzepatide-based offerings, with nearly half (42.3 percent) of the eligible patients able to shed 15 percent or more of their body weight with Tirzepatide as opposed to just around 20 percent of the eligible patients able to achieve this magnitude of weight loss with Semaglutide.

Capital Group: “Last year it was all about artificial intelligence and how large language models will change the world. Now, we are factoring in both the short- and long-term effects of GLP-1”

This brings us to the crux of the matter. As the GLP-1 mania takes over the market, it has prompted a number of analyses portending the imminent demise of the fast food industry, a veritable windfall for airlines, and a substantial reduction in health insurance expenses. American Airlines saved $40,000 in one year in the 1980s just by removing the lone olive in its salad. Given the industry’s meteoric sensitivity to weight-induced savings, it stands to reason that airlines will inevitably end up as one of the biggest beneficiaries of the GLP-1 revolution.

Capital Group recently published a research report to quantify at least some of the proposed changes that GLP-1 proponents claim are about to usher in a revolution.

GLP-1

 

According to Capital Group researchers, the snacks, candy, and prepared food segments are set to witness the largest relative decline in consumption. At the other end of the spectrum, frozen foods, dairy, beverages, and pasta segments are expected to see a more muted dampening effect on their relative consumption.

Morgan Stanley recently estimated that GLP-1 drugs can reduce the caloric consumption of the eligible population by a whopping 20 percent.

GLP-1

Additionally, Capital Group estimates that the Total Addressable Market (TAM) of these GLP-1 drugs is well over 2 billion people. This supports the projection that the annual sales of these drugs will hit the $100 billion level by 2030.

Michael Beckwith, a portfolio manager at Capital Group, noted:

“Executives in nearly every industry are being asked about the impacts of these weight loss drugs on their businesses.”

Capital Group also quotes Henry Wu, a healthcare analyst, who says:

“The drugs will likely change disease progression for diabetes and obesity and other associated co-morbidities in heart, liver and kidney disease.”

One of the biggest uncertainties around the proliferation of GLP-1 drugs is their high price point. If these drugs are to realize their full transformative potential, the role of health insurers as significant subsidizers can’t be ignored. And it is here that governments and healthcare regulations come into the picture.

Do you think GLP-1 drugs will be as transformative as some of their biggest proponents claim? What are your thoughts on Amara’s Law that states humans tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run? Let us know your thoughts in the comments section below.

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