Marc Cuniberti Companies that sell snack foods, candy and similar gobbley goodies saw their stocks hammered last week, if not for a few weeks, and it wasn’t because sales were falling off a cliff.
In a monumental shift in investor thinking, and arguably a little premature, it’s the drugs of two pharmaceutical companies that were the cause of the snack food stock rout.
A new class of drug currently in use for diabetes from two pharmaceutical companies, Novo Nordisk’s “Wegovy” and “Ozempic” and Eli Lilly’s “Mounjaro” has been found to cause weight loss unlike any previous drugs before them.
The Novo Nordisk’s products use a compound called semaglutide while Eli Lilly’s Mounjaro uses a drug called tirzepatide.
Where drugs for weight loss were mostly stimulant types which ramped up metabolism and may have had “speed” like side effects and not been very effective, these new drugs were developed to manage blood sugar levels for diabetics and are approved for that specific use.
What then occurred is after widespread use, people started reporting weight loss in significant amounts over a sustained period of usage. What is different about this class of drug is that it reduces cravings by simulating what your body does naturally when you eat. It gives you the feeling of satiation without stuffing oneself with food. They apparently work so effectively that Lilly and Nov Nordisk cannot make enough of them and sales are off the charts.
Recall that Wegovy, Ozempic and Mounjaro are not yet approved for weight loss but are already out there for diabetes and have been for quite some time. Wegovy has been out since 2014, Ozempic since 2017 and Mounjaro since May of last year.
Nov Nordisk and Eli Lilly are seemingly way ahead of the pack as to production, approvals and actual usage, and with a plethora of information already known about the drugs and new information about their effect on weight loss seemingly coming in daily, the other drug companies are scrambling to catch up.
With the three drugs in successful use already approved for diabetes, both companies are engaged in the final stage of trials and have already submitted the applications for the approval of the drugs for weight loss.
Doctors may not be waiting for the approval as sales are skyrocketing and likely not every prescription may be for a diabetic. My assumption here of course but it aint rocket science.
Some analysts argue the three drugs may be the best selling drugs of all time, and may even have the capacity to alter human lifespan, throwing longevity actuaries into historical revision territory. Others agree and go further to suggest these drugs may be the most important drugs ever developed. They may also help reduce cardiovascular disease, heart attack and stroke in certain instances. If that wasn’t enough to scare the food industry and give a new sense of hope to the rest of us, an increasing number of people who use these injections to help control their food cravings say other cravings disappear as well—including ones for nicotine, alcohol, gambling, skin picking and other compulsive behaviors
Holy Cow Batman.
No wonder the food stocks got hammered.
Now before you rush out to get your prescription or buy the stocks, there are both health and investor risks from the medications and the companies that make them and this is definitely not a recommendation to buy or sell any security nor consume any drug. The stocks themselves have already had an incredible run.
In my 50 years of adult coherency and observation, I have seen many of the “latest and greatest” ideas, theories, stocks, miracle drugs and the like flop horribly. Side effects of the drugs can make themselves known years later and kill the drugs marketability. Think of the drug Thalidomide that caused horrible mutations in humans. Any number of approval setbacks can knock a pharmaceutical companies stock down many fold, and in certain cases obliterate the company altogether. I am not suggesting Novo Nordisk or Eli Lilly could go under. They are both huge conglomerates with billions of dollars in capitalization. But many investors have had their portfolios severely damaged by a drug stock gone bad.
In conclusion, that fact that the major food company stock sell-off in the past few weeks has been at least partially attributed to the rise of this new class of weight loss drug, apparently somebody is taking it seriously. And should these new drugs actually accomplish some of what the scientists are hoping and seriously help with obesity, cardiovascular disease and even other addictions, a rising portfolio balance is the least of our benefits. Mankind, our lifespan and indeed our quality of life in general could be lifted to new heights, and won’t that be good news for all of us.
“Watching the markets so you don’t have to”
This article expresses the opinion of Marc Cuniberti and is not meant as investment advice, or a recommendation to buy or sell any securities, nor represents the opinion of any bank, investment firm or RIA, nor this media outlet, its staff, members or underwriters. Mr. Cuniberti holds a B.A. in Economics with honors, 1979, and California Insurance License #0L34249 His insurance agency is BAP INC. insurance services. Email: [email protected]
