And then Krispy Kreme kame krashing down.
The donut giant’s stock price dropped from nearly $16 a share to under $13. Fewer people are craving fried dough, apparently.
The reason? Ozempic.
Stock analyst Bill Chappell discusses.
We believe in the Krispy Kreme model. However, we have a difficult time recommending the name at least until the GLP-1 wave has started to form.
The wave is not only forming, but surging. Nestle’s down. Heinz and Hostess are struggling. Modelo’s in the red. Chips Ahoy is sailing away...from portfolios.
Meanwhile sportswear brands and “fit” clothing manufacturers salivate as slimmer customers are all-in on new wardrobes. Airline execs too, excited about the prospect of using less fuel to cart consumers around the skies.
And forget about Novo Nordisk (Ozempic) and Eli Lilly (Mounjaro). Glucagon-like peptide agonists (GLP-1) manufacturers have stumbled upon the “AI of healthcare.” Some say this class of pharmaceuticals will be the biggest blockbuster ever.
Some say otherwise, but we’ll get to that.
The data certainly reflect the surge.
Sales of Ozempic and Wegovy, developed by Novo Nordisk, and Eli Lilly’s Mounjaro, are projected to reach $21 billion in 2023 and swell to $53 billion by 2028, according to FactSet. The two drugmakers have added $345 billion in market cap this year, a sum greater than the value of all but 18 companies in the S&P 500.
Those gains are taking a bite out of other sectors. The S&P Food & Beverage Select Industry Index has declined 12% over the past three months. Shares of Kraft Heinz are down 10% over the same period. Hershey is down 19%, while Coca-Cola and PepsiCo have shed 9% and 12%, respectively.
Medical-device company stocks are also in freefall as a potential new reality sets in: fewer people will need insulin pumps, glucose monitors, or knee replacements. The market speaketh, and C-Suites are rushing to keep up.
How much of what’s being mined will turn out to be fool’s gold? Hard to tell, but the hype is winning. Sometimes markets are influenced by fawning more than data.
Currently, GLP-1 drugs cost over $10,000 a year. Most insurance companies aren’t covering off-label uses—as in, taking them for weight loss instead of to treat diabetes. Lines are being drawn between the haves and have-nots, between already-slender folk who can afford the ability to drop those 10 pounds instead of already-struggling people who could really be helped by this regimen, but can barely afford this week’s groceries.
Is all this speculation purely aimed at the small percentage of people with deep pockets?
What happens when the market corrects?
What about the growing downstream effect of fat shaming those who aren’t taking GLP-1s, often from people who have had success with them?
Most importantly, what happens to people who want to try GLP-1s and can’t afford them?
Ozempic is where class warfare becomes crass warfare.
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