Even the Hamburglar didn’t see this one coming.
Excessive weight has been a persistent problem in America, where at least one in five adults in each U.S. state is living with obesity, according to the Centers for Disease Control and Prevention.
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As obesity rates have risen, so have scientists’ efforts to address this serious health issue, which can cause asthma, heart disease, stroke, type 2 diabetes and even some cancers.
Early attempts to treat obesity came to the market as early as the 1930s. Amphetamines were the prevalent treatment in the 1940s and 1950s and demand continued into the 1990s.
Glucagon-like peptide-1 agonists, which mimic the action of the naturally occurring hormone GLP-1, have been available for about two decades.
GLP-1 medications, including Ozempic, Wegovy, Zepbound and Mounjaro, have been used for years to treat Type 2 diabetes, and studies have found that they are also effective at encouraging weight loss.
Wegovy and Ozempic are manufactured by Novo Nordisk (NVO) , while Eli Lilly (LLY) makes Zepbound and Mounjaro.
Study sees shift in fast-food spending
One investment firm says increased use of these medications could have serious implications for two of the biggest names in the fast-food industry: McDonald’s (MCD) and Domino’s Pizza (DPZ) .
The market for anti-obesity drugs, particularly those using injectable versions of GLP 1-based drugs, is still new and continuously evolving, Goldman Sachs said in a May 22 report.
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The investment firm lowered its projections for such medication and now forecasts the global market to reach $95 billion by 2030. That’s down from the previous estimate of $130 billion to reflect trends influencing how the drugs are priced, how long patients stay on them, and how patient populations are segmented.
Goldman lowered its U.S. market projections to a peak of $70 billion, but the firm sees room for greater penetration in markets outside the U.S. Goldman forecasts a market peak of $50 billion outside the US, compared with $35 billion previously.
A survey of more than 50 doctors in the US found that lower doses of anti-obesity medications are working well for a majority of patients and insurance coverage is the most important factor in the decision-making process, Goldman Sachs wrote.
“But to be clear, even with this moderated forecast, we see a significant growth opportunity for both existing players as well as new entrants into this market,” said Asad Haider, head of the health-care business unit within Goldman Sachs Research.
Demand for GPL-1 drugs could dramatically hinder the food and restaurant industries, according to a study from Cornell’s SC Johnson College of Business and the data firm Numerator.
The report, entitled “The No Hunger Games,” found that households with at least one user of GLP-1 drugs reduced its grocery spending by about 6% within six months of starting the drugs. The spending cut was as much as 9% for higher-income households.
“We also find an 8.6% decline in spending at fast-food chains, coffee shops and limited-service restaurants,” the study said.
Analyst sees threat for McDonald’s
“Our findings highlight the potential for GLP-1 medications to significantly change food demand, a trend with increasingly important implications for the food industry as GLP-1 adoption continues to grow.”
The study warned that common side effects of GLP-1 medications, such as nausea, vomiting and gastrointestinal discomfort, have reportedly led to reduced adherence or discontinued use for some patients.
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“Moreover, their long-term efficacy and safety remain areas of ongoing investigation,” the report said.
Redburn Atlantic analyst Chris Luyckx focused on the growing adoption of GLP-1 in recent research reports.
Luyckx double-downgraded McDonald’s to sell from buy with a price target of $260, down from $319.
The analyst expects the GLP-1 weight-loss drugs to suppress consumer appetites and says they present an underappreciated longer-term threat for McDonald’s.
A 1% drag on sales today “could easily build to 10% or more over time,” particularly for restaurant brands skewed toward lower-income consumers, the analyst tells investors in a research note.
McDonald’s stock was down about 1.3% at last check and is up 18.5% from a year ago.
Redburn Atlantic also initiated coverage of Domino’s Pizza with a sell rating and $340 price target.
Domino’s, the world’s largest pizza chain, faces the heaviest pressure from adoption of GLP-1 weight loss drugs, with high exposure to dinner occasions and lower-income consumers, the firm said.
Redburn Atlantic said the company’s organic traffic remains weak, with carry-out far outpacing delivery.
Challenged system-sales growth and elevated consensus expectations present downside risk for Domino’s, the firm said.
McDonald’s closed regular trading on June 10 down 1.4% at $300.43. Domino’s shares were off 2.7% at $455.49.
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