I’m sitting on the fence with this stock at the moment. Long or short, I don’t have high conviction either way. If there is a correlation between obesity and sleep apnea, these new age treatment’s will take 12+ months to see any impact on CPAP machine sales or impact margins on the businesses selling them.
The article below outlines the potential long/short strategies insto’s are positioning themselves for the short to medium-term outlook.
The end of obesity
Timeframe: 1 year +
Speaker: Dr David Allen, Head of Long Short Strategies, Plato Investment Management
Dr David Allen, Plato Investment Management
There are winners and losers from the success of anti-obesogenic drugs, according to David Allen. The winners are not only the individuals who gain health benefits from lower weight, or governments that benefit from a lower health spend on managing chronic diseases where obesity is a co-morbidity.
Drug companies such as Novo Nordisk (makers of Wegovy) and
Eli Lilly (NASDAQ: LLY) (makers of Mounjaro, expected to be approved towards the end of 2023) are winners. Allen notes that they own shares in these companies. The price of Novo Nordisk (currently the largest company in Europe, having just overtaken LMVH according to Allen) has responded positively to the SELECT study of 18,000 people with the results released last month.
"Why was this such a game changer? It showed that it reduced heart disease by 20%. This is going to unlock funding by the US government, by health insurers and governments globally."
And the losers from this prediction? Allen identifies two themes. The first of these are companies that offer obesity adjacent treatments such as
Medifast (NYSE: MED), Dexcom (NASDAQ: DXCM), Resmed (ASX: RMD) and Insulet (NASDAQ: PODD). Weight Watchers (NASDAQ: WW) reversed this trend in this space courtesy of its investment in a tele-health company earlier this year that only does Wegovy consultations.
Source: Bloomberg, September, 2023, prices rebased to 1 at 3 July 2023.
The other theme is a longer term trend according to Allen, and that's what he's described as fast food companies as consumers cut back on high calorific foods.
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