Ozempic is a drug that has been soaring in popularity over the past year. Its ability to help people shed significant weight has turned it into a hot trend on social media, with people posting before-and-after pictures. And it appears demand for it is likely going to remain strong.
Three companies that can benefit from the excitement around this weight-loss treatments are Novo Nordisk (NVO -0.29%), Eli Lilly (LLY -1.00%), and WW International (WW -4.22%). Let's take a look at each one.
1. Novo Nordisk
The biggest benefactor of Ozempic's popularity is likely to be the company that makes the treatment itself: Novo Nordisk. Demand for the treatment hasn't been slowing down. Analysts from JPMorgan Chase estimate that in the last week of January, U.S. doctors wrote over 313,000 prescriptions for it -- a 78% increase from the same period last year. Novo Nordisk has been increasing its capacity in order to keep up with orders.
The controversy around Ozempic is that the Food and Drug Administration (FDA) has approved it for type 2 diabetes, not weight loss. However, people have been taking it for losing weight because of its effectiveness.
Novo Nordisk's Wegovy, like Ozempic, contains semaglutide but is a higher-dose treatment that is approved in the U.S. for weight loss -- and it could be available in the U.K. later this year. On average, adults have lost 15% of their weight using Wegovy.
Between Wegovy's growth potential in the U.S. and possibly in the U.K. as well, Novo Nordisk could have a banner year in 2023. In 2022, the company's sales jumped by 26% and obesity care sales were up 101%.
Although it's trading near its 52-week high and at a price-to-earnings (P/E) multiple over 40, Novo could be well worth the premium as Wegovy and Ozempic could unlock some mammoth revenue growth for the healthcare business in the years ahead.
2. Eli Lilly
Eli Lilly is in a great position to benefit from the Ozempic craze even though it doesn't make the drug. It does, however, have a promising weight-loss treatment of its own in Mounjaro. Mounjaro has helped people lose weight at an even higher rate than Wegovy. It's only approved for type 2 diabetes right now, but approval for a weight-loss indication could be coming this year.
Mounjaro generated $482.5 million in revenue last year, its first year that it brought in any sales for Eli Lilly. But that's a drop in the bucket, compared to what some analysts think it could generate if it's approved for many more indications. The hope is that it can help with many obesity-related illnesses. Some analysts believe it could be the best-selling drug ever. It's one of the reasons I think Eli Lilly has the potential to be an incredibly lucrative investment in the years to come.
While it's not at its 52-week high, Eli Lilly's stock also isn't cheap, trading at nearly 50 times earnings. But if Mounjaro eclipses Ozempic in popularity, which could be a very real possibility, the sky could be the limit for the promising healthcare stock. Buying it now could be a great move for long-term investors.
3. WW International
WW International, also known as Weight Watchers, has been a popular brand in weight loss over the years. And it's hoping to tap into the growth behind Ozempic as well. Earlier this month, it announced that it would be acquiring Sequence, a subscription telehealth platform, for $132 million. And through Sequence, subscribers can obtain prescriptions for Ozempic and Wegovy.
The acquisition won't lead to a significant boost in revenue for Weight Watchers, at least not right away. Sequence's revenue is at an annual run rate of about $25 million. Weight Watchers, meanwhile, reported revenue of just over $1 billion last year. The big question mark will be if it can squeeze more out of Sequence's business through the popular Weight Watchers brand.
There was some initial excitement in the announcement as shares of Weight Watchers jumped to a high of more than $7 following the release of the news. The stock has given back most of those gains, but this can be a potentially solid investment this year if the acquisition leads to strong growth for the company.
A problem for Weight Watchers is that its revenue has been declining over the years, and in 2022, its bottom line went into the red due to impairment charges. If the acquisition can inject some much-needed growth into Weight Watchers, there could be plenty of upside for the stock.
However, investors should be cautious as Weight Watchers is the riskiest stock on this list, given its lackluster performance. It may not be suitable for all portfolios.
