As many as 59 percent of Romanians are currently overweight, with one in five actually in the obese category. This is part of a growing global obesity epidemic, the annual cost of which could reach up to 3 percent of global GDP, writes eToro analyst Pawel Majtkowski.
The hope for overcoming it is new drugs marketed by pharmaceutical companies. It’s also an opportunity for their shareholders to make additional profits.
Obesity is now one of the biggest global health challenges. The world’s average BMI is approaching 25, which is the boundary between normal weight and overweight. According to European Union data, 53% of Europeans, including 59% of Romanians, are overweight or obese (BMI above 25).
The Romanians who live with obesity (BMI over 30) are 22.5% of the country’s population. Overall, it is estimated that more than 2.6 billion people worldwide currently have a BMI above 25, a number that is expected to rise to 4 billion over the next decade. And this, in turn, could generate an economic cost of $4 trillion, equivalent to 3% of the global GDP.
One important tool in the fight against obesity is a new generation of effective weight-loss drugs. Pharmaceutical companies Novo Nordisk and Eli Lilly, capitalizing on their leadership in diabetes drugs, were the first to register GLP-1 antagonist drugs as obesity drugs.
Novo Nordisk sells its drug in the U.S. under the brand name Wegovy (the drug is also available under other trade names), and Eli Lilly sells it under the brand name Mounjaro (it is registered in the EU but cannot yet be purchased in Romania) These drugs are injected weekly and slow down the transmission of hunger signals to the brain.
They are effective for weight loss, especially when combined with diet and exercise. Other major pharmaceutical companies Amgen, AstraZeneca, Pfizer and Sanofi are also preparing to introduce similar products. Drugs in this group will be an increasingly serious source of revenue for pharmaceutical companies, precisely with the introduction of new products and also with the likely reimbursement of these drugs by governments and insurers.
The health care sector is the second-largest sector within the S&P 500 index. It is experiencing a decline this year, but it is not that big precisely because of the very strong performance of the largest pharmaceutical companies in 2022. However, concerns are present in the market about their earnings in the near term, related to legislation introduced by Congress forcing the US government to regulate the price of drugs financed from the Medicare program.
Currently, the industry’s price-to-earnings (P/E) ratio is 16x, close to the broad market. However, drug companies have very strong balance sheets and dividend-paying prospects.
