The weight-loss drug craze

This is an audio transcript of the FT News Briefing podcast episode: ‘The weight-loss drug craze’

Marc Filippino
Good morning from the Financial Times. Today is Wednesday, August 9th, and this is your FT News Briefing.

[MUSIC PLAYING]

Britain is resisting moves to tighten corporate transparency rules, and Moody’s cut the credit ratings of some midsized US banks. Plus, the FT’s Jamie Smyth explains the craze behind new weight loss drugs.

Jamie Smyth
Analysts are saying that the combined market for these weight loss and diabetes drugs could be worth up to $100bn per year. You know, that’s a massive amount of money, and it could really provide a gold mine for these companies.

Marc Filippino
I’m Marc Filippino, and here’s the news you need to start your day.

[MUSIC PLAYING]

Some members of the House of Lords are trying to close loopholes in a corporate transparency law that was passed last year. The goal was to crack down on dirty money passing through the UK. But it looks like the UK’s business department is pushing back on those new rules. The government sent a letter to a member of the House of Lords. It opposed making certain information about beneficiaries available to the public. The letter said that doing so could lead to legal challenges over an individual’s right to privacy. The sentiment isn’t too far off what the European Court of Justice ruled last year. It said that public disclosures of the owners of companies could constitute a violation of an individual’s privacy. Because of that, several countries have restricted access to beneficial ownership information.

[MUSIC PLAYING]

US bank stocks tripped a little yesterday. Investors showed concern after the rating agency Moody’s cut the credit ratings of 10 midsized banks. The credit rating agency also put four large lenders on review, which means they could face downgrades soon. I’m joined now by the FT’s US markets editor Jennifer Hughes. Hi, Jen.

Jennifer Hughes
Hey there.

Marc Filippino
So, Jen, why did investors get spooked by this Moody’s report?

Jennifer Hughes
I think the biggest takeaway from what Moody’s has done here is it’s effectively saying the stuff that happened in the spring when we had banking turmoil — Silicon Valley Bank and others failed — those, those pressures that led to that, they haven’t gone away. Banks are dealing with interest rate risk in a way we hadn’t back in March really foreseen.

Marc Filippino
Now, I understand that midsized regional banks being affected by this because they were the ones hit during the banking crisis earlier this year. But larger banks, I mean, why were they put on notice here?

Jennifer Hughes
We’ve all been watching for signs that the banks are still struggling or that there are bigger pressures on the sector. And we’ve just had second-quarter results, which is partly what Moody’s is basing its moves here of. But what we’re seeing and what Moody’s really serves as a reminder of is that the pressures are sector wide. So a giant bank might be less affected than a smaller one but is still not going to be facing a happy, sunny uplands any time soon. I mean, I’m reading here from the Moody’s press release, but in the first paragraph alone, they talk about growing profitability pressures. Asset quality looks set to decline. Banks faced interest rate and asset liability management risks — that’s back to the March turmoil — and they’re predicting a mild recession in 2024. So, you know, you don’t even if you’re a Citigroup or a JPMorgan, those are still not, it’s still not a great environment to be working in.

Marc Filippino
Jen, what’s your takeaway from the report? You know, what struck you?

Jennifer Hughes
This is why I love covering markets because you can never quite predict how something is going to react. Personally, I wouldn’t have expected this to be so much of a surprise. But I think it’s the doom and gloom at the top of that report that just reminded everybody that, you know, we’ve been talking about a soft landing for the last couple of weeks and the economy going pretty well. But there’s still all these stresses under the surface.

Marc Filippino
Jen Hughes is the FT’s US markets editor. Thanks, Jen.

Jennifer Hughes
Anytime.

[MUSIC PLAYING]

Marc Filippino
Weight loss drugs are the hot new thing, and the pharmaceuticals industry is making a lot of money off of them. Eli Lilly said yesterday it’s upped its full-year guidance by about $2bn thanks to its diabetes drug, Mounjaro, that’s used for weight loss. Eli Lilly shares hit a record high after the news. The FT’s US pharmaceutical correspondent Jamie Smyth has been writing about the weight loss drug craze. Hi, Jamie.

Jamie Smyth
Hi, Marc.

Marc Filippino
So what do we know about these drugs, or, you know, at least the ones that I mentioned?

Jamie Smyth
So this new generation of weight loss drugs are made by the Danish company Novo Nordisk and US drugmaker Eli Lilly. They were actually first developed to treat diabetes. And you’ve probably heard some of the brand names. You’ve got Ozempic, Wegovy, Mounjaro, you know, they’re all the rage at the minute. There’s lots of advertisements on the TV in America. Now, the way they work is they’re administered once a week by injection, and they work to suppress a person’s appetite while also increasing the amount of energy they’re using. So that really is why you get this weight loss effect.

Marc Filippino
Findings of a late stage trial for Novo Nordisk’s weight loss drug came out yesterday. What do we know there?

Jamie Smyth
So this Novo study was a late stage clinical trial of its obesity drug, Wegovy. Now it find that patients who took the drug had 20 per cent less chance of suffering a cardiovascular event such as a heart attack or a stroke than those who received a placebo. Now, that’s a really important finding as it provides statistical evidence that these weight loss drugs have major health benefits.

Marc Filippino
Yeah. Investors also drove up Novo’s share price by about 18 per cent yesterday. So, Jamie, about 40 per cent of Americans suffer from obesity. Given how high that is, what’s the demand for these weight loss drugs?

Jamie Smyth
There’s really very strong demand for these treatments and so much so that, you know, there are shortages of both Novo’s and Lilly’s weight loss drugs at the minute. You know, we’ve heard many reports of celebrities getting their hands on the diabetes drugs such as Ozempic, but using them for weight loss. And there’s been a lot of sort of chatter on social media that’s driven quite a lot of this demand. So analysts are saying that the combined market for these weight loss diabetes drugs could be worth up to $100bn per year by the mid 2030s. You know, that’s a massive amount of money, and it could really provide a gold mine for these companies.

Marc Filippino
So we’ve determined that a lot of people want this, that so far the results are all positive or nearly all positive. Are there any drawbacks to these drugs. Do we know of any yet?

Jamie Smyth
So there have been several clinical studies undertaken already by the companies as part of the regulatory approval processes, and they haven’t really highlighted any really serious safety issues. What they have done is they’ve highlighted some side effects. You know, basically you’ve had some blockages in the stomach area. More recently, there was concern raised by the EU about potential suicide risk by some people taking these drugs, although that, there is no concrete evidence that this has affected a lot of people. And the companies say that all the studies they’ve have done have shown that they’re safe to use.

Marc Filippino
Jamie Smyth is the FT’s US pharma correspondent. Thanks, Jamie.

Jamie Smyth
Thanks, Marc.

[MUSIC PLAYING]

Marc Filippino
All right. We’re gonna end on a nice, juicy story today. Orange juice futures have surged to an all-time high. Investors are betting the price will jump after a series of hurricanes damaged Florida’s main crop. Plus, an incurable disease called citrus greening is eroding orange juice production in the state. So the producers will have a hard time meeting demand, potentially driving up the price of the juice. So just to give you an idea of how bad things are, the head of an orange juice trade association said that the overall production in the US is the lowest it has been in more than a century.

[MUSIC PLAYING]

You can read more on all of these stories at FT.com for free when you click the links in our show notes. I’m taking a few days off, but I’ll be back Monday, August 21st. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

[MUSIC PLAYING]