Wall Street is asking how diet pills will affect the consumer giants, but it may be too early to tell

If you listen to the third quarter corporate earnings calls, it can seem like everyone is taking diet pills.

Delta Air Lines, PepsiCo, Philip Morris International and Darden Restaurants are just some of the companies that have faced questions from analysts about how drugs affect their bottom lines. Executives mostly brush off the effects, saying it’s too early to quantify any real changes. Some want to Hershey, Conagra and Nestlé they assure investors that they will adjust, if necessary.

While some analysts are making grand claims about how obesity drugs will reshape the industries they cover, the drugs are still in their early days. It is not yet clear how many people will actually take them and for how long, or what long-term effect they will have have on food manufacturers, restaurants and other industries.

Known as GLP-1, the drugs were first approved for diabetes and are now also used for obesity. Demand has increased because Novo Nordisk can no longer produce enough of its drug Wegovy to keep going.

But even so, only a fraction of eligible people are actually taking the drugs at this point, said Goldman Sachs analyst Chris Shibutani.

That number could rise to 13% of the roughly 100 million Americans with obesity by the end of the decade, Shibutani estimates, which would mean sales of about $100 billion. The actual total may end up being higher or lower depending on a number of factors, including one particularly important one: how long people stay on the drug.

That question “is very much at the forefront of thinking about the size of the market, as well as what could be the material changes that we see in other industries that could be affected, such as the food and beverage industries, consumer, even the competition. for discretionary spending and luxury goods,” Shibutani said.

Wegovy’s monthly offering costs about $1,400, and insurance coverage varies, which is a big expense for many potential users. Wegovy and similar drugs can also cause some unpleasant side effects like vomiting and diarrhea that can turn some people off.

Only about a third of people who start the drugs are still taking them a year later, according to data provided by the RBC Capital Markets. That suggests the drugs’ effects on other industries may not be as far-reaching as some people expect, said RBC analyst Brian Abrahams.

“Sometimes people get into the idea that you have these drugs that look like a miracle cure and what if 50 million or 100 million people take them and everyone loses a quarter of their body weight. What does that mean for all these sectors? the reality is that pharmaceuticals have limitations on reimbursement, compliance, and the reality often ends up not matching up,” Abrahams said.

At the same time, the story is just beginning to unfold. Vegovi was approved just two years ago.

Dozens more weight loss drugs are in development, and Eli Lilly’s tirzepatide is expected to be approved before the end of this year.

“Let’s see how these drugs really play out as manufacturing progresses, next-generation mechanisms come in and payers make decisions,” Shibutani said. “For all practical purposes, I think this topic will be with us for a while.

CNBC’s Patrick Manning contributed to this report.