Strong demand for weight-loss drugs, in addition to supply shortages of GLP-1s such as Wegovy and Ozempic, is creating opportunities for compounded drugmakers and sellers © Reuters Dear reader, Traditionally August was a time for switching off. Yet more than 40 per cent of UK workers are still checking their emails on holiday, according to a recent survey. I was guilty as charged last week while in Austria. Even worse than checking my inbox, I could not help catching up on all of the WhatsApp and Facebook groups that parents in particular find themselves added to. This wasn’t entirely time wasted. Sometimes local gossip and recommendation groups can provide the kind of consumer insights for which multinationals pay market researchers big bucks. On one site I follow, egg (short for Edinburgh Gossip Girls), several members have recently started posting about their experiences — good and bad — with weight-loss drugs, often bought off label. These are not celebrities or necessarily wealthy individuals, even if the group’s name recalls the TV drama Gossip Girl, which was set at an elite Manhattan school. Interest in GLP-1 drugs now appears to be reaching all levels of society. This week Lex looked at the market for copycat weight-loss drugs. Shares in Hims & Hers Health, a telehealth company that started selling compounded — or copycat — versions of GLP-1s have outperformed even Novo Nordisk and Eli Lilly in the past 12 months. Of course the shares are coming off a much lower base. Hims & Hers Health has a market cap of $3.6bn compared with Eli Lilly’s $900bn. Even so, the rally underscores how strong demand, in addition to supply shortages of GLP-1s such as Wegovy, Ozempic and Zepbound, is creating opportunities for compounded drugmakers and sellers. Even so, Lex is wary. Market leaders Novo and Lilly have filed several lawsuits in an effort to stop the sale of compounded versions of their drugs. They are also working hard to ease shortages of their branded weight-loss drugs. More here. In the UK, high street retailer Next is considered a bellwether for consumer confidence and households’ willingness to part with their cash. In the US, it is Walmart. But should it be? Lex argued this week that Walmart is not necessarily the best proxy for the wider US retail sector. Investors who pile into other big retail names such as Target, Macy’s and Gap off the back of strong Walmart earnings might be setting themselves up for disappointment. Walmart’s size and business mix make it unique among US retailers. Its grocery business is a particular draw because US households still feel life is much more expensive than before the pandemic. Read the full note. Investors in JD.com were surprised on Wednesday by Walmart selling down its nearly 10 per cent holding in the Chinese ecommerce group to zero. Should they have been? Internet group Tencent sparked a similar fall in JD.com’s shares when it handed over most of its JD.com stake as a dividend to shareholders in 2021. When Walmart struck a strategic alliance with JD.com eight years ago, times were very different in the Chinese retail sector. Back then, ties to local ecommerce groups were crucial to gaining market share. Such partnerships are now no longer so important. Not only that, China’s ecommerce companies have lost some of their shine as an investment. Lex reckons investors have yet to see the bottom in the local tech trade. Discover why. Others in the renewable energy sector will hope the latest troubles at Denmark’s Ørsted are not a proxy for prolonged problems in the industry, which was battered last year by higher financing costs and supply chain inflation. Last week investors balked at yet more impairments at Ørsted, even if operating performance was better than expected. Although the latest writedowns were fairly small, Ørsted had only recently reassessed its portfolio and strategy. It will have to reassure investors who will no doubt be wondering whether even the assumptions used in that exercise were cautious enough. Find out more about its travails. European defence stocks have taken a hit this week following reports that Germany’s finance minister planned to veto new military aid to Ukraine. Lex believes some perspective is required. Germany had already hinted at reducing spending in Ukraine. Of course, wars come to an end at some point, or at least the fighting does. But there are 110 armed conflicts under way today. Nearly all Nato members are on a mission to increase military spending. As such Lex doesn’t believe the rally in defence stocks is over yet. Read more on why.
Catch up on some of the best-read Lex notes of the past week. As ever, readers’ appetite for electric vehicles is strong: Helen Thomas will return to write the newsletter in September. Have a good week, Nathalie Thomas Lex writer |