GLP-1s are shrinking some appetites; broader use poses a prickly challenge

Hello and welcome to Global Research Unlocked, where we discuss what's rising from growth industries to rising risks and opportunities in global markets. I'm TJ Thornton, head of product marketing at BofA Global Research, and we're recording this episode on Tuesday, May 19, 2026. But who the consumer ultimately of packaged foods are, it is a lot of kids, so people who wouldn't necessarily be subject to the GLP-1 population, at least not yet.

And then you would also probably include a lot of lower income folks who are buying a lot of, you know, a lot of packaged food products, who maybe when the price was at $700, wasn't necessarily within their scope. Now, given where the price has gone, maybe that equation changes. And again, it's probably more about the go forward versus the actual data that we've seen over the past couple of years.

GLP-1s and the behavior changes that are central to why these drugs are effective, have been an overhang on the packaged food and beverage groups for a few years. And over that period, accessibility of GLP-1 drugs and studies proving their benefits have only increased, adding to concerns, but also meaning that we have data that we can look at to better determine impact on consumption. Today, we'll talk to Jason Gerberi, who covers major and specialty pharmaceuticals at BofA Global Research, as well as Pete Galbo, who covers food producers and beverage and HPC for BofA Global Research.

Thanks for joining us. Yeah, thanks for having us, TJ. Looking forward to the discussion.

Yeah, thanks for having me. Okay, so the first question is for Jason. Over the last couple of years, prices for GLP-1s have come down, orals have been approved.

This was the bull case for GLP-1 option a few years ago, and it happened. So where is penetration now in the U.S. and the rest of the world, and where do we think it'll be in two to three years? Yeah, sure.

I'll take that. So in the key U.S. market right now, we estimate that GLP-1s are about 10% penetrated in obese patients that do not have diabetes. That's about 10 million individuals, 10% treated.

Pretty confident that these are real numbers. You always struggle with really large markets to pinpoint down these numbers. But if you look at key trends and the way the companies are guiding to revenue and the growth trends, it's about 28 billion of U.S. revenues expected in 2026.

So you can back into these patient numbers where the market will go in the next two to three years. We estimate about 15 to 20 million U.S. patients, or 13 to 17% of total, of obese patients will be treated with a GLP-1-based therapy. And the underpinnings of that really are increased adoption amongst early users.

So these are individuals who work in weight loss specialty centers or primary care doctors who have a big obesity practice. But also the introduction of oral therapies is thought to, this term that is used to democratize access to GLP-1 therapies. So having a pill is a lot easier to take.

It doesn't come with the medical stigma, perhaps, of injectables. It's easier for people to tote around versus a therapy that has a refrigeration requirement. So overall, oral therapies are an important underpinning to the category growth outlook.

And you mentioned price, and we are in a bit of a deflationary cycle with GLP-1s. A lot of this is a greater than expected uptake of the struggling consumer cash pay channel. That's good and bad, right?

Good that the consumer is showing high demand level for product. The challenge is that we are starting to see signs of price sensitivity. Typically in pharmaceuticals, the consumer is insulated from the actual cost of medicines.

So that's a unique dynamic. But when we look ahead in terms of pricing, particularly in the U.S. market, there's going to be greater utilization amongst seniors or Medicare patients due to the Trump agreement with some of the manufacturers. And so that's going to have a fixed price point that's even lower than the pricing that the drug was available to individuals in prior years.

And so I'll wrap it up just by saying that internationally, that's been a surprising story as well in terms of adoption levels. It lags the U.S. in terms of percent uptake, but right now the markets are looking pretty much 50-50 in terms of revenue contribution. So Pete, a couple of years ago, we put out a report on GLP-1s and the impact that they may have on other sectors from food to gambling.

The view then was that consumption wasn't really being impacted yet, but with the positives for GLP-1s that we just discussed and heard about from Jason, has that view changed? Yeah, thanks TJ. I think the view is evolving.

If we go back to the report we published back in the fall of 2023, it was kind of an initial first cut at what the potential impact, the kind of total calories consumed, might be over time. I think what's been really difficult in trying to discern the impact of GLP-1 on food is that it's been happening alongside or coinciding with what was pretty significant price increases that most of the packaged food companies were putting in place still at the end of 2023 and even into 2024. So as we're trying to kind of disaggregate the data and understand the multi-variables that are going into the demand equation and what the impact has been, our view has still been much more that this has been cyclical, i.e. the food companies took way too much pricing and kind of destroyed demand on the other end outside of the normal, and that the GLP-1 impact has been there, but maybe not as accentuated as we would have thought.

Now that can be scary for a whole host of reasons because packaged food is already in a really tough spot, and if my, you know, or our view of kind of the cyclical price element is what drove most of the decline over the past couple of years in terms of price, then that means, you know, if Jason's forecasts are correct, which I'm sure they are, then there could be another shoe to drop. Now how do you factor that into estimates on volume demand is a different factor, and companies have tried to kind of give their own one-offs on what they think the impacts to their categories are, but I think by and large it's what's being baked into terminal growth rates for these companies, which for food is kind of already negative, and does this add another 50 to 100 basis points in the realm of what you would put into a terminal growth rate, particularly on the packaged food side? Now the offsets to that are there's a lot of question around who the consumer ultimately of packaged foods are.

It is a lot of kids, so people who wouldn't necessarily be subject to the GLP-1 population, at least not yet, and then you would also probably include a lot of lower income folks who are buying a lot of, you know, a lot of packaged food products who maybe when the price was at $700 wasn't necessarily within their scope. Now given where the price is gone, maybe that equation changes, and again it's probably more about the go-forward versus, you know, the actual data that we've seen over the past couple of years. Okay, and Jason, I know one of the other debates on GLP-1s is, you know, whether people kind of stay on them in perpetuity or, you know, maybe they take them for a short period of time, maybe there's a vacation or an event that they've got coming up, and then they go off of them, and that obviously has implications for, you know, consumption of other things.

So far, how does usage break out between those that kind of stay on these forever and those that come on and off? Yeah, TJ, it's a really important question. It's very germane to the market opportunity for the GLP-1.

So this idea of stay time, by our estimates, about a third of individuals that go on these GLP-1 therapies are on it for what I'd call a short duration. I define that as less than six months, and these individuals will stop their GLP-1 either due to cost tolerability or simply just not wanting to be on a chronic therapy over the long haul. Now, conversely, you know, about almost a little less than half, 40, 45 percent or so will stay on therapy for more than a year.

How much longer beyond a year, we don't know. This is a category somewhat in its infancy, so it's hard to get really good data to pinpoint that down, but it generally aligns with what physicians will tell us that there is a core, almost half the patients are staying on therapy longer term. And that makes sense, at least if you understand how the drugs work and you want to get the benefits of it and keep the weight loss off and potentially get benefits more in the way of longer term reduced risk of cardiovascular health and other comorbidity benefits.

So, staying on the drug is clearly the long-term goal here and what makes sense. But nonetheless, there is a dynamic, like I mentioned earlier, where the consumer may be stretched. And so, we do hear that some individuals, due to cost reasons, will stop therapy early.

Okay. And related question, right, you mentioned side effects, tolerability. One of them is the loss of muscle mass.

I know there's a whole bunch of public and privately held companies out there developing versions that have fewer side effects. So, are these looking promising at this point? What side effects are they targeting?

And do you think that could have additional positive impact on penetration? So, I would just start by answering the question that cost is always the biggest factor that comes up in surveys and doctor feedback as to why individuals may stop these therapies. I think when we look at the pipeline and in terms of the profile that different companies are aiming for, trying to win with next generation drugs in the GLP-1 space, you mentioned it, preserving lean muscle mass definitely comes up as a highly flagged unmet need.

And I think doctors are looking for drugs with different mechanisms. Not everybody gets to the desired outcome, either hitting their weight loss goal or perhaps having the tolerability profile that they desire longer term. So, yes, there's a lot of drugs being developed in the pipeline that aim to have a gentler side effect profile.

I think the gastrointestinal side effects, vomiting and nausea are two of the ones that come up a lot. So, you know, if these companies are successful in differentiating on the basis of these side effect parameters, will it expand the market? I think modestly.

And the reason why I answer the question that way is I think that these new modalities are likely going to be competing for share with the established entities in the market. And so, I think it's a market share shift, if you will, rather than a pie expansion when we look at the opportunity there. And so, likely to be cannibalizing future growth that some of us have in our models for the current established entities.

Okay. And Pete, I wanted to talk about the categories within packaged food where GLP-1 impact is most noticeable. As you point out, it's not that easy to discern what the GLP-1 impact might be from other impacts that we could be seeing like stress consumer and the fact that, you know, prices just got pushed too much.

But from what we know, and there have been studies, in addition, of course, observing the data, you know, what categories have been most impacted? And are there categories, I think protein comes up sometimes, where maybe there's been a positive impact? Sure.

So, what I call the most negatively impacted categories so far that we see are kind of the ones you would most expect. It's sweet treats. So, you know, a cupcake or a donut hole, that sort of thing, seeing the most impact.

Salty snacks, in particular, potato chips have seen quite an impact. That's maybe another one, too, where price has played a pretty big factor. But those have been kind of the most notable.

What was most interesting to us in going through the data, and we worked with Cornell University on this, and they have a pretty broad GLP-1 study and the impact of the panel they follow in terms of consumer preferences, is there's the anecdotal evidence and then there's the evidence that they see in the data. The one you mentioned, protein, is probably the most fascinating because I think there's a lot of anecdotal evidence of people looking to maintain muscle mass, eating more protein, trying to get more protein into their diet as they take this drug in order to be more stable from that perspective. But what the data found is that protein kind of suffered in line with the rest of all of the other categories.

And maybe it was slightly less than the overall average category, but it wasn't that much. Now, what was particularly interesting in discussion we had with them was not all proteins are created equal. So, I think that adds another layer of nuance to all of this.

So, if you're combining meats into kind of one category, maybe hot dogs and bacon and things that are more processed, sausage, are being consumed at a lower rate because those are more processed and less healthy. And, you know, chicken might be doing OK in that backdrop. Now, what was particularly interesting is in the Cornell study, they didn't find any one category that really had statistical significance in terms of an increase in consumption.

So, again, all of protein still declined. It's just that some of it declined less. The one category that they did find, and this maybe goes to Jason's point on some of the side effects, that's on increase, although, again, not statistically significant, was yogurt.

And yogurt is a higher protein input. It is more easily digestible. It's kind of a bland food that if you're having stomach issues in terms of tolerating, this is something you might add to your diet.

So, that was really the only one that they saw move upward. But nothing, you know, nothing really to support the anecdotal evidence, at least in their study, that protein consumption is way up as a result, despite what some of the protein companies may say. A quick maybe sidebar, other piece of it was on alcohol.

And one of the particular trends that they saw in some of the data was that alcohol consumption actually saw, and their data was based on household data, so household panel data. And so, what that does is it surveys the person in the household who's actually on the drug. What they found is that in terms of alcohol consumption, total net consumption actually didn't decline, which was very surprising to us, but that's at the total household level.

Where they did see declines were on things like wine and spirits versus beer, which, again, is kind of contrary to what the anecdotal evidence would say. But the caveat being within the household, it's the person who is on the drug. And the wine and spirits consumption drinker going down, while beer consumption staying relatively flat, maybe tells us a little bit about who in the household is the one who is on the drug and changing their habits, which was particularly interesting as we kind of parsed through some of the data.

Do you think the market misses any of this? We've been talking about this overhang now for a while. People are very bearish on the food stocks for a whole bunch of reasons, including GOP ones, and also just volume declines that are for other reasons.

Are there areas maybe where people are too bearish or even not bearish enough in your view? I think it goes back to what we talked about initially, that if you're thinking about GLP-1 in the context of your long term valuation and what you would put as a terminal growth rate on this company or on these companies, it's now something less than what it was before. Can you pinpoint the impact to any given quarter?

Not really. At least we don't have enough data to suggest that at this point. So I think the bearishness is oriented for a whole host of reasons and has been loud and pronounced for quite some time.

So I don't know that the market is necessarily not anticipating any sort of these impacts at this point. But I also don't know that they've gotten overly bearish, like the bearishness feels right. Okay.

And then, do you expect, there's a possibility the gasoline prices could come down if the straight reopens, which you'd expect at some point. There are other things that I suppose could go right for the consumer. Do you anticipate anything major, gas prices or otherwise, that could turn around the volume weakness that we've seen for packaged foods?

If the view I expressed at the beginning around cyclicality and simply that a lot of these companies took too much pricing and there is an asymmetric skew in terms of staples consumption and that low income consumers are just frankly consuming less. If there is relief on inflation, if there is low income wage growth that now starts to exceed inflation or at least helps catch up to inflation, I think that is what we would look for for any sort of volume improvement to come through. I think as long as inflationary pressure and low income wage growth is low in a K-shaped economy, I think that makes it very difficult for packaged food volumes to really improve, which as you really think about, the demand equation for packaged food has been a little bit of price, some volume growth, which historically relied on some population growth, which is a probably very separate podcast topic that we could spend an hour on population growth.

But those were the building blocks as to how you got to kind of revenue growth and those have both been pretty significant headwinds at least over the past couple of years. There have been a lot of positive developments, especially for volumes, orals, and that is yet to play out, pricing, which I guess is good for volumes, maybe not so good otherwise for the companies. But from the perspective of these companies, could you say that a lot of the positives are now behind them, the big growth is behind them when it comes to GOP ones, and now you have got sort of fears around pricing and competition that take hold, or do you think there is enough runway left?

It is a bit of a complicated question, but I would say that we are in a deflationary pricing cycle. In the next five years, we are going to have another wave of GOP one competitors enter the market in the 2028, 2029 timeframe. We are also going to have generic versions of semi-blue tide.

So we have a number of pressure points, and I think whether the pricing comes down, I think the markets are going to be wanting to underwrite a price deflationary dynamic that is going to be needed to offset by volumes. I think you could argue that in the U.S., the way that investor, I guess, consensus is modeling GOP ones, that category penetration feels pretty full. If we are wrong as analysts, I think we are likely to be more wrong on the OUS opportunity.

So where is the opportunity in all this for drug companies? I think the key question is, will these medicines get reimbursed over time? Will companies get rewarded for innovation?

And what type of innovation will get rewarded? It is an incredibly competitive pipeline. So for example, we have companies in our large cap pharma coverage that have GOP one based pipelines, which trade at pretty little multiples, nine times forward earnings, which we do not think really reflects much value for future pipeline opportunities.

And we think this is just indicative of a heavy level of pipeline competition and a show-me dynamic. And I think this is where those companies that gain value in the stock market, where the value capture is going to be occurring, is really on who takes a greater share of the pie. And if there is an upside lever, I suppose it is more on the OUS category.

And could that be 60% or 70% of the future peak sale opportunity, as opposed to more of an assumed 50-50 split? Okay. Jason, Pete, thanks very much for your time.

Yeah, thank you. Thanks, guys. GOP ones are only about 10% penetrated now among obese patients who don't have diabetes.

And penetration is lower than that in international markets. So there's a lot of room to grow. And the overhang on packaged food, which has other challenges around pricing and lower income consumers is likely to continue.

Data suggests that it's the more processed, more discretionary food categories that have been most impacted by people who are taking GOP ones. So sweet treats and salty snacks, for example, while cleaner proteins have been less impacted or even seen some benefits. However, the statistical significance of some of this data is questionable.

A difficulty that pharma faces is that while volume should keep rising, so will competition. And there are even generics on the horizon. But some formulations will offer lower side effects.

And companies don't seem to be getting much credit for their pipelines in this market anyway. Thanks for joining. Remember, FDIC securities trading research, strategic advisory and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including in the United States, B of A Securities Inc., a registered broker, dealer and member of FINRA and SIPC and in other jurisdictions by locally registered entities.

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