Analysis Pinpoints Sectors and Companies Developing Obesity Solutions
“Global obesity is a mega-investment theme for the next 25 years and beyond. Obesity may be the most pressing health challenge facing the world today and efforts to tackle it will shape thinking by policy makers and in boardrooms around the world,” said
BofA Merrill Lynch has identified a Global Fighting Obesity Exposure Stocklist-50+ centering on four areas: Pharmaceuticals and Healthcare; Food; Commercial Weight Loss, Diet Management and Nutrition; and Sports Apparel and Equipment.
The report by the BofA Merrill Lynch ESG (Environment, Social, and Governance) and Sustainability team identifies that efforts to reduce obesity is a “megatrend” with a shelf-life of 25 to 50 years. It charts the rise of obesity globally and the ballooning costs. BofA Merrill Lynch analysts across several sectors have collaborated to identify the sectors and companies developing long-term solutions. Earlier this year, the firm’s biotech team highlighted in “The Skinny on Obesity” the growing potential for development of new drugs to combat weight gain. “The FDA has historically had little risk tolerance for weight loss drugs, but recently has shown increased support for their development,” said
Globally, 500 million people are obese and 1.4 billion are overweight. Obesity is the fifth greatest cause of death, leading to 2.8 million fatalities each year. Worldwide prevalence of obesity doubled between 1980 and 2008, according to the
Growing costs and tighter regulations spur fight against obesity
The costs of managing obesity are much greater than previously believed. In
Medical costs for treating obese patients are 40 percent higher than for non-obese patients. Treating obese patients comes at a higher premium than treating smokers. Obesity adds 50 percent to annual medical costs, while smoking adds 20 percent. High levels of global childhood obesity and growing obesity in emerging markets will further increase global costs.
As happened with smoking, it is likely that the growing cost burden of obesity on governments, corporates and wider society will spur collective action and greater regulation. BofA Merrill Lynch expects widespread scrutiny of lifestyle aspects associated with obesity including food and drink, schools, work environments, insurers, tackling sedentary lifestyles, and encouraging increasing physical activity.
Investment ideas for fighting globesity
Investors should take a long term view and a broad perspective in selecting stocks as part of the globesity theme, in our view.
- Pharmaceuticals and Health Care – We look at companies taking advantage of the FDA’s increased support for obesity drug development. We also highlight companies tackling related medical conditions and needs including diabetes, kidney failure, hip and knee implants. We also consider equipment such as patient lifts, bigger beds and wider ambulance doors.
- Food – We position companies on their efforts to access the
$663 billion“health and wellness” market, as well as on how they are reformulating their portfolios to respond to increasing pressure such as “fat taxes” to reduce sugar and fat levels.
- Commercial Weight Loss, Diet Management and Nutrition – Up to 50 percent of some western populations pursue dieting, targeted nutrition and behavioral change making it a
$4 billionmarket in the U.S. and growing globally.
- Sports Apparel and Equipment – This is the longer-term play, but we believe that promoting physical activity will become a key priority for more government health policies.
BofA Merrill Lynch Global Research
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|Source:||Business Wire, Inc.|