💉 Weight Loss Drug Market Has Been Captured

MARKET UPDATE

Good Morning Investor! On Thursday, the Bank of England announced it will hold interest rates at their current level of 5% after an 8-1 vote. The central bank cited not wanting to cut rates too fast or by too much.

Meanwhile, European stocks surged off the back of the Federal Reserves 50 basis point cut on Wednesday, with fintech players such as Adyen ($ADYEN) and Edenred ($EDEN) soaring 4.8% adn 3.2% respectively.

TODAY’S BIG HEADLINES

Alaska Air Gets Green Light for $1.9 Billion Acquisition

Influencers Declare War on Lunchables

The Weight Loss Drug Market Has Been Captured

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TRAVEL & LEISURE

Alaska Air Gets Green Light for Acquisition✈️

The Sky-High Romance: The Department of Transportation is giving the green light to the $1.9 billion merger between Alaska Airlines and Hawaiian Airlines, clearing the runway for the first major US airline acquisition since 2016 (when Alaska gobbled up Virgin Atlantic like a hungry passenger devouring the last bag of pretzels). For Hawaiian, the deal is seen as a lifeline, while Alaska is expected to level up its business with more planes, workers, and customers (it’ll control half of Hawaii’s air-travel market).

• The DOT's approval, which comes with more strings attached than a ukulele, arrives about a month after the merger sailed through antitrust review unchallenged.

A Match Made in the Friendly Skies: The airlines agreed to maintain the value of their loyalty points, preserve routes within Hawaii, and ensure competitors' access to the Honolulu hub airport (because sharing is caring, even in cutthroat capitalism). The DOT's approval conditions will last for six years once the deal is finalized. The combined airline will keep Hawaiian as a separate brand but operate as one carrier with a 360-plane fleet and 33K+ employees.

• In the past six decades, Delta, American, United, Southwest, and Alaska have acquired 42 rival airlines, highlighting the ongoing consolidation of the industry. At this rate, we'll soon have just one airline called "The Airline," and it'll charge you extra for oxygen.

The Rise of the Budget Airline: Airlines have faced tough regulator scrutiny under the Biden admin, presumably because someone in the White House had one too many bad experiences with lost luggage. This year, the US successfully blocked a JetBlue-Spirit merger, and last year it broke up a partnership in the Northeast between JetBlue and American (JetBlue's probably more annoyed this week than a passenger who just realized their seat doesn't recline). Concerned with rising airfare, the White House has also gone after airline junk fees. Because nothing says "land of the free" quite like not having to pay $50 to bring a change of underwear on your flight.

• Antitrust scrutiny has paved the way for new budget airlines like Avelo and Breeze to emerge, and both expect to turn a profit this year. Their business model? Charge for everything except the air you breathe. In the Alaska-Hawaiian approval, regulators opted to lock in consumer protections rather than risk a loss in merger court.

CONSUMER DISCRETIONARIES

Influencers Declare War on Lunchables⚔️

Return of the SPAC King: Trying to make sense of social media these days is like trying to nail jelly to a wall. One minute, someone's live-streaming as a giant husk of corn, and the next, you're bombarded with news of wars, celebrity feuds, or Jim Cramer telling you to short Nvidia, only to watch it skyrocket months later. Chaos is the norm, and unpredictability reigns supreme in this digital circus. But nothing quite captures the essence of this madness like Chamath Palihapitiya (yes, that Chamath, the SPAC-tacular wonder himself) tweeting, "Lunchly... available now in Kroger's and Albertsons. Target and Walmart by January." It's as if the universe decided to play Mad Libs with corporate announcements.

• Wait, what’s Lunchly, you might ask? Well, it turns out that millionaire social media influencers Mr. Beast, Logan Paul, and KSI are now at war with Lunchables and trying to feed America’s kids.

Latest Culinary Startup: Chamath Palihapitiya, co-host of the All-In podcast and the man who never met a SPAC he didn't like, took to X to announce the launch of Lunchly. This new meal kit combines a Feastables bar (founded by Mr. Beast) and a Prime beverage (the brainchild of Logan Paul and KSI). This is a full-blown assault on the beloved (and let’s be honest, somewhat questionable) Lunchables brand.

The Battle for Lunchtime Supremacy: What isn't questionable is how the Kraft and Lunchables duo has been doing financially the last couple of years. In 2023, net sales increased 0.6 percent versus the year-ago period to $26.6 billion. That's a lot of dough for what essentially amounts to DIY pizza kits and crackers with suspiciously long-lasting meat. Kraft announced a major initiative to include Lunchables in school lunch programs for the first time starting in the fall, something that likely caught the eye of these three influencers.

• In 2022, more than half of Kraft Heinz’s revenue came from just eight brands, with Lunchables generating $1.8 billion in sales, accounting for 8.6% of the company’s total revenue. That's a lot of cheese, both literally and figuratively.

• On top of all that, Lunchly and the gang aren't the only ones gunning for Kraft and Lunchables. A Los Angeles startup named Sunnie, a brand of plant-forward, superfood snacks and lunches designed for kids and their parents, is also looking to provide a healthier option, though they certainly lack the draw Kraft, Lunchables, and the likes of Mr. Beast.

HEALTHCARE & BIG PHARMA

The Weight Loss Drug Market Has Been Captured 💉

A Weighty Matter: In the obesity drug industry, two players have really been throwing their weight around (pun intended). And there isn’t a clear third in sight. Eli Lilly ($LLY) and Novo Nordisk ($NVO) have both been going hell for leather to capture as much market share in the GLP-1 market as possible. So far, their competition is staying out of it, presumably too intimidated by these heavyweights to even dip their toes in the water.

• On Wednesday, the CEO of Novartis, a Swiss pharmaceutical company with a market capitalization that tips the scales at a hefty $253 billion, said the company won't be joining the feeding frenzy for the oh-so-trendy weight loss drugs. The reason? That pond already has two very big fish, and there's no room for another whale to make a splash.

• Since Ozempic's FDA approval back in December 2017, shares of Novo Nordisk and Eli Lilly have ballooned by a mouth-watering 402% and 971% respectively. This puts the S&P 500's return of 110% in the same time period to shame.

A Tale of Pharma-ceutical Proportions: Novartis CEO Vas Narasimhan said that for relatively mid-sized pharma companies, he thinks new secondary markets are the way forward. He stated, "With obesity right now, we have two very entrenched large players, and I think for future entrants you have to find something new, some sort of new angle that either reduces the nausea and the vomiting or gives patients the ability to lose their weight and retain their muscle." In other words, they need to find a way to trim the fat without causing too much discomfort - a tall order indeed.

• The after-care associated with weight-loss drugs is a whole sector in its own right, and has hit some big stumbling blocks as the number of qualified obesity doctors has not kept up with the skyrocketing demand for prescriptions. It seems the medical community is having trouble expanding as quickly as the waistlines they're trying to shrink.

• Concerningly, another industry of "Ozempic dupes" - i.e., non-pharmaceutical products that promise the same effects - have bloomed since the drug took off. One knock-off has been released by Kourtney Kardashian's supplement company. Because if there's one thing the Kardashians know, it's how to make a quick buck off people's insecurities.

MORE NEWS

Additional market-moving events🌎

T-Mobile Teams Up With OpenAI: T-Mobile ($TMUS) and OpenAI are partnering to launch an AI platform that will use data from T-Mobile’s T-Life app to enhance customer service and improve retention. (MSN)

Alibaba's AI Blitz: Alibaba ($BABA) has debuted over 100 new open-source AI models and launched a text-to-video generation tool, aiming to compete with rivals like Baidu ($BIDU), Huawei, and OpenAI. (CNBC)

Tobacco Giant Selloff: Philip Morris International ($PM) has sold Vectura Group, a UK inhaler company, to Molex Asia Holdings for $198 million amid backlash over its ownership. PMI acquired Vectura for over $1.33 billion in 2021 as part of its strategy to shift from cigarettes to "smoke-free" products. (BBC)

PE Raises Medical Costs: Private equity's expanding role in billing, tracking and collecting payments for health care is exacerbating America's medical debt problem. (Axios)

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