This year’s Oscar winner is...Ozempic

Dress by Dior, body by Ozempic. This year's Oscar discussions won’t only be about who me outfit, but who me body that wears it. In some cases, answer is a weight-loss drug like Novo Nordisk’s Ozempic and Eli Lilly’s Mounjaro. blockbuster treatments are a cultural phenomenon, and are becoming a financial one too.

For tritional luxury goods, glamorous customers have always been a part of business model. Stars are supplied with fancy items, and wearing m generates publicity. When Michelle Yeoh walks red carpet in a Dior dress, or Anne Hathaway carries a Birkin bag, luxury firms like brand-owners LVMH and Hermes International essentially get vertising. For ir investors, that helps sustain higher pricing power, higher margins, and valuations.

That hasn’t tended to be case for drugmakers. Marketing of pharmaceuticals tends to rely on influencing doctors, and vertising directly to patients, both of which come at a cash cost. top 10 drugmakers spent $8.1 billion on vertising in 2022, according to data firm Vivvix. At Lilly, for example, marketing, selling and ministrative costs ate up 22% of revenue in 2023, with vertising equaling about 3% of revenue. Ozempic and Mounjaro raise idea of a different business model, where customers can effectively become vertising, helping to ensure that demand exceeds supply. That’s despite list prices for drugs of around $1,000 a month.

As far as company valuations are concerned, se drugmakers are alrey getting a luxury premium. Eli Lilly, with a market capitalization of $740 billion, tres at 58 times estimated forward earnings, according to LSEG. That compares with LVMH’s 26 times earnings multiple. Even Hermes, tring at 49 times its forecast net income, looks a relative lightweight. Seen by anor metric, Mounjaro-maker’s enterprise value is 17 times its estimated revenue, where peer drugmakers are valued at more like 5 times.

In fairness, pharma companies aren’t peddling ir medications as objects of celebrity desire. Quite opposite: Lilly has taken out vising that weight-loss drugs are for patients with real need, not simply for squeezing into a smaller tuxedo. That’s a big difference from companies that have spent generations honing ir luxury credentials. But for investors who covet makers of in-demand products with happy, attractive customers – with all of resulting boost to price and profit – re may be little difference.

(ditional reporting by Jennifer Saba)