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Companies set to gain from obesity boom: analysts

ObesityJun 26, 08

Merck & Co , Nike Inc and General Mills Inc are among 15 health-care and consumer products companies best positioned to profit from an effort to combat the growing obesity epidemic, Credit Suisse analysts said in a report on Thursday.

Globally, 1.8 billion people were obese or overweight in 2007, and the number of obese and overweight people now exceeds the amount of those who are underfed, the report said.

“At the same time, companies are capitalizing on the trend toward better health and weight management,” the analysts said in the 188-page report titled, “Obesity and Investment Implications.”

The 15 firms were selected based on the effectiveness of their products in either preventing or treating obesity and its related diseases.

The report estimates that revenue related to obesity products in the consumer staples sector, which includes food and beverage companies, will grow 9.3 percent annually on average from 2008-2012, reaching $1.4 trillion.

Aside from General Mills, other consumer staples companies cited by Credit Suisse include Danone, Kellogg, supermarket operator Safeway Inc, and palm oil manufacturer Kuala Lumpur Kepong.

Revenue in obesity-related products in the area of discretionary consumer spending is expected to rise by 6.3 percent on average by 2012, reaching $482 billion.

In addition to Nike, the highlighted companies in this area were CVS, Under Armour, Lululemon Athletica, Life Time Fitness and Dick’s Sporting Goods.

By contrast, revenue in the healthcare sector related to obesity treatments and preventative care is expected to reach only $73 billion by 2012, averaging 7.1 percent annual growth.

Medical supply and device companies are particularly well-positioned to benefit, the report said, noting that surgical procedures and neuro-stimulation are more effective than drugs in shedding excess weight.

Those who use such devices may shed 50 to 90 percent of excess body weight within two years, compared to just five to 10 percent per year for those who use drugs, according to the report.

Allergan, which manufactures a gastric band involved in gastric-bypass surgery, was one healthcare company favored by the Credit Suisse analysts.

The others were disease management company Healthways, and Merck and Novo Nordisk, both major manufacturers of diabetes treatments.

NEW YORK (Reuters)

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