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WEIGHT LOSS DRUGS UNLIKELY TO DENT MEMBERSHIP FOR PLANET FITNESS, TD COWEN SAYS

Popular weight loss medicines Novo Nordisk's NOVOb.CO Wegovy and Eli Lilly's LLY.N Zepbound have made their mark on the food and fitness industry since their launch, but have also left investors with questions about their long-term impact.

A recent survey of broad demographics with people's physical activity levels by TD Cowen analysts suggests that increased use of these drugs will prove to be a modest benefit of membership growth rather than a setback for Planet Fitness PLNT.N.

The brokerage expects minimal impact on earnings from the popularity of these drugs. Shares of Planet Fitness have gained 16% since January 2022, which was just a few months after the launch of Novo's Wegovy in the U.S.

Investors want to understand how the popular adoption of GLP-1s - the class of therapies to which Wegovy and Zepbound belong - can affect the market for companies like Planet Fitness.

A majority of respondents said they don't expect any changes to their physical activity, but about 24% expect to be more active with the use of GLP-1s. Of this, nearly half already have a gym membership or expressed interest in joining a gym.

Currently, 24% of American adults have a gym membership, TD Cowen estimates, with a third of these being members between 18 and 34 years of age. This demographic shift, boosted in part during the COVID-19 pandemic, supports the growth outlook for Planet Fitness.

Supporters argue that more users are likely to join gyms to rebuild some of the muscle lost as patients rapidly shed pounds with GLP-1s. Respondents to TD Cowen's survey also expressed an increased emphasis on weight-lifting, which helps build and strengthen muscle.

Investors are still divided on the long-term effects, with critics arguing that GLP-1s could be used as a shortcut and make people skip the gym.

(Siddhi Mahatole)

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