DaVita Inc DVA

Obesity Drug's Effects on Dialysis Likely To Be Less Than Feared

GLP-1 drug use is increasing materially in patients with diabetes and obesity, and uncertainty around GLP-1 expansion has added risk to dialysis stocks even as pandemic challenges, including excess mortality and labor costs, are easing for the narrow moat dialysis companies we cover—Baxter, DaVita, Fresenius Medical Care, and Fresenius SE. Despite the concerns, new data rolling in on GLP-1s appears roughly in line with our view that GLP-1 expansion should not materially affect dialysis demand for at least the next decade, as mildly extended kidney disease progression to dialysis may be largely offset by cardiac and first-year survival, or "crash," benefits. Considering this roughly neutral outlook, we find the significant discounts to fair value in dialysis-related stocks compelling.