Imperial Brands lights up, Novo Nordisk launches weight-loss drug in China, Alphabet could be forced to sell Chrome, Nestlé to slash costs and carve out water and drinks arm and Mulberry’s losses grow

“Well-received results from Imperial Brands helped to drive the FTSE 100 up 0.15% to 8,121. Imperial Brands’ shares lit up 1.8% to £24.45, having hit £24.84 soon after the market opened,” says Russ Mould, Investment director at AJ Bell.

“Despite a big push from governments, healthcare representatives and campaigners in society to curb the number of people smoking and vaping, Imperial Brands’ results would suggest the industry isn’t disappearing any time soon. The positive response to the results took its share price to a five-year high and extended the year-to-date gains to 35%.

“Industrial-to-healthcare distributor Diploma was the top faller on the FTSE 100 after a rare profit and revenue miss with its full-year results. The company has built a reputation of being a ‘Steady Eddie’ operator and while the latest figures still show earnings progression, it’s not quite to the level forecast by analysts.”

Novo Nordisk

“Novo Nordisk will be hoping for a first-mover advantage in China after it beat Eli Lilly to launch a weight-loss treatment in the country. China has a growing obesity problem and the country could prove to be a major market for weight-loss drug providers.

“Novo’s Wegovy treatment has been a roaring success for the company. Demand has far exceeded supply and the scale of the opportunity ahead for Novo helped to propel its share price to new record highs earlier this year. However, its shares have recently pulled back on concerns about competition as more companies advance trials for rival treatments, together with disappointing trial data and a potential crackdown in the US on the healthcare sector after Donald Trump picked vaccine sceptic Robert F. Kennedy Jr. to be US health secretary.

“A key problem for Novo and Eli Lilly has been production – they aren’t producing enough weight-loss treatments to meet demand. Both companies plan to invest heavily to expand production and that should bring down the price of their weight-loss drugs and put the treatment in the hands of more people.

“The price of Wegovy is much cheaper in China than in the US. While that isn’t necessarily good for Novo’s profit margins, it should benefit from the affordability factor – the opportunity isn’t restricted to the rich, which means it could become a mass-market product in time.

“While the China opportunity warms up for Novo, it is busy working on the next generation of weight-loss drugs, in a bid to improve efficacy and dial down the side-effects. One of the biggest problems with weight-loss drugs is that they can make individuals feel nauseous and that has led to people coming off the treatment. Pharma companies who crack this problem stand to become market champions in this field.”

Alphabet

“A big part of tech companies’ success is plugging users into their ecosystem and making them a captive audience for their services. The risk is a regulator intervenes to break up that cosy set-up.

“Google-owner Alphabet has benefited from a dominant position in the search engine market alongside owning the Android operating system and the Chrome internet browser. However, eye-catching reports suggest the US Department of Justice may ask a judge to force Alphabet to sell Chrome and take additional measures relating to Android and AI.

“A final ruling is unlikely to come until later next year so this issue will be hanging over Alphabet for some time to come. A change in administration, as Donald Trump returns to the White House, could also be key and adds a dose of unpredictability to the outcome.

“Trump had suggested he might target Alphabet thanks to its perceived bias against him but has also expressed doubt about the antitrust agenda pursued under Joe Biden.

“It all adds up to the sort of uncertainty which markets tend to hate and could act as a drag on the Alphabet share price heading into 2025.”

Nestle

“The new boss of Swiss consumer goods giant Nestlé has wasted no time in putting his stamp on the business, unveiling plans to slash costs and carve out its water and premium drinks arm.

“As a company mainstay, Laurent Freixe might have been expected to adopt a steady as she goes approach, however he seems to have accepted from the outset that radical action is needed to get Nestlé back on course.

“His predecessor’s decision to scale back spending on marketing and innovation allowed the company’s key brands to get stale. That, in turn, lost Nestlé share in a competitive market which not only encompasses rival brands but also supermarket own-label goods which have appealed to cost-conscious consumers.

“It’s therefore no surprise to see Freixe outline plans to allocate more money to the marketing budget, although the impact this might have on margins means it is crucial growth is delivered. Perhaps we can expect more tie-ups like the high-profile Kit-Kat sponsorship of Formula One.

“The water arm recently faced fines in France and has capacity constraints and a lack of scale which informs the decision to seek out a partnership arrangement.”

Mulberry

“Frasers was right when it implied that Mulberry was in a mess. The luxury goods company’s half-year results show losses getting bigger, margins falling, sales down in all regions and an outlook statement soured by the words ‘uncertainty’ and ‘challenges’.

“The new boss Andrea Baldo isn’t blind to the problems. His response is to cut costs, make the company more efficient, improve margins and rebuild the company’s financial strength. Those things won’t happen overnight. It’s now a waiting game to see if new life can be breathed into the business.”

These articles are for information purposes only and are not a personal recommendation or advice.