2025 Picks: Why we need to move beyond BMI

Researchers and Lancet commissioners, represented by Prof. Louise Bower, are proposing a shift away from using BMI as a definitive individual health metric toward a two-tier classification of obesity — 'preclinical' (high body fat without current health complications) and 'clinical' (high body fat with health consequences). The proposal underscores BMI's historical population-level purpose and recommends it remain a screening tool, with clinical decisions based on body-fat assessment and comorbidities; real-world cases (e.g., a patient denied referral for breast reduction due to BMI) illustrate misclassification risks. For investors, the change could modestly influence demand and reimbursement dynamics across obesity treatments, surgical providers, diagnostics and primary-care referral practices, but is unlikely to be market moving in the near term.

Analysis

Market structure: A shift away from BMI toward body‑composition and clinically‑stratified obesity benefits specialty diagnostics (DEXA/advanced imaging), chronic care platforms and makers of GLP‑1 therapies. Expect diagnostic equipment vendors (Hologic, GEHC/PHG) and chronic‑care/telehealth vendors (Teladoc, WW) to gain pricing power as payers pay for higher‑value tests and longitudinal management; elective and reconstructive surgery clinics may see a near‑term rise in referrals for procedures previously blocked by BMI thresholds.

Risk assessment: Immediate market moves will be muted (days–weeks) until payers or CMS issue coverage guidance; over 3–12 months expect guideline adoption and payer coding decisions to drive real demand. Tail risks: payers tighten prior authorization or restrict GLP‑1 coverage (high‑impact negative), or regulators mandate costly body‑composition testing (positive for diagnostics). Hidden dependencies include ICD/CPT coding, CMS/Medicaid decisions, and real‑world prescription trends (IQVIA) that will determine uptake.

Trade implications: Direct equity winners are large-cap GLP‑1 makers (NVO, LLY) and diagnostic OEMs (HOLX, GEHC); potential losers are insurers with high Medicare Advantage exposure (HUM) if medical loss ratios rise. Use relative trades (long pharma/diagnostics, short selective insurers) and option call spreads to capture upside around 6–12 month catalyst windows (guideline or payment changes).

Contrarian angles: Consensus overlooks reimbursement friction and capacity constraints — diagnostics and clinic demand may be supply‑capped, slowing revenue realization. Also GLP‑1 growth is increasingly priced; a modest regulatory tightening or safety scare could retrace 20–40% of consensus upside. Monitor prescriptions vs. expectations before levering positions.

Key Decisions for Investors

• Establish a 1.5% portfolio long position in Novo Nordisk (NVO) and a 1.5% long in Eli Lilly (LLY) over the next 30 days; hedge cost by selling 6–12 month 25% OTM call spreads (buy calls 15–25% OTM, sell calls 25–35% OTM) sized to cap downside to ~1% portfolio risk — add another 1% combined on positive CMS/Medicare coverage memo within 3–6 months.
• Initiate a 1.0% long split between Hologic (HOLX) and GE HealthCare (GEHC) (0.5% each) to play higher demand for DEXA/advanced imaging; increase to 2% total if within 6 months CMS issues new CPT/coverage language for body‑composition testing or if quarterly DXA utilization growth >15% y/y.
• Open a 0.8% notional short of Humana (HUM) (or use CDS for insurers) sized to risk tolerance — thesis: higher obesity treatment uptake raises near‑term medical loss ratios; cover within 9–12 months or if HUM MLR does not widen >50 basis points versus prior quarter.
• Set up a pair trade: long Teladoc Health (TDOC) 1.0% and short a BMI‑centric low‑quality telehealth PE/SMB name (if available) 0.5% — rationale: demand shifts to comprehensive chronic‑care platforms. Scale positions on weekly IQVIA Rx data showing GLP‑1 prescriptions rising >30% q/q or on a Lancet/WHO guideline endorsement within 90 days.