Contemplating investment in obesity medication: a potential lucrative venture?
In the ever-evolving investment landscape, the question looms: Are pharmaceutical and biotech companies manufacturing weight-loss drugs a promising investment avenue? The case for these companies becomes compelling as the impact of weight-loss medication takes shape in the lives of consumers and the broader economy.
Todd Gagne, a well-respected analyst at Wildfire Labs, recounts the story of software engineer Lisa Chen, who embarked on a weight-loss journey with a new medication in 2021. By 2023, her grocery bill had slashed by 40%, her alcohol spending plummeted by 85%, and her impulsive online shopping dropped by 60%. The ripple effect of such alterations extends far beyond individual lives, raising questions about the broader implications of weight-loss drugs on consumer habits and the economy.
Major food and drink corporations like Coca-Cola are already responding to this so-called "Ozempic earthquake," with over two-thirds of their product portfolio revolving around low and no-calorie options. Meanwhile, the healthcare sector anticipates a substantial prize, with investments galore poured into the pursuit of market share in this burgeoning segment.
Tackling the obesity epidemic is not only a matter of health. According to The Lancet, more than half of the global population over 25 years old will be overweight or obese by 2050. The public health crisis extends to economic concerns as well, given the increasing burden of obesity-related illnesses on hospital systems and work productivity.
The market for weight-loss drugs is colossal, with massive untapped potential. Evaluate Pharma estimates that the overall market could swell to a staggering $130 billion by 2030, with Wegovy and Zepbound, the current frontrunners, still tallying less than $5 billion in sales in 2023.
The roots of these drugs hark back to the 1980s and the discovery of glucagon-like peptide-1 (GLP-1). Initially used to control type-2 diabetes, the hormone has now found a new role in weight management with the advent of products such as Novo Nordisk's Wegovy (a higher-dose version of Ozempic) and Eli Lilly's Zepbound.
Since June 2021, Novo Nordisk's share price experienced a threefold surge, briefly catapulting the company to the top spot in Europe. Eli Lilly followed suit, with its stock valuation surging in tandem. However, the competitive landscape is ever-shifting, with Novo Nordisk's stock retracing its path while Eli Lilly has emerged as the frontrunner.
The unique appeal of these drugs stems from their unprecedented effectiveness. Patients report annual weight loss averages of 15%-20%, with relatively mild side effects. Previous weight-loss drugs offered mere 5%-10% weight loss and more severe side effects, such as those encountered with the infamous Fen-phen combination, which was ultimately pulled from the market due to safety concerns.
The precise scale of the market remains elusive due to the drugs' high costs, with pricing being a contentious issue that will impact uptake among patients and payers alike. In the United States, for instance, annual treatment sets consumers back a hefty $6,000. Greater affordability and ease of access should boost the market in the years to come.
Beyond weight loss, these drugs could prove beneficial in other areas, including improved cardiovascular health, reduced risks of diabetic kidney failure, and enhanced symptoms management for various mental health conditions.
Optimism about this class of drugs extends beyond their immediate weight-loss effects, with industry experts foreseeing a vast potential to help hundreds of millions of patients, according to Trevor Polischuk, manager of the Worldwide Healthcare Trust.
Amid the race for market share, Novo Nordisk and Eli Lilly lead the pack. Lilly has the edge due to its more effective approved drug and a more diversified development pipeline. However, the theme is far from played out, with myriad rivals angling for a slice of the pie.
Competitors are eager to develop therapies that optimize weight loss while minimizing adverse effects, potentially through combined GLP-1 and other molecule therapies like amylin. Oral pill alternatives to injections are also being pursued, offering improved patient convenience and enhanced global distribution capabilities.
Lilly's promising new tablet, orforglipron, may represent the next stage in the pharma industry's battleground, says Robert Cyran of Breakingviews. Preliminary trial results show that 36 milligrams of orforglipron can lead to 8% weight loss over a 40-week trial period, potentially attracting a broader base of patients and ensuring greater adherence.
Seizing the opportunities and navigating the challenges amid this competitive landscape will require keen insights and effective strategies. Key considerations include pricing, insurance coverage, patient persistence, and the ongoing evolution of drug formulations and delivery methods.
Sources:
- Market Analysis: Weight Loss Medication Market 2022-2030 - Industry Size, Share, Trends, Key Players, Segments, Growth Opportunities, and Global Forecast - Mordor Intelligence
- The Future of Weight-Loss Drugs - Goldman Sachs
- U.S. Weight Loss Market Surpasses $90 Billion - Ortho Molecular Products
- Novo Nordisk Wegovy Obesity Care Division Sales Grow 65% YoY in Q1 - Seeking Alpha
- Can Weight-Loss Drugs Keep Their Promise? - Morningstar Investor
- Prescription Drugs: Big Pharma's R&D Much Less Effective Than Biotech's - S&P Global Market Intelligence
- Todd Gagne, from Wildfire Labs, shares the story of software engineer Lisa Chen, who, after using a new weight-loss medication in 2021, experienced significant financial changes, reducing her grocery bill by 40%, her alcohol spending by 85%, and her impulsive online shopping by 60%.
- In the healthcare sector, a substantial amount of finance is being invested into the market share competition in the burgeoning weight-loss medication segment, particularly as industry experts like Trevor Polischuk from the Worldwide Healthcare Trust foresee a vast potential to benefit hundreds of millions of patients.
- Meanwhile, optimism about the class of weight-loss drugs goes beyond their immediate weight-loss effects, as these drugs could prove beneficial in areas such as improved cardiovascular health, reduced risks of diabetic kidney failure, and enhanced symptoms management for various mental health conditions.
