Weighty Investments: Exploring the Booming Market of Obesity Medications

Suzanne Berkery


Weighty Investments: Exploring the Booming Market of Obesity Medications

Today more people are obese than underweight in every region except sub-Saharan Africa and Asia according to the World Health Organization.


In 2019, it contributed to approximately 5 million deaths from cardiovascular diseases, diabetes, cancers, neurological disorders, chronic respiratory diseases, and digestive disorders. People who suffer from obesity also experience a four-fold increased risk of developing severe COVID-19. Obesity has now reached epidemic proportions and it is estimated that by 2030 over one billion adults globally will be obese [WHO].


In its World Obesity Atlas 2023, the Obesity Federation claims the economic impact of overweight and obesity on the world is set to reach $4.32tn—nearly 3% of global gross domestic product—annually by 2035. This is comparable with the impact of COVID-19 in 2020.


Ireland has one of Europe’s highest rates of obesity; 60% of adults, and over 20% of children and young people, in the country are overweight or obese.


Companies like Novo Nordisk & Eli Lilly have produced groundbreaking medicines that have sparked something of a gold rush in the Pharmaceutical industry.


NOVO.B.DK PE 36x Div Yield 1%


Novo Nordisk [NOVO] the Danish pharma stock has almost doubled in the past two years, overtaking other European behemoths like Nestle, L’Oreal and luxury-goods giant LVMH to become Europe’s most valuable company.


Sales surged in the third quarter as demand continued unabated for these obesity and diabetes drugs Revenues rose 38% to 58.73 billion kroner ($8.3 billion) excluding some items, beating analysts’ estimates while operating profits rose 47% during the period.


Ozempic, the diabetes drug sold by Novo Nordisk, skyrocketed in use after celebrities and ordinary people on TikTok reported that their doctors prescribed it “off-label” for weight loss. Wegovy, a higher dose version of the same medication, called semaglutide, was approved for weight loss for adults in the US in 2021 and for children aged 12 and older the following year.


Ozempic and Wegovy are two versions of semaglutide. The drug mimics a key gut hormone, known as GLP-1, that is activated after people eat, boosting the release of insulin and slowing the release of sugar from the liver. It delays digestion and reduces appetite. Clinical trials indicate that when used alongside diet physical activity and behavioural support that Wegovy users can achieve up to a 15% reduction in body weight after one year.


About 95% of sales of Wegovy are in the US, where the pharma group is struggling to keep up with demand. While the company is investing more than £ 5 billion to expand its Kalundborg site to boost supply capacity, it still expects to periodically face constraints and shortages in the US and elsewhere.


Analysts have speculated that the global market for GLP-1 products will reach >$70bn by 2032. Despite the blockbuster popularity, the treatments are reaching only a fraction of people who could benefit from them. About 15% of adults in the United States have diabetes, and more than 40% have obesity, according to age-adjusted estimates from the US Centers for Disease Control and Prevention, leaving millions more potentially eligible for the much-heralded treatments.


About 40 companies are chasing after Novo to grab a share of this market, led by Eli Lilly & Co.


LLY-US PE 90x Yield 0.89%


Eli Lilly’s Tirzepatide – already approved for type 2 diabetes under the brand name Mounjaro – is poised to become the most potent obesity drug on the market, promising users losses of more than 15 to 24 kg over time.


Tirzepatide is the first drug that uses the action of two hormones, GLP-1 and GIP, which Lilly says contributes to its increased effectiveness. It also targets the chemical signals sent from the gut to the brain, blunting cravings for food.


The US ‘Food and Drug Administration’ (FDA) has just approved Eli Lilly’s brand Zepbound which has the generic tirzepatide for chronic weight management in individuals who are obese or overweight. Tirzepatide is a newer drug, so there is less data available on it than semaglutide; however, the available data shows that it can be up to 2x more effective than similar treatment with semaglutide.


AZN-LON PE 17.75x Yield  2.25%


AstraZeneca last month paid $185 million for an exclusive license agreement with Eccogene—a China-based biopharmaceutical company—for the drug ECC5004, a GLP-1 receptor agonist that could treat obesity, type 2 diabetes and potentially other diseases. In addition, up to $1.8 billion more is promised if it meets clinical, regulatory and commercial milestones.


The drug would be taken once a day as a pill, either on its own or in combination with other medicines for the treatment of cardiometabolic diseases, like heart attacks or strokes. AstraZeneca said it hopes to enter phase two clinical trials for the drug by the end of next year.


ROG-SWX PE 13x Yield 3.86%


Swiss pharmaceuticals giant Roche is to acquire anti-obesity drug developer Carmot Therapeutics, becoming the latest company to attempt to unseat Novo Nordisk and Eli Lilly’s dominance within the global weight loss drugs market.


Under the deal terms, Carmot’s equity holders will receive $2.7 billion in cash on the transaction’s close and could pocket up to a further $400 million, depending on reaching certain milestones. The acquisition gives Roche access to a number of assets.


CT-388, the lead asset is a Phase-2 ready, dual GLP-1/GIP receptor agonist for the treatment of obesity in patients with and without type 2 diabetes. Injected subcutaneously once a week, it has potential as a standalone and combination therapy to improve weight loss and to be expanded to other indications. CT-996, a once-daily oral, small molecule GLP-1 receptor agonist currently in Phase-1 intended to treat obesity in patients with and without type 2 diabetes. CT-868, a Phase-2, once-daily subcutaneous injectable, dual GLP-1/GIP receptor agonist intended for the treatment of type 1 diabetes patients with overweight or obesity.


Roche Pharmaceuticals CEO Teresa Graham said, that this early-stage technology could help crack highly prized oral obesity treatments however it may be several years before the drugs are widely available.


Recent comments from Oprah Winfrey suggest this trend’s only difficulty will be supply. ‘The fact that there’s a medically approved prescription for managing weight and staying healthier, in my lifetime, feels like relief, like redemption, like a gift’ (Oprah Winfrey).


Obesity researchers are only beginning to explore what happens after people lose weight with GLP-1 drugs. Most trials of the drugs have only lasted a year or so. It is expected some type of long-term drug therapy is likely to be needed, just as it is with other diseases like high blood pressure. What form that will take is still unknown.


The success of this drug therapy on obesity and the work that is going on currently regarding maintenance of the achieved weight loss leads me to believe there is more upside for investors and exposure to this theme should be considered as part of a balanced portfolio.


The value of your investment may go down as well as up. You may get back less than you invest.


Past performance is not a reliable guide to future performance.