Not many drugs have their own theme song, but then not many are Ozempic, a key player in this new wave of weight loss and diabetes drugs, known as GLP-1 receptor agonists, that have become a global phenomenon.
Traditional and social media is packed full of familiar stories of patients who have had lifelong struggles with their weight and found new success with the GLP-1s, “my friend had tried everything — liquid diets, bariatric surgery, you name it. Nothing worked…But now, with a diabetes drug called Ozempic, my friend had lost 75 pounds” boasted Ruth Marcus at the Washington Post in one typical example.
As investors focused on life changing treatments, we approach this class of drugs by asking what is the impact on patients? How does that create the commercial opportunity? And what direct and indirect opportunities does that create for investors?
Clinical trials reveal substantial positive impact on obese patients, with weight loss averaging around 10-20% in just over a year, and some patients achieving an over 50% reduction. And the benefits are not just limited to weight loss, Novo Nordisk’s SELECT trial demonstrated once-weekly injections of Wegovy reduced the risk of heart attacks and strokes, a finding that propelled Novo Nordisk to Europe’s largest company by market cap.[1]
Of course, no drug is without side effects, and while the drugs showcase a positive safety profile, responsible investors must address potential risks. Ensuring prevention of misuse, especially by underweight individuals with eating disorders, remains a priority.
There have also been sporadic reports of side effects, such as severe vomiting and stomach pain. We believe these incidents do not pose a long-term risk to demand or stock performance because, inevitably, as millions embrace these drugs, rare side effects are likely to emerge and the significant media focus on these drugs brings these rare cases to the fore.
Projections suggest the GLP-1 class could become the largest-selling drug class ever, with estimates ranging from $30-40 billion to a staggering $100 billion in annual peak sales.
In terms of winners, Eli Lilly and Novo Nordisk lead the charge, with stock values surging in 2023 (Bloomberg as at 24/11/23). Conversely, a ripple effect was felt across the healthcare equipment sector, as investors anticipated higher risks for companies with solutions for conditions more prevalent in obese patients from declining demand. Companies that sell wearable insulin pumps and continuous glucose monitors device manufacturers, in particular, experienced declines after Novo Nordisk’s SELECT data release.
We think this is surprising and probably an incorrect reaction by many investors because we know that patients taking GLP-1s are at risk of hypoglycaemia, particularly if patients are taking another drug that also lowers blood glucose levels, such as insulin. Therefore, we believe continuous glucose monitors may experience increased demand, not lower demand, due to higher GLP-1 usage because of their ability to alert patients to hypoglycaemia in real time.
And indeed, Robert Ford, CEO of Abbott, which sells the Libre CGM device told investors on its third quarter earnings call that it had observed that “on average, those using both Libre and a GLP-1 exhibited a higher rate of use for both products, wearing Libre sensors more often and taking GLP-1 medications more frequently compared to other users.” (Source: Abbott as at October 2023)
There will be winners and losers as these drugs transform the healthcare landscape and cultivate an array of opportunities across the obesity market. Naturally, this space has attracted a lot of attention from patients, physicians, policymakers, investors and society more broadly. We ultimately believe focusing on solutions that demonstrate a positive impact on patients’ lives, such as weight loss medication and continuous glucose monitors, will be key in navigating market noise and irrational investor fears.
Source:
[1] https://fortune.com/europe/2023/09/05/novo-nordisk-lvmh-europe-most-valuable-company-wegovy-weight-loss-uk/ accessed on 28/11/2023
Key Information
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