Weight loss wonder drugs

What do fund managers think?

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Pharmaceutical companies Eli Lilly and Novo Nordisk have recently dominated international headlines with their blockbuster weight loss drugs. These new cutting-edge medications, known as GLP-1 antagonists, help manage blood sugar levels and reduce hunger and food intake, and are currently used mainly to treat obesity and type 2 diabetes.

However, strong evidence is emerging that these drugs are also effective at treating a range of health conditions including cardiovascular disease, Parkinson’s and Alzheimer’s.

While Eli Lilly and Novo Nordisk are currently leading the way in the production of these medications with drugs such as Wegovy/Ozempic (Novo Nordisk) and Zepbound/Mounjaro (Eli Lilly), dozens of other companies are working on similar treatments, making the most of recent developments.

As the market leaders, Novo Nordisk and Eli Lilly have seen their share prices soar in recent months, with Novo Nordisk up 352% and Eli Lilly up 381% over one year. This year, sales of GLP-1 antagonists are projected to reach $6 billion, with some speculating that this drug class could be the first to reach $1 trillion in sales (source: Schroders).

The Association of Investment Companies (AIC) has collated comments from managers of investment trusts in the Biotechnology & Healthcare sector, as well as managers in the Europe sector with large holdings in Novo Nordisk.

What’s the potential for weight loss drugs? 

Trevor Polischuk, Partner of OrbiMed Capital, which manages Worldwide Healthcare Trust, said: “In a word, enormous. The combination of incredible efficacy, long-term safety, and a massive addressable market in terms of global patient prevalence has created the largest therapeutic market opportunity I have ever seen in my career. And that is just in obesity. The impact that these drugs are having in other areas, including but not limited to diabetes, cardiovascular disease, kidney disease, liver disease, arterial disease, heart failure, and potentially even Alzheimer’s disease is incredible. As the newest data was emerging last year, we began to forecast a market potential of $100 billion by 2030. Now we are wondering if it could be $200 billion.”

Marek Poszepczynski, Manager of International Biotechnology Trust, said: “The gravity of the obesity crisis and the escalating demand for solutions has prompted biotech and pharma companies to invest billions into developing and manufacturing next-generation anti-obesity medications. Some analysts forecast that peak sales will be between $50 billion and $150 billion by 2030.

“However, some of these firms offer little more than compelling narratives and insufficient data, seeking to capture investor interest and boost their valuations. Such trends risk creating an ‘obesity bubble’, with the companies involved rising to unsustainable and unjustifiable valuations.”

Sam Morse, Portfolio Manager of Fidelity European Trust, said: “Obesity is a global epidemic, and one that is getting worse, with some estimates suggesting that there are over a billion people worldwide suffering with severe excess weight and related health issues. The emergence of treatments for diabetes and obesity via weight loss drugs rather than managing symptoms through insulin shots has a wide variety of positive implications. Given the efficacy of the drugs in managing weight, drugs like Wegovy and Ozempic are in huge demand. Sales estimates for the class of drugs (including diabetes) are $165bn.

“Beyond weight loss, strong evidence is emerging that these drugs are also effective at treating other health issues such as cardiovascular disease, Parkinson’s, Alzheimer’s and a whole variety of other innovative paths that could result in a much bigger end market than first anticipated.”

Stefan Gries, Co-Manager of BlackRock Greater Europe Investment Trust, said: “Currently, only a very small percentage of an estimated 800 million people who live with obesity globally receive long-term medical treatment given the severe side effects of older therapies. The emergence of new weight loss drugs is a hugely significant and positive development in treatment for this area.”

Woody Stileman, Managing Director – Business Development of RTW Investments, which manages RTW Biotech Opportunities, said: “Obesity is the gateway towards many serious conditions like heart disease, strokes and diabetes. We believe that obesity drugs will be the biggest drug class in history. Peak annual global revenues of the currently launched drugs and leading drugs in phase 3 trials could be $115bn.”

Potential risks

Gareth Powell, Head of Healthcare of Polar Capital Healthcare Trust, said: “We believe Eli Lilly and Novo Nordisk will maintain their dominance, but other products should reach the market. The key risks we see are pricing pressure being greater than expected and unexpected safety issues appearing after long-term treatment, although the probability of the latter appears low.”

Jamie Ross, Portfolio Manager of Henderson EuroTrust, said: “So far, the biggest problem facing Novo Nordisk and Eli Lily has been their inability to ramp up supply quick enough to meet the huge demand levels for their obesity drugs. Both companies have invested significantly to overcome this issue and we are unlikely to see significant supply constraints beyond 2024.

“There are three major remaining potential risks that I am focused on. Most importantly, Novo Nordisk and Eli Lilly have a head start, but they will one day face competition. This competition could result in a still-rational market where pricing is robust and volumes grow strongly, but changing competitive dynamics could also result in aggressive price competition if the products competing are relatively undifferentiated from each other.

“Second, political pressure, especially in the US, or changing regulatory treatment, could also put unanticipated pressure on pricing. We have heard Bernie Sanders in the US call for price reductions for Novo Nordisk’s products (whilst seemingly ignoring the US company Eli Lilly) and this noise could increase leading to faster than anticipated price reductions.

“Finally, and this is unlikely given extensive testing and how much we now know about these drugs, there is always the risk with pharmaceutical products that long-term usage results in side-effects that were unanticipated.”

Trevor Polischuk, Partner of OrbiMed Capital, which manages Worldwide Healthcare Trust, said: “Cheaper alternatives, whether it be in the form of generic drugs or ‘me too’ products that are discount priced, are a constant and familiar theme within the pharmaceutical industry. The best and most successful companies combat this with innovation – creating a better mouse trap. Despite the recent launches of Wegovy and Zepbound, both Novo Nordisk and Eli Lilly have next generation products already in late-stage development – and these developmental assets appear to be superior to what they are selling today.

“Competitors will also have to start – now – creating capacity to compete to even give them a fighting chance to take any meaningful share from Lilly and Novo in the future. The moat that Lilly and Novo have created is huge. And if I am wrong, I think the market is massive enough, especially beyond 2030, to have more than two entrants in this space and multiple competitors could enter and be successful with blockbuster products.”

Marek Poszepczynski, Manager of International Biotechnology Trust, said: “Supply constraints are already posing a problem for Eli Lilly and Novo Nordisk, due to the scale of demand for these drugs. Obesity drugs require the manufacturing of peptides, a process that takes both time and effort since they are not small molecule drugs. Both companies have recently announced a combined $50-60 billion to be put aside for manufacturing plants, which could address such issues and allow them to keep pace with growing demand.  This opens the door to other companies to enter the market with competitor products and many are seeking to take advantage of the situation.” 

Companies poised to benefit

James Bird, Fund Manager of European Opportunities Trust, said: “The growth of the obesity market will be accompanied by its stratification: as the heterogeneity of the disease becomes better understood, drugs will increasingly tailor to patient needs and risk profiles. From this standpoint, headline weight loss will become less significant, whilst molecule specific secondary benefits, and the wealth of supporting clinical evidence required, will become more important. Together with the costs, timelines and challenges of capacity buildouts, this creates a formidable barrier between the current leaders and prospective challengers.”

Woody Stileman, Managing Director – Business Development of RTW Investments, which manages RTW Biotech Opportunities, said: “Lily and Novo are the clear leaders currently, but, given the market opportunity, many companies are developing alternatives. These companies are potentially developing more effective drugs, namely a better version of Lily’s Zepbound, or an oral small molecule drug that is only slightly behind Lily’s program orforglipron, or an alternative treatment that can be combined with other drugs.”

Gareth Powell, Head of Healthcare of Polar Capital Healthcare Trust, said: “The other companies I would highlight as having potential to benefit are Amgen, Zealand Pharma, Viking Therapeutics, Innovent and Structure Therapeutics in the public space.”

Trevor Polischuk, Partner of OrbiMed Capital, which manages Worldwide Healthcare Trust, said: “Companies like AstraZeneca and Roche have both made astute acquisitions for GLP-1s and early data look promising. And another company, Merck is under the radar with their own offering by not focusing so much on weight loss but other medical conditions like liver disease.”

Jamie Ross, Portfolio Manager of Henderson EuroTrust, said: “This will be a market where first mover advantage and manufacturing scale and capabilities will matter. I see Novo Nordisk and Eli Lilly as likely to lead the market throughout the 2020s. However, as we approach the end of the decade, we are very likely to see new drugs on market from Roche, Viking, Amgen and Zealand Pharma amongst others. In addition to this dynamic, there will also be companies involved in the value chain who will benefit. For example, Gerresheimer make speciality syringes used in GLP-1 production and Lonza provide outsourced manufacturing capabilities that will be in increasing demand. It is often our job as investors to explore value chains, to think outside the box and invest in areas where the benefits of a particular structural theme are underappreciated.

“Finally, it is worth thinking about the companies and industries that will lose out from widespread weight loss drug adoption. Will people taking weight loss drugs drink less alcohol, will they avoid frozen food, will sugar consumption be hit? These are all questions that inform investment decisions today but the answers will not be visible for several years to come.”

Sam Morse, Portfolio Manager of Fidelity European Trust, said: “As a portfolio manager focused on the opportunity set within Europe, we see Novo Nordisk as the clear winner in terms of its first mover advantage in the GLP-1 space. Novo Nordisk originated as a diabetes treatment company focused on insulin to manage the condition. Along the way they found that the GLPs that they were using had a variety of other benefits beyond diabetes. We strongly believe that the obesity runway is strong and long, but beyond that, in the same way Novo Nordisk pivoted from insulin and diabetes to obesity and weight loss, we think there are a number of adjacent areas that the company can pivot to in time.”

Marek Poszepczynski, Manager of International Biotechnology Trust, said: “There are currently three drugs approved for treating obesity, the two most dominant being Novo Nordisk’s Wegovy and Eli Lilly’s Zepbound. However, hot on their heels are various emerging biotech and pharmaceutical companies attempting to chase the market. 

“Current GLP-1s require weekly injections, a somewhat cumbersome method compared to oral tablets, so many companies including Novo Nordisk and Eli Lilly themselves, are attempting to develop more convenient and longer lasting treatments. Amgen and Zealand are the only sizeable biotech companies (as opposed to pharmaceutical companies) that are currently actively trying to get involved in the obesity space.

“With behemoths like Eli Lilly and Novo Nordisk in a dominant market position with strong next generation pipelines, we remain sceptical about the emergence of a major new contender in the near term. However, emergent companies such as Amgen, Structure and Zealand could also be placed to benefit over the longer term, as well as addressing supply and pricing issues.”


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