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What are GLP-1s?
The emergence of GLP-1 drugs as effective treatments for obesity has dominated the recent news. Top headlines from Bloomberg, CNBC, The New York Times, People, and numerous other publications illustrate how this product has quickly become a mainstream part of our culture. GLP-1, or glucagon-like peptide-1, is a peptide hormone antagonist that blocks glucagon secretion to prevent excess glucose from entering the bloodstream. Initially developed over 15 years ago for lowering blood sugar for Type 2 diabetics, GLP-1 drugs are now also clinically proven to reduce weight significantly. Danish pharmaceutical company Novo Nordisk led this most recent trend by developing a drug called Semaglutide, known commercially as Ozempic, which was approved in 2017 for diabetes treatment. The big breakthrough came in 2021 when this same drug (named Wegovy for this particular iteration) was approved for obesity. This was quickly followed by pharmaceutical giant Eli Lilly developing Tirzepatide, commercially known as Mounjaro, for diabetes, which was approved in 2022. It was subsequently approved for obesity in November 2023 under the commercial name Zepbound.
How effective are GLP-1s? And are they only for weight loss?
The impact of GLP-1 as a treatment for obesity is significant, with Zepbound showing almost 25% weight loss in patients with minimal side effects. Equally impressive is the long-term data recently presented by Novo Nordisk for Wegovy in the SELECT study. The SELECT study was specifically designed to evaluate the cardiovascular benefits of Wegovy in an obese population. The study showed a statistically significant impact on cardiovascular outcomes and an all-cause mortality benefit. Novo Nordisk’s study revealed that in addition to inducing weight loss, GLP-1s lead to a 20% reduction in major adverse cardiovascular events, including cardiovascular death, nonfatal heart attack, and nonfatal stroke. GLP-1s are true game changers to both consumer health and the healthcare industry, as their use has broad health implications that could lead to longer lifespans for millions.
How broad will the impact of GLP-1s be?
An estimated 100 million people in the United States are obese, and approximately 38 million Americans have Type 2 diabetes. Estimates show that even if a portion of these people, about 5 to 10 million, take GLP-1 drugs, the treatment is expected to be a $100 billion market by 2030. This would make GLP-1s by far the largest drug class (a term used to describe drugs of similar characteristics) in history. Investors have already rewarded the two leading players in the GLP-1 industry, Novo Nordisk and Eli Lilly. The Danish company Novo Nordisk became the largest company in Europe and Eli Lilly’s stock grew by over 70% in the 2023 fiscal year which gave it a value of almost $500 billion.
Most GLP-1 drugs currently on the market are administered through a weekly injection. Many companies are working to further develop the class with combination drugs and oral versions. Oral versions of the drug, while preferable for some consumers, have not come into the mainstream market and are not as effective in clinical trials. Many companies are actively working to develop more effective orals. For example, Swiss pharmaceutical company Roche recently completed a $2.7 billion acquisition of California-based Carmot Therapeutics for their GLP-1 pipeline. Another example is Structure Therapeutics, a small biotech company currently developing an oral product.
How much do GLP-1 drugs cost?
GLP-1s are prescription drugs that cost about $1,000 per month, which totals over $12,000 a year per patient. Insurance coverage is still evolving. Meanwhile, consumers are pressuring companies to cover it for all employees. Demand for the drug has been so high that it has outstripped supply as Eli Lilly and Novo Nordisk struggle to keep up with the prescriptions. While GLP-1 drugs can be costly, the evidence that they will reduce the likelihood of future health problems such as kidney failure or heart attack makes the upfront costs reasonable for insurers. Ultimately, it will be a cost-benefit analysis for companies. If the drug cost is lower than the predicted future healthcare expenditures for an individual if they did not take the drug, it will likely be covered.
Will GLP-1s affect other industries beyond pharmaceuticals?
GLP-1s are impacting our society far beyond the healthcare system. GLP-1 drugs reduce appetite, with Morgan Stanley research showing that individuals who take the drug consume 20-30% fewer calories a day. It has also been found that GLP-1s make people not want to drink alcohol which offers a positive health benefit. Walmart’s grocery and pharmacy divisions can anonymously track consumer buying patterns and have seen a drop in snack purchases from individuals who have obtained Ozempic prescriptions. Many investors are very concerned about the indirect impact GLP-1s have on companies beyond the pharmaceutical industry. By reducing calorie consumption and fostering a reduction in alcohol use, certain consumer stocks, such as restaurant and snack food brands, may be negatively impacted. As another example, Novo Nordisk conducted the FLOW study to evaluate the effect of GLP-1s on kidney function. This study was cut short due to early efficacy when it discovered the drug had kidney-related benefits. The only reason to stop a study early is if it is already showing a statistical benefit, which means that it has well exceeded the expected efficacy. The data from the study was released after the market closed on October 10th, 2023, and on October 11th, the stock prices of dialysis companies, including DaVita and Fresenius Medical, went down around 20% as investors feared fewer patients would end up on dialysis. On the positive side, certain companies that produce the vials, syringes, and auto-injectors used for GLP-1 drugs benefit from the significant investment and expansion of their product line. These companies include Gerresheimer (GXI.DE), Stevanato Group SpA (STVN), and West Pharmaceutical Services (WST).
GLP-1 drugs are on a path to having one of the most profound impacts on public health in history. They hold the promise of weight reduction, diabetic control, and improving quality and duration of life. Since it is too early to see the full impact of GLP-1s, investors are grappling with how these drugs will affect a wide range of industries, including pharmaceutical and biotech companies, hospitals, suppliers, and even snack food companies and restaurants. What is clear is that GLP-1s will broadly impact our economy and people’s lives. The question is, by how much and for whom?
