The relentless ascent of obesity rates in the United States over the past decade has prompted some of the world’s leading pharmaceutical companies to capitalize on the burgeoning treatment market.
During its most recent quarter, Novo Nordisk witnessed a substantial surge in profits and revenue, predominantly propelled by the success of Wegovy—an injectable weight-loss treatment greenlit by the Food and Drug Administration in 2021. Novo Nordisk reported a remarkable 174% increase in obesity care sales for the first three quarters of 2023, primarily fueled by the robust demand within the U.S. market. Such is the popularity of Wegovy that the company has found it necessary to implement ongoing supply restrictions while concurrently striving to augment production capacities.
Adding to the landscape, Eli Lilly has recently joined the weight-loss treatment market with the regulatory approval of Zepbound. Positioned as a novel iteration of the diabetes drug Mounjaro, Eli Lilly has strategically priced Zepbound at approximately a 20% discount compared to Novo Nordisk’s Wegovy. This competitive pricing is a deliberate move by companies to attract more employers to incorporate weight-loss drugs into their insurance benefit plans.
Statistics from the Centers for Disease Control indicate that as of 2021, approximately one-third of U.S. adults were classified as obese—an increase from around a quarter in 2011. Some experts project that by 2030, half of all U.S. adults could be grappling with obesity.
“To gain coverage in Medicare and Medicaid, they’ll likely need legislation at the state and federal level,” suggests Jeff Jonas, a portfolio manager at Gabelli Funds. “It’s likely going to take years of market development to reach their full potential, but these drugs could be revolutionary.”
Goldman Sachs foresees robust revenue growth from anti-obesity medications as a consequence of escalating obesity rates. The global market for such medications surpassed $6 billion this year and is anticipated to burgeon to $100 billion by 2030, according to the bank’s forecasts.
In anticipation of potential future competition, Novartis and Eli Lilly’s injectable treatments may encounter challengers in the form of Pfizer’s danuglipron—a potential oral medication for obesity—and Amgen’s ongoing development of an obesity treatment.
However, this surge in demand for weight-loss drugs is not without consequences. Medical device makers may face adverse effects through a decline in weight-loss surgeries. Even retail giant Walmart has reported that customers picking up prescriptions for weight-loss drugs are purchasing less food.
Nick Anderson, a portfolio manager at Thornburg Investment Management, describes the market sentiment as a “shoot first, ask questions later” approach to weight-loss drugs. “It’s clear that these are highly effective drugs, and there is exceptionally strong demand for them.”
Furthermore, companies specializing in obesity treatments are striving to underscore the broader health benefits of their products to bolster their case for increased insurance coverage. A wider insurance net could ultimately translate into more affordable and accessible weight-loss management for a larger segment of the population.