The Obesity Drug Revolution: A Closer Look
Obesity drugs have been making major headlines lately for good reason. These drugs offer a seemingly straightforward solution to the daunting issue of obesity: weekly injections that naturally reduce people's desire to eat and drink, removing the need for the challenging willpower typically associated with exercise and dieting. For some, the outcome is impressive, with individuals reducing up to 20% of their body weight in just a year1.
Stock markets have reacted to the potential hit to demand. JP Morgan argues that the relative performance of the S&P beverage & Food Indices relative to the S&P 500, is the worst five-month period since 2000, during the peak of the dot-com bubble.2
Our team has conducted extensive analysis on the subject, engaged with various stakeholders (covering medical, food, drink, retail, Government and policy), whilst following the journey of patients.
Global Obesity Crisis
Obesity is an escalating, chronic issue. Globally 13% of adults are obese and more than 40% of the adult population in the US3. This is defined as a Body Mass Index (“BMI”) above 35. Rates of obesity have surged 30% since the early 2000s, in the US. The annual medical cost stands at $173 billion with the multiplier effect much larger4. It is estimated that medical expenses for adults who are obese are nearly $2,000 higher compared to those of a normal weight. According to the Centre for Disease Control & Prevention (“CDC”), 45% of those aged between 40-59 are obese in the US.5
Across Europe, 30% of the adult population is estimated to be obese by 2030 (~215 million)6. In China, rates of obesity have increased 3x since 2004, according to the Chinese CDC, to ~90 million people7. To achieve a healthy weight, a 30% weight reduction would be required for someone with a BMI above 35. For those who are overweight (BMI>30), a 20% reduction in body mass is required 8.
How GLP-1 Works
GLP-1, or Glucagon-Like Peptide-1, is a hormone pivotal in regulating sugar levels in our bodies after meals. When we eat, our bodies release GLP-1, signalling the pancreas to release insulin and slowing down the rate at which our stomach empties. GLP-1 agonist drugs mimic these actions, creating a sense of fullness, reducing appetite, and ultimately leading to weight loss. The mind and body believe they are not hungry. In reality, it is a form of starvation and leads to a rapid reduction in calories, for many users. A Jefferies survey of about 800 U.S. consumers on GLP-1 drugs revealed significant changes in eating habits. 73% reported eating less, and 71% felt fuller more quickly9.
Source: IMS/IQVIA10. For illustrative purposes only. There are no assurances trends described or depicted will continue.
Adoption
The first GLP-1 drug was approved by the FDA in 2005 for diabetes management, yet recent trials demonstrate the effectiveness in weight loss. The combination of celebrity endorsement and social media story telling has led to enormous engagement, with ~1% of the adult population using the drug (2.5 million11). Average monthly doses have increased threefold in the past two years 12.
73% of social media posts about prescription weight loss are from women 13
Prescription weight loss as a topic is growing 600% YoY
Changing narrative, growing empathetic tone and obesity viewed as a ‘chronic disease’
Females aged over 45 and high income were most likely to mention prescription weight loss on Instagram
Within prescription weight loss conversations: Ozempic is the most talked about brand (33% of traffic), followed by Mounjaro (17%), and Wegovy (16%). Weight-watches has entered the prescription weight loss business and has less than 3% of traffic.
+1900% increase in semaglutide related posts over the past two years.
The overwhelming majority of users are in the US. Approximately 80% of users are women. The age cohort with the largest usage is 40-59 year olds (the most obese)14. This group also has the highest median incomes in the US, according to DQYDJ.15
As the word has spread, a black market for these drugs has emerged, causing a severe supply shortage. Novo Nordisk, with their Wegovy, Saxenda, and Ozempic labels, and Eli Lilly, with Mounjaro and Tizerpatide, are the major producers. Demand for the product has seen Novo Nordisk surpass LVMH as Europe's most valuable company, and Eli Lilly is now worth over $500 billion.16
Source: Jefferies17. For illustrative purposes only. There are no assurances that the trends described or depicted will continue.
Challenges and Barriers: Price, Side Effects, and Long-Term Adoption
Price & Access
The price of medication has made drugs unaffordable to most of the population. Prices vary (as do insurance policies), yet individuals can be expected to pay up to $20,000 per year18. For context, this represents the equivalent of 65% of the median income in the US19. Further, obesity and household income are inversely correlated, making affordability more challenging.
The insurance market is adapting as more consumers seek the product, for obesity. Coverage under Medicaid and Commercial insurance plans is limited and is unlikely to change in the short term under the ‘Treat and Reduce Obesity Act’ (“TROA”)20.
Novo Nordisk estimates that of the 110 million adults with obesity in the US, 30 million have commercial coverage of Wegovy and 10 million have access to Wegovy through Medicaid21. Medicaid is currently prohibited from covering any anti-obesity medications and would requires legislative change (which the TROA aims to overturn).
Despite the forecasts from Novo Nordisk, some insurers are responding differently. Citing high costs, the University of Texas withdrew coverage for GLP-1 drugs in September, as ‘Cost analysis on these medications indicates they are currently the costliest prescription drugs paid for by the plan on an annual basis, even more costly than medications for complex conditions like cancer’22. This was from ~2% of people covered, seeking the weight loss drug. Outside the US, the pricing is more affordable, at as little as $100 per month in several European markets, or $200 in Japan23.
Global demand is outstripping supply. The FDA has put Ozempic and Wegovy on a shortage list since 2022.