Will GLP-1 make your portfolio trim and fit?
Tembusu Partners
A leading boutique private equity investment firm backing early to growth stage ventures across Asia.
What is GLP-1?
Glucagon-like peptide-1 (GLP-1) receptor agonists are a class of type 2 diabetes drugs that not only improves blood sugar levels, but also possibly gives rise to weight loss.?
The role of GLP-1 is to induce the body to produce more insulin, which reduces blood sugar levels.?
However, consuming GLP-1 in higher amounts also interacts with parts of the brain that suppresses appetite. When used in conjunction with diet and exercise, it may lead to significant weight loss and subsequently a lowered risk of cancer, diabetes and heart diseases in overweight individuals.?
One such example of GLP-1 receptor agonists is semaglutide. Currently, semaglutide is only approved for weight loss under the brand name Wegovy, which is produced by Novo Nordisk ($NVO). Drugs like semaglutide will mimic the action of GLP-1, which helps stimulate the body to produce more insulin when a spike in glucose levels are detected. Hence, healthcare providers have used semaglutide as a treatment method for Type 2 diabetes mellitus (T2DM).?
Currently, there are only 3 FDA-approved semaglutide products, the other 2 being Ozempic and Rybelsus and all of which are produced by $NVO.?
FDA-approved semaglutide product comparison
Benefits and side effects
Studies have shown that GLP-1 agonists may have other potential benefits, such as:?
However, common side effects include:?
The extent of weight loss varies depending on the type and dosage of GLP-1 drug consumed, and studies have shown that people using semaglutide lost about 15.3kg compared to 2.6kg in non drug users.?
Moreover, patient adherence to the prescribed regimen and lifestyle modifications (e.g. diet and exercise) are essential components of successful weight management strategies.
Market size
In 2023, GLP-1 receptor sales generated US$25B in revenue in 7 major markets - the U.S., Spain, France, Germany, Italy, Japan and the U.K.
The GLP-1 receptor agonist market has recorded a steady increase of 20.6% CAGR between 2020 to 2023. In 2022, the market was worth USD$18.75B and with obesity and Type 2 diabetes rates on the rise, it is expected that the market for GLP-1 drugs will reach US$125B by 2033.?
Market Dynamics
The US obesity market is on a sharp upward trend, expecting a 53% CAGR from 2022-2030.?
Obesity is a common risk factor for Type 2 diabetes, with studies showing that 90% of people with Type 2 diabetes have diabetes, or are overweight (BMI of at least 25). Addressing obesity is crucial in the prevention of T2DM, with weight reduction leading to prevention, control, and in some scenarios, remission of T2DM.
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Diabetes is estimated to affect approximately 537 million adults worldwide, with a global prevalence of 10.5% among adults aged 20 to 79 years. This number is projected to rise to 643 million by 2030, and 783 million by 2045. Type 2 diabetes is a key issue, making up approximately 98% of global diabetes diagnoses. The worldwide incidence rate is on a steady rise among adolescents and young adults, rising from 117 to 183 per 100,000 population between 1990 and 2019.?
Currently, there are 10 GLP-1 receptor agonists approved for Type 2 diabetes, and 3 for obesity. Drug makers are seizing the opportunity to capitalize on the GLP-1 trend by developing new, lucrative drugs. With 27 new GLP-1 drugs in the pipeline, these next-generation medications not only contain the GLP-1 hormone but also incorporate additional hormones to enhance benefits such as improved heart and liver health and reduced muscle loss, a side effect associated with older GLP-1 drugs. One can expect to see many more GLP-1 drugs to be rolled out in the next 5-10 years.?
Competitor Analysis
The 2 biggest players in the weight loss drug market are Novo Nordisk ($NVO) and Eli Lilly ($LLY).?
As of 8 July 2024, $NVO has a market capitalization of USD$634B, while $LLY has a market capitalization of USD$823B.?
They are currently the 2 most valuable healthcare companies in the world, with both stocks rising more than 250% over the past 3 years and significantly outperforming the S&P 500. With investor expectations of these 2 companies dominating the GLP-1 market, valuation multiples have expanded, reflecting optimism in potential growth of these 2 companies.
Novo Nordisk is the producer of Ozempic, Wegovy and Rybelsus, while Eli Lilly’s key product is Mounjaro?(tirzepatide), which is a single molecule designed to bind to glucose-dependent insulinotropic polypeptide (GIP) and GLP-1 receptor agonists. It is the first and only GIP and GLP-1 receptor agonist approved for treatment of Type 2 diabetes. Another up-and-coming product by $LLY is Zepbound, another tirzepatide based obesity medicine.?
Zepbound and Mounjaro activate a second hormone receptor GIP, which will aid in reducing appetite and also improve how the body breaks down sugar, bringing about a similar effect to GLP-1.?
With the dual agonists that combine GLP-1 and GIP, research has shown that it has led to a 22.5% average weight loss versus a single-digit average of other medications, proving to be an effective weight-loss method.?
Challenges
However, the addressable market for GLP-1 might not be as large as expected. As although they are a promising weight-loss drug, the market is only limited to a fraction of the population that suffers from obesity. It also requires patients to be consistent in their use. More critically, there is a severe lack of insurance coverage for GLP-1s solely for obesity. With the cost of treatment going up to more than US$1,000 per month, this poses a major obstacle to overcome for many.?
Conclusion
In conclusion, GLP-1 receptor agonists pose as a promising solution for individuals that are finding solutions to weight loss and Type 2 diabetes management, offering benefits beyond glucose control. With major pharmaceutical companies investing heavily in drug development for GLP-1s and T2DM being on a steady rise, there is significant potential for growth in the market for weight-loss drugs.? However, it is crucial to address the challenges, and the necessity for consistent use and patient compliance to fully capitalize on the advantages these medications offer.
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Nothing herein constitutes investment advice - suitability of any investment or product will vary from person to person. Tembusu Wealth Management is a division of Tembusu Partners which is regulated by the Monetary Authority of Singapore.