Obesity drugs: broadly good for investors, with some strictures
The maker of Wegovy and Ozempic generated $2.4bn in sales from weight-loss treatments last year
Obesity drugs are generating a buzz to rival chatbots and quantum computers. Wegovy, an injectable drug, Ozempic and several other diabetic treatments have gone viral on social media. Elon Musk and Hollywood celebrities say they have used the drugs to shed weight.
One side effect of the treatments, which use a hormone to regulate appetite, should be scepticism. Wonder drugs, from Valium to Zantac, have a history of unintended consequences. But at least one slimming institution is giving obesity treatments an apparent vote of confidence: WeightWatchers.
Now called WW International, it is buying Sequence, a telehealth operator that can prescribe drugs including Wegovy and Ozempic. The $106mn deal is small. But a jump of up to 48 per cent in WW’s share price on Tuesday suggests the market thinks the transaction can tip the scale in the company’s favour.
Investors are rightly excited. Obesity affects about 650mn people worldwide. Almost half of Americans will be obese by 2030, a Harvard study found. About 18 per cent of healthcare spending would then go on related conditions.
Morgan Stanley thinks the market for weight-management medicines could reach $54bn over seven years — with $31.5bn of this from the US alone.
Companies behind new obesity treatments are flying. Novo Nordisk, the Danish group that makes Wegovy and Ozempic, generated DKr$16.9bn ($2.4bn) in sales from obesity treatments last year. Its shares are up 40 per cent over the past year. Eli Lilly, whose diabetes drug tirzepatide should get regulatory approval to treat weight loss this year, has risen 19 per cent.
Both are trading at steep premiums to Pfizer, whose shares have dropped 16 per cent as the Covid-19 vaccine sales boom faded.
Demand for the drugs is high. In the US, the challenge will be convincing insurers and government to pay for them. At $1,349 for four weekly shots per month, Wegovy is beyond the reach of most Americans — particularly the low-income groups where obesity is rife.