A booming weight-loss drug market has investors scrambling for a piece of the action
After Copenhagen-headquartered Novo Nordisk published trial data this week suggesting its weight-loss jab Wegovy cut the risk of heart attacks and strokes in patients by a fifth, something extraordinary happened.
Long the most valuable company in the country, a surge in Novo Nordisk’s share price saw its market value eclipse that of the whole Danish domestic economy. It is now on track to becoming Europe’s most valuable company.
The market mania reflects one of the biggest booms in the pharmaceutical sector for decades: anti-obesity jabs. These drugs are expected to be worth $100bn (£79bn) a year by the mid-2030s and both investors and companies are racing to get a piece of the action.
Already, demand is surging. Eli Lilly this week became the most valuable healthcare company in the world after announcing a 70pc jump in sales of its own rival anti-obesity jab.
Weight-loss jabs are “likely to be the largest category of drugs for generations”, says Andy Richards CBE, a veteran life sciences investor.
Those who make, sell and invest in them are set for huge rewards. Britain risks being left behind in the great weight loss gold-rush, with AstraZeneca and GSK seemingly caught flat-footed by the boom.
Ozempic, another treatment developed by Novo Nordisk, has already become a byword for this new market, rumoured to be used widely in Hollywood and admitted by Boris Johnson.
Originally developed as a treatment for diabetes, its obesity-fighting potential was discovered as a lucrative side-effect. There is already another challenger that threatens to overshadow it: Mounjaro.
Like Ozempic, Mounjaro was developed as a treatment for diabetes. However, recent trial data suggested patients could lose more than a quarter of their weight if they use Eli Lilly’s drug for an extended period of time or with intensive lifestyle changes. This marks the highest weight reduction seen in a late-stage clinical trial to date.
The US Food and Drug Administration is looking at whether to approve it for treatment of obesity and has fast tracked the application.
Sales are already surging even without the authorisation. Eli Lilly, the US company behind the drug, sold almost $1bn worth of Mounjaro in the three months to June, a jump of 72pc compared to the first three months of the year.
The company is struggling to keep up with demand, ploughing billions of dollars into new factories to churn out the drug.
The potential of these new anti-obesity treatments goes further than simply helping patients lose weight. Preliminary findings this week revealed that Novo Nordisk’s best-selling Wegovy could slash the risks of heart attacks and strokes.
Wells Fargo analyst Mohit Bansal says: “Until now, these medicines were only weight-loss drugs but now they are much more than that.”
The early findings have turned the question of whether healthcare systems should provide these drugs on its head. According to Evan Seigerman, an analyst at BMO Capital Markets, it is now almost “unethical” for these medications to not be offered to people.
Sir John Bell, the UK’s life sciences champion, says the drugs are likely to become “the new statins”, the cholesterol-lowering medicines that are among the most widely prescribed in Britain.
Naveed Sattar, a professor of metabolic medicine at the University of Glasgow, says it could mark a “paradigm shift” for doctors that allows them to take patients off a cocktail of other drugs designed to treat illnesses that have arisen because of obesity.
However, Prof Sattar cautions that this new class of drugs should not be treated as a silver bullet that can cure all ills.
“By the time you get to the level you need these drugs, you’ve got heart disease, and you’re living with obesity,” he said. “There’s a lot of damage that has already been done that cannot be undone.
“You’ve already damaged your joints to a certain degree, you’ve already stretched your heart to a certain degree. We cannot think that these drugs alone are going to take away all the adverse things that obesity causes.”
Research suggests that people who have been obese may need to continue taking treatments such as Wegovy or Mounjaro in order to keep the weight off.
Dr Hakim Yadi OBE, chief executive of Closed Loop Medicine, says this means “you potentially have a pharmaceutical blockbuster that people don’t have to come off, but actually can’t come off”.
With the potential that these drugs could also then have a positive effect on the risks of strokes and heart diseases, longer-term use could yield other benefits.
This huge potential for use explains why investors are scrambling to get a piece of the action.
While the development of Covid-19 vaccines and treatments was a huge money maker for companies such as Pfizer, it has proved temporary. The market for weight loss jabs has much more staying power.
Conspicuous by their absence in this new space are British pharmaceutical companies.
AstraZeneca is understood to be at the early stages of developing its own version of the drug, which is known as a semaglutide.
GSK has yet to make a play, a situation that is likely to fuel criticism that chief executive Dame Emma Walmsley has failed to develop innovative drugs under her watch.
The fact that Britain’s pharmaceutical giants appear to have been caught flat-footed raises fears the UK will miss out on the gold rush.
Richards, the life sciences investor, says: “Companies like AstraZeneca could and should have been in the pack, but they didn’t quite make it.”
Next-generation weight-loss drugs are currently not available for the vast majority of people in the UK, though regulators have recommended the use of Wegovy for adults with at least one weight-related condition, such as heart disease, and a body mass index (BMI) of at least 35 in Britain.
Up until this point, Novo Nordisk has prioritised its supply in the US, and has held off selling into the UK. It has suggested the treatments could go on sale in Britain later this year and be available at chemists.
There remain major questions over whether the NHS will be able to afford to prescribe these drugs en masse. Medicines such as Wegovy can cost more than $1,000 per month in the US whereas statins, which treat some conditions linked with obesity, can cost as little as a pound a day.
Richards predicts a “huge stand-off looming between these companies and the payers” given the cost.
Sir John says: “The pressure to prescribe it will be strong, but the NHS drug budget, which is half what all other countries have, won’t tolerate it.”
The UK’s drug cost-effectiveness watchdog earlier this summer held off approving Eli Lilly’s weight loss jab for adults with diabetes, saying more evidence was needed before it could give the green light.
Dr Yadi says the pressure will be on the NHS to make sure “that only the right patients get these drugs and that they use it appropriately”.
For the companies racing to develop weight-loss jabs and the investors backing them, all of this is a footnote. The main concern is can they manufacture it fast enough to take advantage of the biggest new market to open up in a generation.