It's fair to say the pharmaceutical landscape is experiencing a seismic shift due to the burgeoning success of drugs such as Ozempic, the diabetic treatment that has now morphed into a super-blockbuster treatment for weight loss, which goes by the alternate name of Wegovy.
Developed by Novo Nordisk (NYSE:NVO), Ozempic has transformed the Danish company from an also-ran to Europe's largest drug company by market capitalisation.
Traditionally, bariatric surgery has been a primary method for combating obesity, offering substantial weight reduction and health benefits. However, its limited accessibility has left a gap in the global healthcare market.
Void being filled
This void is now being filled by the rapid growth of glucagon-like peptide-1 (GLP-1) medications, which mimic a naturally occurring hormone to reduce appetite and increase insulin release after meals. Initially developed for type-2 diabetes, these drugs have proven effective for weight loss without the serious side effects that have historically plagued obesity treatments.
The impact of these drugs extends beyond healthcare, potentially influencing sectors such as the food industry as consumers shift towards healthier options.
The immediate effects are seen in the declining demand for bariatric surgery and intensified competition in the healthcare sector for more convenient and affordable alternatives to current GLP-1 drugs.
Oral versions
As companies explore ways to broaden the market, oral versions of these drugs are in development, which could significantly increase patient reach and acceptance.
For investors, Novo Nordisk (NYSE:NVO) remains a pivotal player, according to the investment bank Liberum, which Monday published its research on the sector.
Despite high valuation compared to historical and sector averages, Novo Nordisk (NYSE:NVO)'s leadership in GLP-1 drug development, particularly in oral ingestible forms, makes its stock a key component in European portfolios, Liberum's analysts said.
In a research note assessing the prospects for this new boom sector, it pointed out that others - aside from Novo Nordisk (NYSE:NVO) - are now getting in on the act.
The biggest immediate threat is Eli Lilly Co's Mounjaro, a dual GIP and GLP-1 receptor agonist, which has shown promising results in weight management.
Race is on
At the same time, Pfizer and Boehringer Ingelheim are each working on their versions of GLP-1-related treatments.
Closer to home Anglo-Swedish giant AstraZeneca PLC (LSE:AZN) and Denmark's Zealand Pharma are also developing competing products, Liberum points out.
AZ's collaboration with Eccogene to develop a small molecule GLP-1 for obesity treatment is in its early stages, offering long-term investment opportunities.
Downsides?
Zealand Pharma, with its drug targeting both obesity and diabetes, has raised funds for R&D, indicating robust investor support and potential growth.
However, the success of these anti-obesity drugs has its downside. Companies like Fresenius Medical Care (NYSE:FMS) (FMC), specialising in dialysis products and services, have seen their share prices and growth forecasts negatively impacted due to the effectiveness of GLP-1 drugs like Ozempic in treating kidney failure, a condition often linked to obesity.