Pharma’s race for obesity drugs is still hotting up

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It sometimes seems like weight loss drugs are being grasped as the answer to all society’s troubles — including, with UK plans to trial them in the unemployed, worklessness.

But there are good reasons to think the class of drugs known as GLP-1s, including Novo Nordisk’s Ozempic and Eli Lilly’s Zepbound, could be used in therapeutic areas that extend beyond obesity and diabetes.

The latest is a study suggesting such drugs reduce opioid and alcohol addiction by up to half. GLP-1s are being tested on patients with Alzheimer’s, on top of conditions that can often go hand-in-hand with obesity.

For pharmaceutical companies that are (or want to be) big players in areas from cardiovascular health to renal diseases, developing GLP-1s is becoming an imperative. This race is no longer about catching up with Novo and Lilly in the anti-obesity category, which is forecast to reach $130bn a year in peak sales by 2030.

Take Roche. It re-entered the battle for a weight loss pill last year through its acquisition of California’s Carmot Therapeutics for up to $3.1bn. Roche’s chief executive Thomas Schinecker, who is trying to restore faith in the Swiss group’s pipeline, is seeking to “fast-track” its anti-obesity treatments so it can try to take a slice of the weight-loss market. But it also sees GLP-1s as a possible platform to strengthen its position in other disease areas such as cardiovascular, which also often afflict overweight patients.

The UK’s AstraZeneca, which is working on an oral GLP-1, also views the drugs as part of a combination strategy. In other words, an obesity pill could be taken alongside existing medicines to manage diseases such as diabetes, hypertension and heart conditions.

The bigger and more “complex” the potential market for GLP-1s becomes, the more room there will be for other companies to compete, reckons Daniel Chancellor of pharma solutions group Norstella. That is because patients with more than one illness might still be treated for obesity in the first instance. Additional uses could also mean patients take GLP-1s for longer as part of a wider drug regimen, Chancellor says.

But the market leaders are also pushing forward in new areas. Novo in 2021 began a late stage study of semaglutide — the active ingredient in its blockbuster weight-loss drugs — in early Alzheimer’s, with results expected in 2025. While valuations have come down since the start of 2024, Novo still trades at more than double the rest of the sector on a two-year forward earnings basis, Lilly at three times.

The frenzy around weight-loss drugs could threaten to reach bubble territory. But the potential wider uses of GLP-1s should maintain investor enthusiasm — and keep pharma companies jostling for position in the market.

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