Because Ozempic and Wegovy excite the markets (too much).
GLP-1 weight loss drugs are revolutionizing the healthcare industry. Anti-obesity drugs are predicted to become the biggest pharmaceutical market ever, while share prices of medical device companies, particularly those specializing in weight management and diabetes, come under pressure. Analysis by Kevin Kruczynski, Investment Manager of GAM Investments
GLP-1 weight loss drugs are revolutionizing the healthcare industry. Anti-obesity drugs could become the biggest pharmaceutical market ever, some analysts predict, while share prices of medical device companies, particularly those specializing in weight management and diabetes, come under pressure.
GLP-1 (glucagon-like peptide-1) drugs are transforming the healthcare industry. These drugs, including Ozempic and Wegovy (the brand names of semaglutide), could have revolutionary effects in the treatment of diabetes and obesity. They replicate the behavior of a hormone present in the human body, GLP-1, which reduces the feeling of hunger, contributing to weight loss and better management of blood sugar levels.
The results are impressive: in the clinical trial, patients lost between 15% and 26% of body weight in 18 months, depending on the drug and dose administered. We believe that the enormous market opportunity for anti-obesity drugs, taking into account that there are over 650 million obese adults worldwide, has made GLP-1 drugs extremely interesting and profitable. In this context, some analysts predict that the anti-obesity market could become the largest pharmaceutical market of all time.
Not surprisingly, the rise of GLP-1 drugs has had repercussions not only on pharmaceutical companies but also in other industries such as food, consumer packaged goods, restaurants and medical devices. Companies that have traditionally been in the weight management segment, such as Jenny Craig, have suffered and in some cases have closed weight loss centers due to the popularity of new drugs. Other companies have adapted and incorporated these drugs into their weight loss programs.
Malls with on-site pharmacies, such as Walmart and Kroger, initially saw increased traffic from customers with GLP-1 prescriptions, but more recently Walmart has reported declines in average spending and calories purchased. Pharmaceutical companies operating in the sector will benefit, as will health insurance companies as the population becomes healthier in the long run. According to one prediction, one of the less obvious beneficiaries could be airlines, given the potential fuel savings if passengers, on average, weighed a few pounds less.
Share prices of medical device companies, particularly those specializing in weight management and diabetes, are under pressure. But there are not only black clouds on the horizon. While the GLP-1 drugs have undoubtedly been successful, there is no shortage of problems. Side effects, the cost of these products and patients' decisions not to continue with treatment can make other solutions seem more attractive. Hence the need to have different treatment options available in order to achieve optimal results with patients.
In the diabetes market, for example, continuous glucose monitoring (GCM) and insulin pumps will likely not be replaced by new drugs due to concerns about affordability, complications and patient loss. Dexcom has found an increase in the use of continuous glucose monitoring systems among patients with type 2 diabetes who use GLP-1 drugs. Similarly, in the weight loss segment, bariatric surgery continues to produce more sustainable clinical results than drugs. Despite the promising potential of GLP-1 drugs, they are not expected to entirely replace medical devices. In the future, these drugs will likely coexist with other solutions, each with an important role in patient care.
GLP-1 drugs truly have a transformative effect, but they also pose problems. As their rise in the market continues, a balanced approach that encompasses both drugs and medical devices will be critical to sustainable patient care.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/perche-ozempic-e-wegovy-eccitano-troppo-i-mercati/ on Tue, 26 Dec 2023 06:18:40 +0000.