I weigh an eighth of a ton. That’s ideal for a harbor seal or panda, but not for a 6’4” man. The good news is that I’ve lost 11 pounds, and I’m told that if I drop seven more I’ll win a status upgrade from obese to overweight. Call me a dreamer, but I feel like I can hit husky by August.
There are powerful new medicines for weight loss. I’ll pass, for reasons I’ll explain, but Wall Street is making colossal sales projections for two key pharma players.
The first is Denmark’s
(ticker: NVO), the world’s top maker of insulin. For more than a decade, it has sold drugs that help manage blood sugar levels, with the happy side effect of weight loss, so it has won approvals for both Type 2 diabetes and obesity. The drugs are called GLP-1 agonists, meaning they mimic a certain hormone that both stimulates insulin secretion and causes a feeling of fullness.
The latest of these is semaglutide, which is sold as Ozempic for Type 2 diabetes and as Wegovy for obesity. It won US approval for obesity just last year. Wegovy is more effective than Novo’s older obesity drug and requires only weekly self-injections, down from daily, so sales have taken off, but supply has been held back by problems with a contract manufacturer.
Novo’s total obesity drug sales doubled year over year to 3.4 billion Danish kroner during the first three months of the year, or about $480 million. By the middle of the decade, the company had an obesity sales target in kroner equal to $1.69 billion, but now it says $3.72 billion. And that might be just the start.
Here comes another insulin giant.
(LLY) received Food and Drug Administration approval last month for tirzepatide for diabetes, which it will sell as Mounjaro. It mimics both GLP-1 and GIP, a second hormone that plays a role in insulin and appetite. In tests, this dual-acting drug appears more effective and tolerable than Novo’s Wegovy.
The weight-loss evidence in particular is “truly stunning,” David Risinger, who covers Lilly for SVB Securities, tells Barron’s† This month, Lilly presented new details at a big diabetes conference in New Orleans. Patients on the highest dosage dropped an average of 22.5% of their weight, which worked out to 52 pounds. That would shrink a guy like me straight into healthy territory on the height/weight charts.
As with many drugs, the full warning list is long and daunting. Key side effects appear to include gastrointestinal killjoys like nausea, diarrhea, and vomiting, which fade over time. Lilly could seek approval to market tirzepatide for obesity this year or next.
I’m not buying. Trainers like to say, “No pain, no gain,” but my fitness motto is just “No pain,” which extends to both crunches and unnecessary needles. The Novo drug could be available in pill form in the US as soon as 2024. Then again, Novo is working on an even more promising drug that could come to market in 2025. Lilly, too, is already working on a follow-up. So for now I’ll just keep mixing in more fruits and veg and taking my daily dose of NoChipsOrBeer. Plus, I do virtual hikes, bike rides, and rows on my big-screen exercise machines. Yes, I know I can do that stuff outside—don’t screen-shame me.
There’s also the expense. I just canceled a
(CVS) program that costs shoppers $5 each month in exchange for a $10 store credit, because my utilization rate fell below what I had modeled in my break-even analysis, so imagine how keen I would be to pay the $1,350-a-month list price for Wegovy. My last complaint is that because these drugs work on appetite, patients might have to keep taking them even after they reach the weight they want.
What about insurance? “Historically, insurers have really tried to put anti-obesity medications in the bucket of cosmetic type drugs, along the lines of a Botox for wrinkles,” says Risinger. “But the transformational health benefits that these drugs offer really, we think, will drive much greater adoption by both health plans and employers in coming years.” Those benefits appear to include reduced blood pressure and triglycerides.
My reservations aside, the market for these new drugs will be immense. Some 42% of Americans are now obese, up 10 percentage points from 2000. Much of the rest of the world is catching up. Worldwide, there are half a billion potential customers.
JP Morgan reckons Lilly’s new obesity drug will sell for $19 a day, after subtracting for discounts, and that Novo’s Wegovy, now $25, will come down to match. It predicts $34 billion in overall annual obesity drug sales by 2031, or $5 billion more than Lilly’s total sales today.
Novo will ultimately grab 60% of the market, JP Morgan predicts. This past week it upgraded Novo shares to Overweight, calling for 20% upside. Judging by consensus estimates, Novo’s obesity drug sales could overtake its insulin within five years. Risinger at SVB doesn’t cover Novo but is bullish on Lilly, predicting about 12% upside. Both stocks go for more than 30 times earnings. Lilly could double its earnings per share in four years, and Novo, in five.
The secondary effects of all this are difficult to guess. Will insulin sales fall off? Will insurance premiums rise, or will insurers be able to squeeze drugmakers while saving on obesity-related aids? What about sales of fast food and snacks? History says to bet against miracle obesity cures, if not fitness altogether. We’ll see.
Now if you’ll excuse me, it’s treadmill time. I’m hoping to drop from panda-weight to something more flattering, like warthog, and Kilimanjaro isn’t going to virtually climb itself.
write to Jack Hough at email@example.com. Follow him on Twitter and subscribe to his Barron’s Streetwise podcast.