Obesity drug success sparks biotech buying spree

Obesity drug market

The last few months have seen the obesity drug market soar, after new weight loss and diabetes drugs like Novo Nordisk’s Wegovy and Ozempic took the world by storm with their incredible efficacy at inducing weight loss. 

These new drugs belong to a class of medications called GLP-1 analogs (or incretin-based therapies), which work by activating GLP-1 – a critical hormone produced by the gut – receptors in the body. GLP-1 analogs help people lose weight through several mechanisms, including slowing down stomach emptying, reducing appetite by acting on the brain, and boosting the release of insulin. 

In the case of Wegovy and Ozempic, the active ingredient in these drugs is semaglutide, which is relatively new, and was first approved (as Ozempic) by the U.S. Food and Drug Administration (FDA) in 2017 as a treatment for type 2 diabetes. 

And it’s not just Novo Nordisk’s drugs gaining all the attention; Eli Lilly’s diabetes medication Mounjaro – which uses the active ingredient tirzepatide – has also been shown to induce dramatic weight loss in clinical trials compared to placebo. 

As demand for these drugs skyrockets, so does the obesity drug market, with physicians citing a new era for weight loss drugs, naming semaglutide and tirzepatide as “paradigm-shifting”

Novo Nordisk becomes Europe’s ‘most valuable’ company thanks to Wegovy

The success of these new obesity drugs can be seen in the fact that, at the beginning of September, Novo Nordisk became Europe’s biggest company by stock market value, briefly dethroning French luxury group LVMH. Its share price closed up 0.7% to $190, giving it a market capitalization of $421 billion including unlisted stock.  

This also meant that the Danish company’s stock market value exceeded Denmark’s entire economic output, to the extent that Denmark’s economy ministry actually doubled its growth forecast for 2023 to 1.2%. The economic outlook report mentioned Novo Nordisk several times and cited a boost from the pharmaceutical industry as a key factor in its revised growth forecast.

At the same time, Novo Nordisk also finally introduced Wegovy in Britain, despite the drug being launched in the U.S. back in 2021. This is because the soaring demand resulted in delayed marketing in Europe.

By sales, the company is now the largest producer in the diabetes and obesity drug market, with the success of Wegovy – as well as further demand for Ozempic – causing the value of the company’s shares to more than quadruple since 2018, gaining 41% this year alone. 

Obesity drug market: multiple buyouts from big players for obesity pipelines prove huge demand 

Another indication of just how hot the obesity drug market is right now, is the highly publicized acquisitions that have taken place recently involving weight loss companies. 

Once again, Novo Nordisk is heavily involved in this, as well as its biggest competitor in the market, Eli Lilly, which has also recently applied for regulatory approval to use its diabetes drug Mounjaro to treat obesity. 

Eli Lilly started off the competition back in July, as the Indianapolis-based company signed off on a $1.92 billion deal for Versanis and its lead asset bimagrumab. At the time of the deal, the monoclonal antibody was already being tested in a phase 2 trial – both alone and in combination with semaglutide – in overweight or obese adults. 

In its press release, Eli Lilly said that “combining incretins with bimagrumab has the potential to further reduce fat mass while preserving muscle mass and may lead to better outcomes for people living with obesity and obesity-related complications.”

Next, it was Novo Nordisk’s turn. At the beginning of August, the company announced it would be snapping up obesity drug developer Inversago Pharma in a $1.075 billion dollar deal, which includes Inversago’s lead development asset INV-202 – an oral CB1 inverse agonist.

INV-202 is designed to preferentially block the receptor protein CB1 – which plays an important role in metabolism and appetite regulation – in peripheral tissues, such as adipose tissues, the gastrointestinal tract, as well as the kidneys, liver, pancreas, muscles and lungs. With the acquisition, Novo Nordisk intends to investigate the potential of this drug for obesity and obesity-related complications.

“The acquisition of Inversago Pharma will further strengthen our clinical development pipeline in obesity and related disorders,” said Martin Holst Lange, executive vice president for Development at Novo Nordisk, in a press release. “This promising class of medicine pioneered by the Inversago team could lead to life-changing new treatment options for those living with a serious chronic disease and, in particular, may offer alternative or complementary solutions for people living with obesity”. 

Shortly after, towards the end of August, Novo Nordisk was back at it again, this time paying $16 million to acquire Embark Biotech and its lead asset targeting obesity and other cardiometabolic diseases, alongside entering a three-year research and development collaboration to discover and develop novel pharmaceuticals to treat obesity and related conditions.

Fellow Danish company Embark Biotech has been on Novo Nordisk’s radar for a few years now, as the company spun out of the Novo Nordisk Foundation Center for Basic Metabolic Research at the University of Copenhagen in 2017, and began collaborating with Novo Nordisk in 2018. 

These have been the main deals within the obesity drug market so far, but given they happened over a period of just a couple of months, there could potentially be more to come in the very near future, as the market continues to grow. 

Global obesity drug market expected to reach $100 billion by 2035 

Speaking of the obesity drug market, it is projected that it could reach $100 billion by 2035, according to a recent forecast from BMO Capital Markets analyst Evan David Seigerman, who, in a recent note to clients – as reported by Fortune – also said that revenue for obesity medications could be as high as $70 billion in the U.S. alone.

In another recent report by Morgan Stanley, Mark Purcell, Morgan Stanley European Biopharmaceuticals analyst, said: “While supply constraints have capped sales growth in the near term, the global obesity market could go from a $2.4 billion category in 2022, to reach $77 billion in 2030, up from our previous estimate for a $54 billion.”

Therefore, looking ahead to next year, the demand for drugs like Ozempic and Wegovy is very much expected to continue. Plus, additional recent reports regarding the fact that semaglutide has shown large reductions in heart failure-related symptoms and physical limitations in people with heart failure will likely make these drugs even more attractive to people.

The only issue is that the rising demand has started to create problematic supply shortages for Wegovy, particularly in the U.S., where Novo Nordisk has said it will continue to restrict U.S. supplies of starter doses of the drug, most likely into 2024. This struggle to satisfy demand could be bad news for Novo Nordisk, as they may lose out on market share to competitors working on weight loss drugs similar to Wegovy. 

And, it is fair to say that, with the obesity drug market on such a high at the minute, there are plenty of competitors waiting in the wings, vying to be the ones to develop the next big weight loss drug.

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