The success stories surrounding the use of incretin-based weight loss products originally developed for diabetics to fight obesity have led to a veritable run on these drugs. Initially triggered by testimonials from well-known personalities like Tesla founder Elon Musk and a number of Hollywood celebrities who publicly raved about effortless weight loss after using these products, the hype has now snowballed into a mass phenomenon.
Pharmaceutical companies such as Eli Lilly and Novo Nordisk can barely keep up with the enormous demand and are reporting supply bottlenecks. On the stock markets, the boom in weight loss products has recently generated strong gains for pharmaceutical companies.
Market could grow strongly
According to experts, the market for weight loss drugs could grow to several hundred billion dollars in a few years, as the number of overweight or obese people is increasing rapidly. According to current data from the Robert Koch Institute, more than half of adults in Germany are overweight. The latest Eurostat survey from 2019 shows a similar picture across the EU.
Accordingly, high hopes are being pinned on the promising incretin drugs. Pharmaceutical companies Eli Lilly and Novo Nordisk currently control a large share of the market, but several other companies also either already offer corresponding drugs or have them in the pipeline.
Experts also warn of potential side effects
The active ingredients in the drugs, incretin mimetics, were originally developed for the treatment of diabetes. They mimic the function of incretins – intestinal hormones that increase the production of insulin after food intake and thus stimulate the satiety centre in the brain. This reduces the feeling of hunger, resulting in a significant weight loss effect. However, experts also warn of potential side effects and a possible yo-yo effect: some studies have shown that the effect only lasts as long as the product is taken.
One of the first commercially available incretin mimetics products was the drug Byetta manufactured by US pharmaceutical company Eli Lilly. The drug, based on the incretin active ingredient exanatide, was approved in the US in 2005, and in the EU the following year. In 2009, Novo Nordisk released the drug Victosa, which is based on the incretin active ingredient liraglutide.
In the following years, the two companies, as well as competitors such as AstraZeneca and Sanofi, launched numerous other weight loss products based on these and other incretin active ingredients. The incretin mimetics drugs originally developed for diabetics have now also been approved by health authorities in many countries as anti-obesity agents.
Eli Lilly expects further revenue growth thanks to its weight loss products
Weight loss products have recently provided pharmaceutical companies with strong revenue growth. Eli Lilly exceeded analysts’ forecasts for the financial year 2023, primarily thanks to the positive development of its incretin weight loss drug Mounjaro. The Group remains optimistic for the current financial year.
The next boom in demand is expected for Eli Lilly’s injectable weight loss drug Zepbound, which is based on the same active ingredient as Mounjaro. The US Food and Drug Administration (FDA) approved the drug a few months ago for people suffering from obesity and for overweight people with at least one weight-related health problem.
Overall, Eli Lilly expects its revenue to increase to between USD 40.4bn and 41.6bn in 2024. This would mean a further increase of around 20 per cent, after sales climbed to USD 34.1bn in 2023. Mounjaro alone contributed just under USD 5.2bn to total revenue in the previous year.
Weight loss boom made Novo Nordisk the most valuable listed company in Europe
Danish pharmaceutical company Novo Nordisk also profited further from the booming weight loss products, particularly from its injectable drug Wegovy. Following a jump in sales and profits of more than 30 per cent last year, Novo Nordisk is aiming for further strong growth. In the US, the Group plans to increase deliveries of its lower-dose Wegovy starter doses more than twofold compared to the previous months. This could allow more new patients access to the weight loss injection.
Wegovy, launched in the US in mid-2021 and in Germany in the summer of 2023, has helped Novo achieve record sales. Last year, Novo’s obesity-related revenue saw a 147 per cent surge. In total, the Group achieved a revenue of DKK 232.3bn (approximately EUR 31bn), an increase of 31 per cent within a year. Operating profit climbed by 37 per cent to DKK 102.6bn. For 2024, Novo expects sales growth of 18 to 26 per cent and an increase in operating profit of 21 to 29 per cent.
Note: Past performance is not a reliable indicator of future performance.
The stock market reacted to Novo-Nordisk’s good figures with a sharp increase in the share price, causing the company’s market capitalisation to break the USD 500bn mark and making Novo Nordisk the most valuable listed company in Europe – ahead of luxury goods group LVMH.
Roche enters the weight loss product market with acquisition
However, several other pharmaceutical companies have now also launched or are developing weight loss products. Swiss pharma giant Roche recently acquired the Californian company Carmot Therapeutics for USD 2.7bn, and with it a corresponding development portfolio. Carmot is also developing incretin active ingredients to fight obesity; three such active ingredients are currently being researched or have already been tested in trials.
German pharmaceutical company Boehringer is also currently conducting research in this area with its Danish partner company Zealand Pharma. While the drugs from Eli Lilly and Novo Nordisk are based on the imitation of intestinal hormones, Boehringer is researching an active ingredient that imitates a pancreatic hormone. Initial study successes have recently led to a sharp increase in Zealand Pharma share prices.
How to invest in healthcare shares
With the two equity funds ERSTE RESPONSIBLE STOCK GLOBAL and ERSTE RESPONSIBLE STOCK EUROPE, investors can invest in securities from the healthcare sector.
The advantage: In addition to stocks from the pharmaceutical and healthcare sectors, the fund also includes other sectors that are crucial for the economy, such as the technology sector, finance and industry. This gives investors the opportunity for attractive value growth with broadly diversified risk across several economic sectors.
Note: However, it is also important to be aware of the potential risks of an investment. The price of a fund can fluctuate significantly and there is a risk of capital loss.
The companies mentioned in the article, Novo Nordisk and Roche, currently the second and fifth largest, are particularly well represented in ERSTE RESPONSIBLE STOCK EUROPE. However, the securities are also currently part of the ERSTE RESPONSIBLE STOCK GLOBAL portfolio.
Note: The companies listed here have been selected as examples and do not constitute an investment recommendation. The portfolio positions listed may change at any time as part of active management. There is no guarantee that securities will be permanently included in the portfolio.
Notes ERSTE RESPONSIBLE STOCK GLOBAL
The fund employs an active investment policy and is not oriented towards a benchmark. The assets are selected on a discretionary basis and the scope of discretion of the management company is not limited. Please note that investing in securities also involves risks besides the opportunities described.
For further information on the sustainable focus of ERSTE RESPONSIBLE STOCK GLOBAL as well as on the disclosures in accordance with the Disclosure Regulation (Regulation (EU) 2019/2088) and the Taxonomy Regulation (Regulation (EU) 2020/852), please refer to the current Prospectus, section 12 and the Annex “Sustainability Principles”. In deciding to invest in ERSTE RESPONSIBLE STOCK GLOBAL, consideration should be given to any characteristics or objectives of the ERSTE RESPONSIBLE STOCK GLOBAL as described in the Fund Documents.
Notes ERSTE RESPONSIBLE STOCK EUROPE
The fund employs an active investment policy and is not oriented towards a benchmark. The assets are selected on a discretionary basis and the scope of discretion of the management company is not limited. Please note that investing in securities also involves risks besides the opportunities described.
For further information on the sustainable focus of ERSTE RESPONSIBLE STOCK EUROPE as well as on the disclosures in accordance with the Disclosure Regulation (Regulation (EU) 2019/2088) and the Taxonomy Regulation (Regulation (EU) 2020/852), please refer to the current Prospectus, section 12 and the Annex “Sustainability Principles”. In deciding to invest in ERSTE RESPONSIBLE STOCK EUROPE, consideration should be given to any characteristics or objectives of the ERSTE RESPONSIBLE STOCK EUROPE as described in the Fund Documents.