The Rundown - Deep Dive: The Gold Rush to Cure the Obesity Epidemic

Episode Date: December 15, 2024

GLP-1 weight-loss drugs, such as Novo Nordisk's Ozempic and Eli Lilly's Zepbound, are credited with reversing obesity trends in the U.S. for the first time in decades, according to a new study in the Journal of the American Medical Association. The episode highlights the rapidly growing market for these drugs, projected to expand from $22 billion to over $100 billion, driven by their effectiveness without requiring major lifestyle changes. We explore the competition sparked by supply shortages, with companies like Hims offering affordable alternatives, and discuss innovations like pill formulations that could make the treatments more accessible. Finally, the conversation turns to cost barriers, the potential expansion of Medicare coverage, and collaborations aimed at reducing prices to broaden access. Download ⁠⁠Alpha⁠, an AI-powered investing watchlist. The content of the video is for general and informational purposes only. All views presented in this show reflect the opinions of the guest and the host. You should not take a mention of any asset, be it cryptocurrency or a publicly traded security as a recommendation to buy, sell or hold that cryptocurrency or security. Guests and hosts are not affiliated with or endorsed by Public Holdings or its subsidiaries. You should make your own financial and investment decisions or consult respective professionals. Full disclosures are in the channel description. Learn more at Public.com/disclosures. Past performance is not a guarantee of future results. There is a possibility of loss with any investment. Historical or hypothetical performance results, if mentioned, are presented for illustrative purposes only. Do not infer or assume that any securities, sectors or markets described in the videos were or will be profitable. Any statements of future expectations and other forward-looking statements are strictly based on the current views, opinion, or assumptions of the person presenting them, and should not be taken as an indicator of performance nor should be relied upon as an investment advice.

Welcome back to the rundown for another weekend deep dive. Today we're talking about weight loss drugs. Weight loss drugs have existed for decades at this point, going all the way back to shady diet pills. But none of them have had the impact as these new drugs called GLP-1s are having. They've been a game changer. Drugs like OZempic and Manjaro are helping people shed weight like never before. And that's catching the attention of doctors, celebrities, and also investors.

So in today's episode, we're going to break down the impact these drugs are having. How big is the market for weight loss? Which companies are leading the charge? And the ripple effects that weight loss drugs might have on other industries and the economy as a whole. We got a lot to cover today, so let's dive in. Obesity has been on the rise in the U.S. for decades now. Just to give you some perspective, according to the CDC, back in 1990, about 11% of U.S. adults were classified as obese, which is having a BMI of more than 30.

Today, about 44% of U.S. adults are considered obese. That's over 100 million people in the U.S. And this actually has a real impact on our economy. See, obesity leads to higher rates of other health problems like diabetes, high blood pressure, heart disease, and all of that leads to higher spending for health care. So obesity is a real problem. And over the years, there have been many attempts to address the obesity issue. You know, there's been sketchy diet pills.

There's been viral diet programs. Like Weight Watchers was very popular at one point. You know, I still remember seeing commercials for the Nutris System like 10, 15 years ago on TV. Anyone else remember that? But none of those really had any sort of impact on the obesity numbers. They just kept going up. Until now. According to new studies, obesity actually fell in 2023.

The obesity level in the U.S. fell slightly to 44%. And many researchers are pointing to the rise of weight loss drugs like OZemper, in Manjaro as the reason for this. These GLP-1 drugs have gotten really popular over the last two to three years, and some people are calling them a miracle drug. Now, I'm not going to get into the details of how these drugs work.

But essentially, they curb the appetite of the user and slow down their digestive process, which allows people to lose weight without making any drastic lifestyle changes. And that's why these drugs have gotten really popular. Everyone wants to get their hands on these drugs, which is now leading to shortages. Let's talk about the major players

making these weight loss drugs right now. Nova Nordisk and Eli Lilly. Nova Nordisk is a Danish company. They're the maker of Ozempic and Weegovy. And they have a market cap of $350 billion. And they've seen their stock price jump more than 50% since the start of 2023. The other big player, and I'd argue the leader in the space at this point, is Eli Lilly. They make Manjaro and Zepbaum, which some say is more effective than what Nova Nordus is making.

Their stock price has gone up more than 100% since 2023. and they have a market cap of over $700 billion. So these companies have seen a surge in their stock price, but what's making investors really take notice is that we might still be early when it comes to all of this. Right now, the obesity drug market is worth around $22 billion. But according to UBS, only about 4 to 5% of the market has been penetrated so far. One reason for that is probably because of the high cost of these drugs,

which we're going to talk about in a bit. But overall, UBS is projecting that over $125 billion, of these gLP ones will be sold by 2029. In fact, I'd probably take the over on that number because people have been waiting for a drug like this forever. A drug that sheds pounds without requiring strict dieting or making major lifestyle changes,

a lot of people want this. I mean, right now these drugs are so expensive, but they're already so popular that Eli, Lilly, and Nova Nordus can't seem to make enough of them to fill the demand. They've been dealing with supply issues. In fact, these supply constraints left the door open, for competition to come in.

The FDA in the U.S. has a rule that when there are drug shortages, compounding pharmacies are free to make copycat versions of that drug. So shortages by Eli Lilly and Novodornis have other companies ready to jump at this opportunity. One company that took advantage of these shortages was Hems and Hers. Their publicly traded telehealth company known for their hair loss and ED medications, well, they quickly entered the weight loss market with their own compounded drug that had the same active ingredients as the gLP ones made by eli lily and they were selling them for much cheaper than what eli lily was selling their drugs for him's copycat drug started at two hundred

dollars a month compared to the over thousand dollars per month that it cost to get the weight loss drugs from eli or nova nordisk and that caused him's stock price to more than triple this year it's up around two hundred and thirty percent because investors seem to be enthusiastic that consumers will buy these generic lower price weight loss treatment. But beyond just the shortages, other pharma companies are rushing to get their own weight loss drugs to market, especially a weight loss pill. So right now, these gLP ones require an injection every week, which might be a turnoff to some users. But if a pill form ever came out, I mean, that would be attractive to a lot more people. And that's what companies like Pfizer, Viking Therapeutics, and AstraZeneca are rushing to do. But still, the number one thing

holding back these drugs from widespread adoption is price. Currently, the out-of-pocket cost for just one month supply of Zepbound or WeGovie is about $1,000 a month. And that makes it unaffordable to a lot of people. The thing is, insurance companies don't cover these drugs for weight loss treatment. Now, the Biden administration has actually proposed that Medicare and Medicaid cover these weight loss drugs. That would be a significant policy pivot because legislation from two decades ago,

restricts Medicare from covering drugs for weight loss. So I got a feeling this is pretty unlikely to happen. Now, these companies are working to drive down the price and make it more affordable. You know, if a pill form has ever developed, it's likely going to be less expensive to manufacture than injections. So it should be cheaper to sell. On top of that, Eli Lilly just announced a partnership with the healthcare startup row to sell Zepbound directly to consumers for around $400 per month.

Again, that's still pretty expensive, but a lot more affordable than $1,000. a month. You know, as with anything, I think over time the cost of manufacturing these drugs will get cheaper and cheaper. So maybe in like three to five years, you'll be able to buy one of these drugs for like a hundred bucks a month. And who knows, maybe insurance companies will start covering them too. Because if it results in people losing weight, that should result in less medical costs for insurance companies to cover the patient. Then again, I'm not going to try to predict what insurance companies do. If these drugs continue to have widespread adoption as they become cheaper and cheaper, the wider impact on the economy could be fascinating. Imagine a world,

like five to ten years from now, where these GLP1 weight loss drugs are affordable and widely available, what impact would that have on the economy? Well, for one, if we have reduced obesity rates, it should result in less medical expenses. Remember, obesity can lead to other issues like heart disease and diabetes. So less obesity would reduce long-term health care costs, which is great. In fact, investors are already starting to get a little nervous about this. One of the worst, The worst performing stocks in the S&P 500 this year is a company called Dexcom. They developed devices for diabetics to monitor their blood glucose levels. Well, if GLP1s become popular and less people are diabetic, that could impact Dexcom's business long term.

Dexcom's stock is down more than 35% so far this year. Now, beyond just a cost for health care, you might see food and beverage companies impacted. A lot of users of GLP1's report reduced appetite. So people might start buying less. snacks or less junk food, which should impact sales of Coca-Cola, PepsiCo, be some fast food companies like McDonald's and Wendy's. To me, this is just some really fascinating stuff, you know, and I think it's something worth paying attention to as an investor. Well, all right, guys, that's it for this week's deep dive episode. Thank you guys so much for spending a part of your

weekend with me. Let us know in the comments on Spotify what you thought about this episode and drop some ideas of potential topics you want us to cover in future weekend deep dyes. Thank you guys again for listening. Shout out to Mike for all. the help behind the scenes. Have a great weekend, everybody, and we'll see you guys back here on Monday. This is the rundown, your real-time resource for news events and trends in the markets. All views presented in the show reflect the opinions of the guests. You should not take any mention of a publicly traded security as recommendation to buy, sell or hold that security. Run-down guests are not financial advisors and are not affiliated with public holdings or its subsidiaries. You should make your own financial and investment decisions or consult, respected professionals.

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