Patrick (00:00)
Hi, and welcome back to the Barclays Brief podcast. It’s Patrick here.
We have a really interesting episode coming up for you today, recorded last week.

Before we begin, the focus right now is naturally on events in the Middle East. Clients of Barclays can find our latest insights across all asset classes on Barclays Live, where our teams are updating views as the situation evolves. So, do head there to stay fully up to date with our thinking.

And now, let’s turn to the episode we recently recorded, focusing on the rapid rise of weight loss drugs and what it means for markets.

ORIGINAL EPISODE BEGINS

Patrick (00:37)
Welcome back to the Barclays Brief podcast. Now, this might sound dramatic, but weight loss drugs could end up being even more economically significant than statins were in the 90s. They're changing how we think about obesity, prevention and long-term health care costs. And in the process, they're driving billions of dollars in market cap. So, from household names like Ozempic, Wegovy, Manjaro and Zepbound.

The debate is no longer whether these drugs work. It's how far their impact reaches. Because obesity doesn't just affect health outcomes, it shapes productivity, quality of life and the economic burden across societies. And the reason we're talking about this today is that we're approaching a major inflection point in the weight loss drug boom, the arrival of oral obesity drugs alongside, the injectable drugs that are already on the market is going to have a big impact on the sector.

And I'm happy to be joined by my long-term colleague Emily Field, a US Pharma analyst and an expert on obesity therapeutics. Emily, great to see you again.

Thanks for joining the podcast and nice to be here in London with you.

Emily (01:51)
Thanks for having me. It's great to be back in London than eight years here with Barclays. But the call came to go back home to the US, for a new challenge covering the, US Mega-Cap Pharma names. And we just initiated last week. So, seeing clients here and it's great to be back in the conversation. Great.

Patrick (02:08)
Well, before we get into it, a few stats that stood out for me, at least from your recent big initiation on the US mega-cap names. Firstly, the global prevalence of obesity is expected to rise from 14% of the global population in 2020 to 24% by 2035.

Now, if we include the overweight population, that number more than doubles to around 4 billion people worldwide. And in the US alone, roughly 43% of adults were living with obesity in 2022. So that's the backdrop for this conversation.

Tell us, what is the state of play in the obesity drugs market right now?

Emily (02:47)
Yeah. Well, I mean, one example of sort of where we're at today is for the pound and Manjaro for this year, the two Eli Lilly drugs, even though they're the same drug, one for diabetes, one for obesity A we're projecting over $50 billion in sales.

So that's just kind of what's already there. And that's not including the new pill that they're going to be launching this year.

Novo Nordisk has just launched their pill. And then there's still, very much in the market with Ozempic and with Wegovy. So, a very, very big market, in terms of this class of drugs across diabetes and obesity, a few years ago, we put out a report thinking that just in obesity alone, it could be a $100 billion market by 2030.

At this point, I see no reason to take that down. But there's still a lot of unanswered questions in terms of when we might get to those sorts of numbers and what the path may be, both in terms of U.S. share and ex-U.S. share.

Patrick (03:46)
Okay. Well, let's try to answer some of those questions today. And let's start with this big shift that we're seeing in terms of all weight loss drugs.
They seem to be described as a game changer. But as I look at it, my first question is do they cannibalize the injectable weight loss drugs market, or do they expand the total addressable market by bringing in new patients who prefer a kind of needle free option?

Emily (04:09)
Yeah, we've really been thinking the latter, just because, you know, if you're a patient, the drugs are all available today before these orals are a once-a-week tab.

It's a very, very small needle. So, if you're sort of able to get past that initial period, which causes some people some GI upset, it's once a week. It's not that big of a deal. So, we're thinking that people on the drugs today that are happy are probably just going to stay there because once a week jab, easier to remember than taking a pill once a day.

So, we've really been thinking that this will open the market to new patients who may be needle phobic. And then also certain ex-US. markets pills could be very big market openers because they may not have the storage. These must be stored in a in and refrigerated environment. And they can be produced at scale, particularly the lily pill.
So, we really think that this will be a market opener.

Patrick (05:03)
Tell me about the Lilly pill, when’s that planned to be launched.

Emily (05:06)
Yeah. So, Novo launched their pill, right at the beginning of January. And, it's only been a couple of months, but they've been able to have a very, very strong launch, even with all the storms going on in the US, which has created some volatility in the prescription data.

But it looks phenomenal so far. Eli Lilly's Pill is set to launch in the second quarter. And so how those two compete in pills when they've competing against each other and injectables for a very, very long time will be, the most important driver of both of those stocks this year.

Patrick (05:37)
Yeah. So that's going to be a big, big thing to focus on. The other thing is pricing because pricing dynamics are changing across the whole of this market. So, the question I have is do these lower costs of these drugs. And some of them are very expensive each month. Does that shuffle share between the brands, or does it bring new patients into the treatment, which would again expand the total population?

Emily (06:00)
Yeah, that's a great question because there's so much about this market that has sort of flipped everything that us as formal analysts, have traditionally thought on its head, because normally when you're going to the doctor to get a medicine, it's because you're sick. You don't necessarily want the medicine.

So, this being a consumer driven market is very, very different. And we have not seen that elsewhere. And one interesting point is that when Lilly launched that Zepbound, which is their, obesity formulation in the US, they announced a $500ish discounted price available to consumers.
And I thought, that's a little weird because we know that the list price, at least at the time of Covi, which was the market incumbent, is $1,300. What we tend to see in pharma markets is that there is a list price, and that's not what actual insurance companies or consumers pay, just because it's a very, very complicated system.

However, we've not really seen, oh, this is the direct-to-consumer price from these drugs before. And Lilly really started doing that in a big way when these drugs were both in shortage. They take a lot of plastic. They must put them in a file. They're hard to make. Demand was through the roof.

So, Lilly just said, hey, we know people want this drug. We're going to put it in a little vial, send a syringe and a patient can come order it from our Lilly direct website. To your point, for people to be able to afford that every month, something like $500 is still really a lot of money. So, pricing had already been coming down and then, yes, there was this big agreement with the Trump administration, with both companies.

In the fourth quarter of last year that announced a big price reset. And right now, the novel pill for the starting dose is under $200 a month. And so, they are becoming more affordable as consumer products. I think people are still expecting that those prices will come down over time, but they're thinking that that's probably going to be offset by greater volume.

Patrick (07:57)
Yeah. So, they're becoming more affordable. And the companies like Lilly are adapting by offering these direct-to-consumer platforms. I think it's worth remembering that in a recent survey, we saw that 61% of those surveyed said they took the drugs to treat a chronic condition like diabetes or heart disease, and 38% said they took the drugs just solely to lose weight.

So given that backdrop, tell me about the competitive dynamic outside of Novo, outside of Lilly, because presumably other competitors are going to come into this market and shift the dynamics even further.

Emily (08:29)
Yeah. So right now, we really think of it in terms of this diabetes and obesity market as a duopoly between Novo Nordisk and Eli Lilly. However, because it's just such a big market in terms of number of patients, it certainly makes sense for a lot of other companies to want to be active here. And some of the other companies that could probably launch by the end of the decade include Amgen.

They have a drug that could be administered potentially once monthly, maybe even once quarterly. Roche has several different drugs. They also have a combination with a company called Sealand Pharma that they could also enter the market by 2030.

And then AstraZeneca is another one that has made a lot of investments and just announced moving forward their portfolio when they reported results.

And then the last one, of course, is Pfizer. Pfizer had a very heated bidding war over a biotechnology obesity company called Metsera was, them versus Novo Nordisk. Pfizer ended up winning. So, this could go from a two-player market to, you know, 4 or 5, six, seven player market by the end of the decade.

Patrick (09:30)
So, there's so much going on in this market. It's as innovative as I think I've ever seen the health care sector. And it's turning into a much more of a kind of consumerization sector rather than, again, a health care sector in traditional formats. What are the signposts, then, that investors should be watching over the next 6 to 12 months to know who's going to be winning this massive race?

Emily (09:52)
Yeah, that's a that's a great question. I think certainly the next major data point that investors are looking for is this Lilly pill, because Novo has this pill market on their own right now. And they've been doing phenomenally well.

Although another thing that as these companies report results, we don't really get great prescription data outside of the US. And one thing that all the companies have said, you know, even people not in the market, people like a Pfizer, like a Roche, like an Amgen, have said that they expect that the ex-US market will probably remain cash pay.

And so, we're not going to get good prescription data outside of the U.S that we, you know, as pharma investors, can track every week and put it into our models. It's really going to come down to when the companies report quarterly results. So I think how big these drugs get ex-US where it really is, I'm at probably at least 8,090% cash pay will be a great indicator of just how willing consumers are to pay for these drugs with their own money.

Patrick (10:53)
Interesting. So, over the next 12 months, we've got that Lilly launch. We've got the competitors thinking about changing and we've got, you know, their growth in the US that will come into numbers as well in their quarterly earnings.

Lastly well I've got you know loads of other sectors have been impacted by these weight loss drugs. I know you're not a food analyst. I know you're not a beverages analyst. But some of these companies and sectors are having to really innovate and change what they're producing for consumers because of the increase in weight loss drugs.

What should we be thinking about over the next sort of 12, 24 months about how that drugs could impact other sectors and other products from our side as pharma analysts?

Emily (11:35)
You know, when different, companies in other sectors, mentioned impact from GLP one drugs, we get calls from food analysts. And over the last couple of years that seem to have ebbed and flowed. You know, how much consumer investors care. There's been some written about, oh, maybe this will be a benefit for the airlines because people will weigh less, love to spend less on jet fuel.

I spoke to a tech analyst, trying to indicate, or figure out what impact this could have on DoorDash and Deliveroo, but are people going to be ordering different things?

So, there's still so many things to learn. However, you know, the pharma companies, they measure stuff like weight loss, cardiovascular effects, effects on cholesterol. So, we're not going to have a lot of hard answers and hard data to really give to consumer analysts. I don't think any time soon.

However, one of the things that we've heard anecdotally since these drugs have become, more widespread and usage is that they have had impacts in terms of people's alcohol consumption, compulsive behaviours like compulsive gambling and shopping that hasn't been investigated in rigorous clinical trials, such that those could be approved by a regulator.

However, Lilly does look like they're changing that. They have a drug that has just entered phase three. It is a different formulation of the same components that are in, Munjal and Zepp found. And this is in phase three for alcohol use disorder specifically. And what could be very interesting is just like obesity was really a market without a medicine.
In a lot of ways. Some of these categories of addiction are markets without a super effective medicine. So, the neurological effects of these drugs, I think will be very interesting to watch over the coming years.

Patrick (13:27)
Thanks, Emily. Brilliant to have you on. I think if I was trying to summarize a complicated market in three simple, digestible takeaways.

Firstly, oral obesity drugs are a big unlock, not necessarily because they'll take share from the injectables market, but because they could lower friction and bring in new patients into treatment. Secondly, pricing is compressing, and that matters because it can expand the treated population. So again, it should help the market grow rapidly. And finally, the competitive edge isn't just the pipeline and modality. It's now the commercial infrastructure.

Again, if the companies can get this right, this should help grow the addressable market. So that's it for this week. To read more from Emily and our global health care analysts, clients can head to Barclays Live.

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