Obesity – the first trillion-dollar drug class?



Ailsa Craig
Portfolio Manager
Marek Poszepczynski
Portfolio Manager

In the dynamic world of biotech investments, few subjects have ignited as much interest and discussion as the development of next-generation anti-obesity medications (AOMs). The vast potential market and the surging demand for treatments, particularly the GLP-1 class of drugs, have captured the attention of investors. This year, sales are projected to reach $6bn, with some analysts forecasting peak sales of a staggering $100bn by 2030, and the class of drugs could become the first to reach $1tn.

However, amid this economic potential, questions arise about the financing of obesity treatments. Unlike cancer, Alzheimer’s, and heart disease, whose treatments are widely accepted as societal responsibilities, obesity treatment sparks debate. Will the public consent to use tax revenues for a condition often viewed as a lifestyle choice rather than a disease?

This dilemma extends into policymaking. If governments shoulder the ballooning costs of treating obesity, will that mean less funding will be available for treatments and research for cancer and other critical conditions? If governments restrict access to obesity drugs, will this lead to even more of a social stigma around obesity and widen the gap between those who can afford private healthcare and those who cannot?

Obesity - A Focused Epidemic

In 2013, the American Medical Association (AMA) officially classified obesity as a chronic disease, marking a pivotal shift in its recognition. According to the World Health Organisation (WHO), the global prevalence of obesity has nearly tripled since 1975. Projections from the World Obesity Atlas indicate that by 2035, over half of the world's population will be overweight or obese, compared to 38% in 2020. In the United States, one in five children and one in three adults grapple with obesity. The prevalence of adult obesity measured in the Continuous NHANES[1] survey in the US has risen from 30.5% in 1999-00 to 41.9% in 2017-20, with severe obesity increasing from 4.7% to 9.2% during the same period.

Reimbursement Challenges

However, despite the rising mortality rates linked to obesity-related medical complications, Medicare - the US Federal Government healthcare programme that covers the over-65s - does not currently cover AOMs. To address this issue, Congress has reintroduced the 'Treat and Reduce Obesity Act'. This act, first introduced to the Senate in 2012, aims to secure coverage for obesity medications under Medicare Part D.

The Quest for Safe and Effective Obesity Medications

The gravity of the obesity crisis and the escalating demand for solutions has prompted biotech and pharma companies to invest billions in developing and marketing next-generation AOMs. The current landscape of approved AOMs for chronic weight management includes approximately half a dozen options. However, it is essential to highlight that the earlier generation of therapies yielded only modest weight reduction results, ranging from around 3% to 11% of body weight in overweight or obese individuals. Past efforts to develop AOMs have also faced significant safety issues. A case in point is fenfluramine/phentermine (fen-phen) in the 1990s, which exhibited harmful effects on heart valve function after FDA approval, leading to its withdrawal from the market.

The Advent of GLP-1 Receptor Agonists

Enter the glucagon-like peptide 1 (GLP-1) receptor agonists. These innovative therapies target crucial receptors in the gastrointestinal tract, effectively making patients feel less hungry. Prominent AOMs in this category include Novo Nordisk's semaglutide (marketed as Ozempic for diabetes and Wegovy for obesity) and Eli Lilly's tirzepatide (marketed as Mounjaro for diabetes, or Zepbound for obesity). These medications have demonstrated clinical profiles approaching the weight loss levels only achieved with bariatric surgery, a medical procedure designed to alter the digestive system, often reaching the mid-20% range.

GLP-1 receptor agonists have been available on the market for type 2 diabetes (T2D) since 2005 and have established a well-characterised and generally tolerable safety profile. The demand for Wegovy/Ozempic and tirzepatide as obesity treatments has been robust, to the extent that manufacturers have struggled to keep up with the demand for these therapies.

Transition to Oral Option

The current GLP-1s require weekly injections, a method that, while not a deterrent, is somewhat more cumbersome compared to oral tablets. Companies like Amgen, an IBT portfolio company, and Pfizer are among those looking to develop an effective oral GLP-1, potentially offering an alternative to those who may prefer it over weekly injections. Amgen is the only sizeable biotech companies (as opposed to pharmaceutical companies) that is currently actively trying to get involved in the obesity space.

The Introduction of EliLilly's Zepbound

Notably, the approval of Wegovy has significantly expanded the AOM market, and this expansion is expected to continue with the approval and availability of additional therapies, such as Eli Lilly's tirzepatide, which was recently approved by the FDA as an obesity treatment.. Tirzepatide, which until recently was only approved for Type 2 diabetes patients but was being widely used “off-label” for weight loss, is a dual-acting GIP (gastric inhibitory peptide) and GLP-1 receptor agonist. The drug reduces glucose levels and decreases food intake, leading to weight loss in patients in excess of the weight loss of patients using Ozempic. Both drugs require weekly injections.

Avoiding the Hype

The burgeoning field of obesity treatments is attracting many companies hoping to capitalise on the trend. Yet, some of these firms offer little more than compelling narratives and insufficient data, seeking to capture investor interest and boost their valuations. We are already seeing some signs of “meme-behaviour”, reminiscent of the Covid pandemic when some companies made opportunistic forays with products that they thought might have an application for Covid symptoms. Such trends risk creating an “obesity bubble”, with the companies involved rising to unsustainable and unjustifiable valuations. An example of this was Moderna, which soared to a market capitalisation of $195bn in August 2021 on the back of the Covid bubble, only to decline to less than $30bn by October 2023.

Uncertainty lingers over who will bear the costs of obesity treatments, and the prospect of future regulations continues to be a concern. As investors, we fundamentally look past the hype and focus instead on clinical data, market potential for the product and realistic valuations. The sector is undoubtedly appealing, but with behemoths like Eli Lilly and Novo Nordisk in a dominant market position and recent interest from Pfizer and Amgen, we remain sceptical about the emergence of a major new contender in the near term.

Broader Implications of a Leaner Population

The profound impact of these drugs on the world is a subject of compelling interest. As they become more widespread, we may see a shift in healthcare trends. For instance, if the population's weight decreases, the demand for hip replacements could fall. This is because excess weight puts considerable stress on joints, and losing weight could reduce the need for such surgeries. Similarly, those considering bariatric surgery might opt for these drugs if they can replicate the weight loss achieved through surgery. The ramifications extend beyond medical procedures and have even impacted the food industry. For example, companies like Krispy Kreme and McDonald's might experience a dip in future sales and analysts are adjusting their predictions in anticipation of a population with a reduced appetite.

Prolonged Lifespan and Reduced Cardiovascular Events

Obesity is known to be associated with comorbidities such as heart disease and cancer. A reduction in obesity rates could translate to a decreased demand for drugs that treat these conditions in the medium term. However, patients may go on to have longer lifespans, as individuals become less susceptible to fatal cardiovascular events. This raises the question of whether reducing one health risk may increase the likelihood of other ageing-related diseases, such as cancer and Alzheimer's, in the long run.

Is This a Transient or Persistent Market?

What happens to patients who have successfully lost weight due to AOMs once they discontinue therapy? There is a concern that some individuals, whose weight loss resulted from reduced muscle mass and fat, may regain more weight with less muscle mass than before starting AOMs, leading to a higher percentage of body fat. If they were losing weight without exercise or altering their lifestyle in general, they might be tempted to revert to unhealthy habits. This could result in deteriorating health or necessitate ongoing medication use, potentially for life. Prolonged consumption of these drugs also raises the issue of possible long-term side effects that may not have been evident in the relatively short-term clinical trials.

No Universal Solution

It is crucial to understand that AOMs are not a universal remedy for obesity. As highlighted in Boris Johnson's experience with Ozempic, which he wrote about in the Daily Mail in June, these drugs do not work for everyone, even when they seem to be ideal candidates!


We are still in the early stages of comprehending the impact of AOMs on Western society, both in terms of costs and the broader effects on the healthcare market. It may take many more years before we fully grasp the magnitude of this impact. Nevertheless, we will closely monitor developments and seek fresh ideas to address the colossal issue of obesity.


[1] National Health and Nutrition Examination Survey https://www.cdc.gov/obesity/data/adult.html


Ailsa Craig
Portfolio Manager
Marek Poszepczynski
Portfolio Manager


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