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Obesity has long been a significant global health challenge, particularly in the western world, due to the implications it can have for associated conditions such as heart disease, diabetes and certain cancers. Until recently, treatments focused on lifestyle changes and pharmacological interventions like appetite suppressants and fat absorption inhibitors. However, these early drugs often had limited efficacy and significant side effects, leading to a persistent demand for more effective solutions.
Recent breakthroughs
Over the last couple of years, a new class of drugs known as GLP-1 receptor agonists have shown considerable success in the fight against obesity. As explored in our article last year, "Obesity – the first trillion-dollar drug class?", these therapies have demonstrated remarkable efficacy and safety profiles, revolutionising the anti-obesity medication (AOM) landscape.
These innovative therapies target crucial receptors in the gastrointestinal tract, effectively making patients feel less hungry. Novo Nordisk and Eli Lilly have led the market with Semaglutide (marketed as Ozempic for diabetes and Wegovy for obesity) and Tirzepatide (marketed as Mounjaro for diabetes and Zepbound for obesity) respectively. These drugs not only improve glycaemic control but also promote substantial weight loss, offering a dual benefit for patients with obesity and type 2 diabetes. Both drugs are administered via weekly injections which make them costly and onerous to deliver to patients. Furthermore, concerns are growing over the longer-term outcomes for patients after they have ceased treatment. Initially, patients tend to lose a mix of fat and muscle but, post-medication, many revert to prior habits and find that their regained weight is predominantly fat.
Market expectations for these treatments have been extremely high, with sustained demand growth anticipated. According to recent market analysis, the market was valued at approximately $3.2 billion in 2023 and is projected to reach $11.3 billion by 2028, growing at a compound annual growth rate (CAGR) of 28.9% during this period1.
Nevertheless, investors should be mindful of the risks posed by continued supply constraints and uncertainty lingers over who should ultimately bear the cost of these treatments. Meanwhile, these high expectations are already reflected in the valuations of the major players, which represents an additional layer of risk should their growth falter. Indeed, recent share price weakness from both businesses may imply that future expectations are already starting to moderate.
Furthermore, existing market leadership should not be taken for granted in an area of biotechnology that is currently seeing a significant amount of innovation.
The next generation
The future of obesity treatment looks highly promising with the development of next generation therapies. There are currently 79 clinical stage programmes across at least 41 unique mechanisms of action (MOA), and these numbers continue to rise2.
Among the most exciting new developments are combination therapies that activate multiple pathways, such as GLP-1 combined with gastric inhibitory polypeptide (GIP) receptors, amylin, glucagon or leptin. These combinations aim to boost efficacy, improve patient outcomes and offer more comprehensive weight management solutions. Additionally, new targets such as, amylin, mitochondrial uncoupling and cannabinoid-1 (CB1) reverse antagonists are being explored, promising to deliver innovative new approaches to more effective long-term obesity management.
Innovative delivery methods, including oral formulations and longer-acting injectables, are also in development, aiming to improve patient adherence and convenience. The focus on personalised medicine, leveraging genetic and metabolic profiling, is expected to tailor treatments to individual needs, further enhancing their effectiveness.
Capturing the opportunity
As dedicated and experienced biotech investors, IBT is positioning to benefit from continued innovation in the AOM market. Rather than backing individual assets, we are adopting a lower risk portfolio approach by taking smaller positions across a range of the most promising assets. This is an approach we have successfully taken over the years, in other therapeutic areas at a similar stage of maturity. Many of the obesity programmes that we are most interested in are at a relatively early stage, but there are several important data read outs looming as we move through the remainder of this year and into 2025.
Approximately 10% of the portfolio's assets are allocated to obesity-related therapies, spread across eight companies. A notable example is Altimmune, which is developing pemvidutide, a dual GLP-1 / glucagon receptor agonist designed to enhance weight loss by increasing energy expenditure and reducing appetite.
Investors should also be prepared for further merger and acquisition (M&A) activity in this part of the biotech universe. Several large pharmaceutical companies do not yet have an obesity franchise and may look to acquire exposure, given the anticipated growth and continued investor enthusiasm for this market. Existing players may also look to bolster their positions, as reflected in Novo Nordisk’s acquisition of Inversago Pharma. This deal highlights the strategic importance of emerging obesity therapies that target novel mechanisms, as well as the inherent value in innovative solutions.
Conclusion
For investors, the obesity drug market presents significant opportunities. The sector is poised for continued growth, driven by rising obesity rates and the increasing demand for effective treatments. The biotech industry continues to invest in innovation, with advances in drug development, novel mechanisms of action and improved delivery methods set to transform the AOM landscape in the years ahead.
As the next generation of obesity therapies develop, substantial investment returns can be unlocked. By taking a portfolio approach to this part of the biotech landscape, IBT aims to capture this long-term potential for the benefit of its shareholders. Meanwhile, innovation in the AOM market can continue to significantly reduce the global burden of obesity and its related diseases, benefiting healthcare systems and society as a whole.
[1] Source: Research And Markets, November 2023
[2] Source: Evercore ISI, June 2024
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