The market for GLP-1 drugs to treat obesity is expected to soar to more than $1 trillion, Moritz Pott, founder and CEO of Tema ETFs, offered the optimistic prediction in an exclusive interview with Benzinga.
“Long term, our view is that this is not a two-way race between Eli Lilly and Novo Nordisk (NYSE:NVO),” Mauritz said, disputing the common notion of a duopoly in the weight-loss market.
Pott predicts that growing demand for weight loss treatments and the expanding use of GLP-1 drugs will drive this trillion-dollar market opportunity.
In November 2023, Tema ETFs launched its first weight loss-focused ETF, the Tema GLP-1, Obesity and Cardiometabolic ETF (NYSE: HRTS). Since inception, the fund has risen 25%, slightly outperforming the S&P 500 that the SPDR S&P 500 ETF Trust (NYSE: SPY) tracks.
The ETF’s major holdings include Eli Lilly and Company, Amgen Inc. (NASDAQ:AMGN), Novo Nordisk Inc., and Alnylam Pharmaceuticals Inc. (NASDAQ:ALNY), each with a weighting of around 5-6%. The HRTS portfolio also includes over 40 other weight-loss related companies.
Chart: Thematic GLP-1, Obesity, Cardiometabolic ETF outperforms S&P 500 since inception
Charts: Benzinga Pro
Weight Loss Treatments: Expanding Applications and Innovation
In addition to weight loss, Potts said, GLP-1 drugs may soon be used to treat diabetes, heart disease, liver disease and kidney disease, and then cancer, Alzheimer’s disease, Parkinson’s disease and other neurological disorders.
Traditional injectable methods are being challenged by new approaches focused on oral administration and reducing the frequency of dosing. Innovations are aiming to make treatments less invasive, such as moving from weekly injections to once every two months, or significantly easier to manufacture, such as producing oral tablets.
Obesity leads to various diseases such as diabetes, heart disease, cancer, etc. Addressing obesity can reduce various health issues, thus increasing the market potential for GLP-1 drugs.
This market is expected to expand beyond Eli Lilly and Novo Nordisk and address multiple disease areas.
“We could be on the brink of a world where half the world’s population is taking GLP-1 or other weight-loss drugs for a variety of reasons, including primary prevention,” Potts said, citing uses for obesity, diabetes and even Alzheimer’s and cancer.
The projections behind the $1 trillion estimate
The number of obese people worldwide is expected to double from 1 billion to 2 billion by 2035. Even without this increase, the current 1 billion obese people represent a large market.
Assuming long-term treatment only reaches 20% of today’s obese population — roughly the same as current adoption rates for diabetes medication — that’s 200 million people. Assuming prices fall from $12,000 to $6,000 per person per year, the market for GLP-1 drugs could exceed $1 trillion, Pott explained.
Goldman Sachs puts the market at $100 billion to $130 billion, but Potts thinks it could reach $1 trillion, even before speculative applications for cancer, Alzheimer’s and Parkinson’s disease are factored in. The market is consistently underestimated, with estimates rising every few months.
Patent expirations will also impact the market: in the US, Ozempic/Wegovi patents expire in 2032, in Europe in 2031, and in China in 2026.
“We believe it could become a trillion-dollar market before the patent expires,” Potts said.
Focus on small and mid-cap stocks
When asked why investors should focus on a diverse basket of weight loss stocks rather than a few large companies, Potts explained that “in this huge market, the impact of positive clinical results is much larger for small and mid-sized biotech companies than it is for a large company like Eli Lilly.”
He stressed the importance of holding large caps to balance a portfolio, but noted that smaller companies could deliver better returns in the long run.
Potts emphasized that mergers and acquisitions are booming in the biotech sector: Last year alone, there were 22 biotech-related M&A deals worth more than $1 billion.
Large healthcare companies without obesity-related businesses, such as Merck & Co. (NYSE:MRK), Pfizer (NYSE:PFE), and AbbVie (NYSE:ABBV), are likely to explore acquisitions.
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