Key takeaways

  • J.P. Morgan Research forecasts that the GLP-1 market will exceed $100 bn by 2030, driven equally by diabetes and obesity usage.
  • Total GLP-1 users in the U.S. may number 30 mn by 2030 — or around 9% of the overall population.
  • The increasing appetite for obesity drugs will have myriad implications, boosting sectors such as biotech and creating headwinds for industries such as food and beverage.

Ozempic. Wegovy. Mounjaro. Zepbound. Originally developed to treat diabetes, these GLP-1 agonists — now also popularly known as obesity drugs — have been making headlines for their weight-loss effects. According to the Centers for Disease Control and Prevention (CDC), the prevalence of obesity in the U.S. has grown from 30.5% over 1999–2000 to 41.9% over 2017–2020.

What’s whetting the consumer appetite for these weight-loss drugs, and what does this mean for sectors ranging from biotech to food? 

“The newest generations of GLP-1s and combos lead to 15–25+% weight loss on average, well above prior generations of products.”

What are GLP-1 agonists?  

GLP-1 agonists are a class of medications used to treat type 2 diabetes (T2D). Besides helping to lower blood sugar levels, they also suppress appetite and reduce calorie intake — fueling their growing popularity as obesity drugs. 

“GLP-1s have been used to treat T2D since 2005, starting with the approval of Byetta, with follow-on products continually improving on efficacy. The most recent, Ozempic and Mounjaro, offer significant advantages over previous products and have accelerated class growth,” said Chris Schott, a Senior Analyst covering the U.S. Diversified Biopharma sector at J.P. Morgan. “Indeed, the newest generations of GLP-1s and combos lead to 15–25+% weight loss on average, well above prior generations of products.” 

What’s driving the increase in appetite for obesity drugs?

 

Originally developed to treat diabetes, GLP-1 agonists — or obesity drugs — have risen in popularity thanks to their weight-loss effects.

 

J.P. Morgan Research forecasts the GLP-1 market will exceed $100 bn by 2030, fueled equally by diabetes and obesity usage.

 

Total GLP-1 users in the U.S. may number 30 mn by 2030 — or around 9% of the overall population.

 

This could lead to a paradigm shift in health care and also impact other sectors, from biotech to food.

 

What’s the market for obesity drugs?

J.P. Morgan Research forecasts the GLP-1 category will exceed $100 bn by 2030, driven equally by diabetes and obesity usage. 

Today, GLP-1s are used by around 10-12% of T2D patients in the U.S. “We model GLP-1 usage expanding to around 35% of diabetics in the U.S. in 2030 and would not be surprised to see upside to this number, especially as outcomes data continues to emerge,” Schott noted. “In addition, we forecast that around 15 mn obese patients will be on GLP-1s by the end of the decade.” Overall, total GLP-1 users in the U.S. may number 30 mn by 2030 — or around 9% of the population. 

The GLP-1 landscape is currently dominated by two major players: U.S.-based Eli Lilly and Denmark-based Novo Nordisk. “We expect the obesity market to largely be a duopoly between both companies, with modest share attributed to later entrants,” Schott said. “While demand could continue to outstrip supply for the next several years, we do see these issues resolving in the longer term with more plants coming online and more competitive oral options becoming available.” 

The U.S. obesity market is expanding rapidly 

Sector implications

 

The growing popularity of GLP-1s could transform how obesity is viewed and managed. “We believe this marks the beginning of a paradigm shift in the way that obesity is treated, with physicians moving to a weight-centric treatment of multiple co-morbidities associated with the condition. We expect this to drive substantial uptake of GLP-1s,” said Richard Vosser, Head of European Pharma & Biotech at J.P. Morgan. For instance, GLP-1s may aid in the management of cardiovascular disease and heart failure, which around 9 mn obese patients suffer from. 

Likewise, the rise of GLP-1s will shape diabetes treatment. “In diabetes, we see growth of GLP-1s driven by a shift in medical guidelines, including those proposed by the American Diabetes Association and European Association for the Study of Diabetes, which place weight management and assessment of co-morbidities profile on par with glycaemic control,” Vosser added. 

 

With the GLP-1 market proving to be highly lucrative, new biotech firms will seek to enter the drug race. “Naturally, with a class so potentially unprecedentedly large, we expect many biotechs across the market cap range to be motivated to participate. Even capturing a small share of such a large market could be very interesting for some companies, and these efforts may also lead to attractive partnering opportunities,” said Jessica Fye, a Senior Analyst covering the Large-Cap Biotechnology sector at J.P. Morgan. 

There is also scope for biotech firms to explore, through clinical trials, how certain medications work in tandem with GLP-1s. “For example, we believe companies investigating drugs targeting certain cardiovascular indications may want to consider planning to generate data that includes patients on GLP-1s,” said Anupam Rama, a Senior Analyst covering the U.S. Biotechnology sector at J.P. Morgan. “All in all, we see GLP-1s as an exciting category, with biotechs angling for a slice of the pie.” 

 

How will GLP-1s impact other technologies used to treat diabetes and obesity? Despite the recent fall in medtech share prices, J.P. Morgan Research does not see an imminent threat to devices such as insulin pumps and continuous glucose monitors (CGMs). “In fact, we anticipate CGM utilization could increase as they will be vital to track progress and determine if GLP-1s are actually working,” said Robbie Marcus, a Senior Analyst covering the U.S. Medical Supplies & Devices sector at J.P. Morgan. “Plus, the weight loss benefit from CGMs, while not quite comparable to that of GLP-1s, is nevertheless material, especially considering how much more affordable they are.” 

Weight loss surgery will also continue to be in demand due to its superior and more sustainable clinical outcomes. “Even those patients who opt for drugs will most likely still undergo bariatric surgery down the line due to the low adherence rates and high recurrence of weight gain from GLP-1s,” Marcus noted. 

Overall, the outlook is still positive for the medtech industry. “With medtech now trading at a slight discount to the S&P 500 vs. a 15–25% historical premium, we think a reasonable amount of GLP-1 risk is already priced in,” Marcus said. “While GLP-1s will be a huge drug class, medtech volumes can also increase over time. We think both can live side by side and don’t see them as mutually exclusive.” 

 

In the U.S., many insurance providers are scaling back on coverage of GLP-1s due to the high costs involved. As of November 2023, a month’s supply of Zepbound is priced around $1,060, while a month’s supply of Wegovy is around $1,350.

However, J.P. Morgan Research expects coverage to eventually improve, especially for obesity treatment. “Coverage for obesity currently far lags that for T2D, and this will likely remain the biggest debate in the class for some time,” Schott noted. “We estimate current coverage at only around 40%, but this will likely reach the 80% range by the end of the decade, driven by a series of outcomes studies that we expect will show broad health benefits from losing weight.”

In the life insurance space, companies that cover mortality risk will benefit the most from GLP-1s to the extent that the treatment of diabetes, obesity and related co-morbidities translates to longer life spans for the insured population. “In financial terms, higher life expectancies would allow life insurers to earn more premium income and higher investment income on reserves, as mortality claims are deferred,” said Jimmy Bhullar, Head of the U.S. Insurance research team at J.P. Morgan. 

On the other hand, GLP-1s could have a negative impact on life insurers that cover longevity risk through products such as structured settlements and pension risk transfer (PRT) plans, or lapse-supported policies such as long-term care and universal life with secondary guarantees (ULSG), where insurer economics deteriorate the longer the policy stays in force. “This is because longer life spans would translate to more benefits paid in the future,” Bhullar noted. 

 

GLP-1s could have a significant impact on food and beverage consumption. The advent of GLP-1 use for appetite suppression has been a key factor in the median larger-cap U.S. food producers underperforming the S&P 500 by nearly 40% year to date. “We have seen a number of trends and possible disruptions come and go in consumer staples over the years, but never one quite like GLP-1s,” said Ken Goldman, Lead Equity Research Analyst for the U.S. Food Producers and Food Retailers sectors at J.P. Morgan. 

Using data from alternative data provider Numerator, J.P. Morgan Research has found that current GLP-1 users purchased around 8% less food — including snacks, soft drinks and high=carb products — for at-home consumption over the last 12 months compared with the average consumer. Food intake could decrease by  -3% in North America by 2030E, though the figure could be higher for packaged foods. While European food companies derive up to 30–40% of their sales in North America, many of them have broad category and regional exposures, mitigating potential headwinds.

“Overall, we think that if GLP-1s start to make a meaningful difference in consumption patterns, grocers will be hurt less than packaged food companies,” Goldman said. “This is especially as they sell a lot of higher-margin fresh food, which could offset much of the impact on the center store and snacking in particular.” 

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