As earnings season unfolds, investor attention is sharply focused on industry leaders. The biotechnology and pharmaceutical sectors, particularly those driving the explosive growth of obesity and weight loss treatments, have been under intense scrutiny. With Novo Nordisk (CSE:NOVOb) and Eli Lilly leading the charge, recent quarterly results from these pharma giants have captured headlines. We delve into the latest developments and explore potential investment opportunities within this thriving sector through ETFs.
Weight Loss Drugs Manufacturers Q2 Earnings Key Takeaways
Eli Lilly delivered a strong performance in the second quarter, with earnings significantly exceeding analyst estimates. The pharmaceutical giant attributed its success to robust sales of its diabetes medication Mounjaro and weight loss injection Zepbound. Buoyed by this performance, Lilly raised its full-year revenue projections and increased its earnings per share (EPS) guidance, citing robust demand and improved production capabilities.
In contrast, Novo Nordisk reported a disappointing second quarter, with net profit falling short of market expectations. While the company witnessed impressive 55% sales growth for its weight loss drug Wegovy, this was insufficient to offset overall financial metrics.
As a result, Novo Nordisk lowered its full-year operating profit outlook, adjusting its growth expectations from a range of 22% to 30% to a new range of 20% to 28%. Despite these setbacks, the company expressed optimism about future growth prospects, particularly in light of recent Wegovy approvals in China and positive European regulatory endorsements for its cardiovascular benefits.
While the recent results presented a mixed picture, both Eli Lilly and Novo Nordisk have enjoyed extraordinary stock price growth in recent years. Novo Nordisk's share price has soared by an impressive 435% over the past five years (in Danish Krone terms), while Eli Lilly's has surged by 672% during the same period. This remarkable performance is directly attributable to the overwhelming success of their respective flagship obesity drugs. Consequently, these pharmaceutical giants have ascended to the upper echelons of global market capitalization, with Novo Nordisk even surpassing luxury conglomerate LVMH to become Europe's most valuable company.
Ozempic, Mounjaro, and the Weight Loss Drug Craze
Ozempic, Wegovy, Mounjaro, and Zepbound are popular medications often grouped together, though they have distinct purposes and mechanisms. "Ozempic" has become a catch-all term for these drugs, but it is important to understand the differences between them and their developers.
Novo Nordisk weight loss and diabetes drugs
- Ozempic (semaglutide), developed by Novo Nordisk (NYSE:NVO), is FDA-approved for type 2 diabetes, not specifically for weight loss. However, it is often associated with weight loss due to its effects on appetite.
- Wegovy, also developed by Novo Nordisk and containing semaglutide, is specifically approved for weight management in individuals with obesity or overweight who have a related condition, such as high blood pressure.
Eli Lilly weight loss and diabetes drugs
- Mounjaro (tirzepatide), developed by Eli Lilly (NYSE:LLY), is another drug that has been approved for type 2 diabetes. Although it has shown significant weight loss effects, it is not specifically approved for weight loss.
- Zepbound, also developed by Eli Lilly and containing tirzepatide, is a newer drug that was recently approved specifically for weight loss.
The mechanisms of these drugs differ slightly. Semaglutide (in Ozempic and Wegovy) is a GLP-1 receptor agonist that reduces hunger, slows gastric emptying, and affects brain areas that control appetite.
Tirzepatide (in Mounjaro and Zepbound) acts as a dual agonist of GLP-1 and GIP, influencing satiety and digestion. Despite their similarities, understanding these nuances and the companies behind them is crucial for making informed decisions about their use.
Why are they popular?
The growing media coverage and endorsement of healthcare professionals and celebrities has significantly contributed to their popularity. As more people see the success stories and positive outcomes associated with these medications, they become increasingly sought after as viable options for both diabetes management and weight loss.
Furthermore, the dual benefits of improving metabolic health and supporting weight loss make these drugs especially appealing in a society that increasingly values overall health and well-being.
Weight Loss Drug Market: Growth, Players, and New Treatments
According to MarketResearch.biz, the market size reached a staggering USD 260.7 billion in 2022 and is projected to surpass USD 532.5 billion by 2032, reflecting a healthy compound annual growth rate (CAGR) of 7.6%.
Several pharmaceutical players are aiming to enter the market with similar drugs. For instance, Pfizer (NYSE:PFE) has selected a preferred formulation for its oral weight loss drug, Danuglipron, and plans to start testing different doses later this year. The goal is to prepare for larger studies and eventually bring this treatment to the market for people with obesity.
Are There Any Ozempic or Weight Loss ETFs?
The large market for these drugs and increased competition has made it appealing for U.S. ETF issuers to provide focused access to companies engaged in manufacturing and selling related drugs. As of today, there are three ETFs to gain exposure to weight loss and obesity drugs, which include:
- Tema Obesity & Cardiometabolic ETF (NASDAQ:HRTS): Launched in November 2023, this ETF was the first to target this specific niche in the market.
- Roundhill Glp-1 & Weight Loss ETF (NASDAQ:OZEM): This ETF joined the scene in May 2024, offering another option for investors on the Nasdaq.
- Amplify Weight Loss Drug & Treatment ETF (NYSE:THNR): Amplify also launched its own ETF focusing on weight loss drugs on the same day as the OZEM launch.
Which ETFs to Choose?
If you're interested in jumping on the trend and adding one of these ETFs to your portfolio, make sure to research each fund, analyzing its holdings, expense ratios, performance history and how the fund is managed (active or passive?)