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Tackling a full-blown global health crisis
The world’s population keeps getting heavier. The number of overweight people worldwide has doubled since 1980, and this increase shows no sign of slowing. According to the World Obesity Federation, by 2035, the number of obese people (those with a body mass index, or BMI, above 30) is predicted to reach more than 2 billion – more than a quarter of the global population. Most concerning is rising obesity in the younger generation. Notably, obesity in boys is forecast to double to 20% between 2020 and 2035.
There are a number of factors behind weight gain, including genetics, a lack of physical activity, side effects of certain drugs such as antidepressants and illnesses such as hypothyroidism. Unhealthy eating behaviours are another notable contributing factor.
As well as having health implications, this weight gain comes at a huge cost to the global economy. The World Obesity Federation estimates that uncontrolled obesity could lead to a 3% cut in GDP by 2035, worth around US$4 trillion. This is as a result of an increased strain on healthcare and obesity leading to more absences from work, reduced productivity in the workplace and premature retirement and death.
New approved drugs taking obesity head on
Fuelled by stories of transformative and dramatic weight loss on social media, the market for anti-obesity drugs is booming.
While there’s no miracle cure that can halt the global obesity epidemic by itself, this new class of medication is grabbing international headlines due to its ability to help people control their blood sugar and lose weight.
First developed to treat type 2 diabetes, GLP-1 agonists (short for glucagon-like peptide 1 receptor agonists) help reduce calorie intake, slow down digestion and make those who take the drugs feel fuller for longer. In doing so, GLP-1 agonists also help them reduce the risk of cardiovascular diseases and strokes.
The US is the largest market for weight-loss drugs … for now
The US is currently the biggest market for these drugs. More than 70% of the population is classed as either overweight or obese.
The US Food and Drug Administration has approved four different weight-loss drugs between 2014 and 2023. The inclusion of these medications in affordable insurance coverage has further increased demand by making obesity treatment more widely available. As an example, in 2023, there were 1.3 million outpatient prescriptions written for the four key weight-loss drugs covered by Medicaid agencies across all US states. This was more than 70 times the number of prescriptions in 2019. In terms of total Medicaid reimbursement, gross spending reached nearly US$1.5 billion in 2023 (compared with US$10 million in 2019). That’s a 14,900% increase over the five-year period.
Obesity in other nations has also risen dramatically, potentially opening up new markets for anti-obesity drugs. The rise is particularly notable in rapidly growing middle-income economies like Brazil, China and India. In China, for example, as average household incomes have increased, people’s diets have changed – the average person living in rural areas ate about 12 kg of meat in 1990, but by 2020, this had more than tripled.
The investment story so far – only scratching the surface?
The global weight-loss drug market is still very much in its infancy. We believe it will continue to see revenue growth for years to come. Despite total sales of US$15 billion of these new drugs so far, this is only patients in the single millions – in contrast to the nearly 1 billion obese patients who could require treatment.
Where is there most room for growth? In the US, where weight-loss drugs are most prevalent, recent surveys show that while there’s a high level of awareness of their availability, nine out of ten US adults claim they’ve never taken any prescription drugs to lose weight, giving us reason to believe there may still be further market penetration. There is also the opportunity for further take-up of the drugs in those other countries where obesity is rising at an alarming rate, especially China.
Additionally, the technology and treatments are also evolving. This current class of approved drugs is only the first generation of treatments. Major pharmaceutical manufacturers are already testing second- and even third-generation compounds.
Healthy living is more than just medication
Anti-obesity drugs are a key part of the healthy living megatrend and, for investors, can be an important part of a diversified portfolio. The global obesity market will continue to see significant supply shortages in the next three years and most likely beyond, as additional competitors will not be able to enter the market until 2028–2029. The weight-loss drug market is still in its early stages and has the potential for substantial revenue growth in the coming years.
But a healthy lifestyle goes beyond medication. It depends on a nutritious diet, regular exercise and other factors such as managing stress. Rising obesity is just one of the chronic diseases and health conditions that are occurring due to a rapidly ageing society and changing lifestyles. Therefore, we believe further growth in drug treatments available won’t adversely affect those companies involved in other important areas of health, for example, nutrition, physical activity, mental health and medical technology. We continue to believe there are opportunities for investors right across businesses linked to the theme of healthy living.