Last year, artificial intelligence (AI) was a hot topic and captured the imagination of investors and the mainstream alike because of the broad implications and potential for dramatic change in the way business is conducted. Also last year, healthcare faced a similar dramatic change with the introduction of Glucagon-like peptide drugs (GLP-1). GLP-1 drugs are designed to manage type 2 diabetes, but their greater application and interest is in the areas of managing obesity and potentially controlling the unfavorable results of long-term obesity such as cardiovascular and kidney disease.

The presence of GLP-1 drugs, despite their recent hype, goes back decades safely treating type 2 diabetes. The recent sea change of interest centers around the drug’s efficacy in helping with weight loss. As a result of the perceived benefits, prescriptions have skyrocketed despite the relatively high cost to consumers. Many of these prescriptions were “off-label,” which refers to the practice of using a drug for a different purpose than what is approved by the Food and Drug Administration (FDA). Until recently, GLP-1 drugs were only approved for treatment of diabetes but were being used off-label for weight loss. Now, GLP-1 drugs like Saxenda, Wegovy, and Zepbound have been FDA approved for weight loss, and more GLP-1 drugs are currently in active trials.

GLP-1 drugs are the latest solution in the attempt to solve the adult obesity crisis. Obesity is a major health problem in the U.S. and the percentage of people considered obese has been increasing for the last several decades. The latest data from the CDC considers 42.4% of the US adult population as obese¹ (see chart below). According to the Mayo Clinic, obesity is not just a cosmetic concern, but it is a medical problem that increases the risk of many other diseases and health problems. These can include heart disease, diabetes, high blood pressure, and even certain cancers.²

Obesity is also a structural problem, as healthcare costs for obese adults are considerably higher than those for adults who are not obese. It is important for the healthcare system to reverse the trend of rising obesity levels before healthcare costs overwhelm hospital systems and costs spiral higher for both private insurance and Medicare/Medicaid.

The early weight loss results have been encouraging with various studies showing a 5-10% body weight loss³ when using a GLP-1 drug. The possibility of GLP-1 drugs helping to bend the cost curve, and the potential to address such a large market is creating significant changes to healthcare companies and other industries as well. Currently only 4% of the U.S. adult population is taking a prescribed medication⁴ for weight loss, providing a large opportunity for GLP-1 drugs to help with the 42% of the population that is overweight.

In addition to weight loss, there are early studies pointing to the possible efficacy of GLP-1 drugs in treating other diseases, such as cardiovascular and kidney disease, which have large patient populations. If GLP-1 drugs are effective in treating these additional diseases it could be the drug class that further bends the cost curve for healthcare. Below is a diagram with the global population and the number of people in the large disease categories⁵, which GLP-1 drugs could address.

The excitement and expected benefit to companies is most evident by the stock price increases in two drug development companies that are the direct beneficiaries of the surge in use of GLP-1 drugs, Eli Lilly (ticker LLY) and Novo Nordisk (ticker NVO). These companies rose 60.9% and 54.3% respectively in 2023 and have now become some of the largest companies in the world.

As investors, we examine mega trends like artificial intelligence (AI) and GLP-1 drugs to determine how they may impact the economy and if there is an opportunity to invest in companies that drive these trends. These are extraordinarily complex issues, and it is often difficult to determine their overall impact, but this is something we constantly monitor. There is a lot of hype and promise about these potential mega trends changing the world, and we look to decipher if there is substance to the hype or if the trends might fade as quickly as they took center stage. We are in early innings of both these trends, artificial intelligence and GLP-1 drugs, and there looks like there is some hope along with all the hype.

1. CDC: Prevalence of Obesity Feb 2020
2. Mayo Clinic Problems from Obesity
3. Forbes Health: GLP-1 Weight Loss
4. KFF Health News survey results
5. Global patient populations across potential treatment areas for GLP-1 drugs