JPMorgan Chase & Co. is making a significant move into the burgeoning market for weight-loss therapies, signaling confidence in the long-term potential of this sector. With the launch of a new biotech venture fund exceeding $500 million, JPMorgan aims to capitalize on the increasing demand for innovative treatments, primarily focusing on obesity.
The Rise of GLP-1 Agonists and Their Impact
The surge in popularity of GLP-1 agonists, originally developed for type 2 diabetes (T2D), has transformed the pharmaceutical landscape. Drugs like Ozempic and Wegovy (Novo Nordisk) and Mounjaro and Zepbound (Eli Lilly) have gained widespread attention for their weight-loss benefits. These medications, initially designed to treat T2D, have demonstrated such significant weight loss effects that they are now popularly known as obesity drugs.
Clinical Benefits Beyond Weight Loss
New data shows obesity drugs can also be used in the treatment of conditions such as coronary heart disease and stroke, hypertension, kidney disease and sleep apnea. Clinical studies indicate that they could be applied to fight other diseases, including Alzheimer’s, neuropsychiatric conditions, and cancer.
The SELECT trial, the largest clinical trial of GLP-1s to date, demonstrated that Wegovy reduced heart attacks, strokes, and deaths due to cardiovascular disease, and drove a 73% reduction in the progression toward diabetes versus the control group. Subjects who took it had a 19% reduction in all causes of mortality vs.
Expanding Insurance Coverage
Insurance coverage is likely to expand as obesity drugs are approved to treat new diseases, as prices come down over time, and as new therapeutic options reach the market. Medicare currently does not cover weight loss medications, but there is tremendous pressure on the government to change this, particularly after the SELECT trial demonstrated the drugs’ benefits in reducing cardiovascular disease and deaths. Even without legal changes, manufacturers are expanding these drugs’ labels to indications that Medicare does cover, such as cardiovascular and renal disease.
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The Potential for Pill-Based Alternatives
Some drugmakers are successfully developing obesity drugs in pill form instead of injectable medications as an alternative for patients targeting weight loss slightly less than that of next-gen injectables and/or use in the maintenance setting.
JPMorgan's Strategic Investment
JPMorgan's asset-management arm raised over $500 million for a new biotech fund that will invest in weight-loss drugs. The fund, named the 270 Life Sciences Private Capital Fund I, closed earlier this month and is primarily focused on obesity treatments. Steve Squinto, the chief investment officer of the bank's life sciences team, emphasized that the fund's top three investment priorities are exclusively centered on obesity, describing the weight-loss sector as having vast potential and indicating a pivotal moment for the pharmaceutical industry.
Why Obesity?
Stephen Qunito, the chief investment officer of the bank’s life-sciences team told Bloomberg that the fund’s “top three choices are obesity, obesity and obesity.” JPMorgan considers the market “wide open” and expects more players to enter the fray.
Anticipating Market Growth and Competition
Last November, JPMorgan analysts predicted that the global market for GLP-1 (glucagon-like peptide-1) therapies will expand to over $100 billion by 2030. They estimated that approximately 9% of the U.S. population would be using GLP-1 therapies, split between managing diabetes and obesity.
While the current commercial GLP-1 market is dominated by Novo Nordisk and Eli Lilly with their products Wegovy (semaglutide) and Zepbound (tirzepatide), respectively, JPMorgan anticipates substantial opportunities for new competitors to emerge. Gaurav Gupta, the managing partner of the new fund, noted that a stable duopoly is unlikely to dominate the future of obesity treatment, suggesting that there will be multiple significant winners in the industry.
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Several companies are already racing to break up the Novo-Lilly duopoly, including Amgen, Vikings Therapeutics, and Zealand Pharma.
Implications Beyond Pharmaceuticals
The growth in use of obesity drugs has implications beyond the pharmaceutical industry. “Obesity drug patients continue to report eating healthier foods, spending less on groceries or cutting back on restaurant expenses. Additionally, nearly two-thirds of users in our survey went through a wardrobe refresh in the last six months,” Boutherin says.
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.
Impact on the Food and Beverage Industry
As one in eight American adults have used a GLP-1 medication for weight loss, brands are recognizing and adapting to this significant shift in consumer trends. Nestlé is now debuting a CPG line with messaging directly geared towards GLP-1 patients. Brands that focus on nutrient-packed products and transparent labeling will thrive. Brands that figure out how to speak credibly to this audience will win.
Early studies of GLP-1s showed patients decreased their food consumption based on reaching satiety and made broader behavioral shifts as they adopted healthier lifestyles. Some stocks that were perceived to be potentially at risk from GLP-1s declined far more. Food, beverage and lifestyle-oriented companies should be among the consumer sectors likely to feel a gradual impact.
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The impact on restaurants could be more uneven. While surveys showed people taking the drug didn’t want the same foods in the same quantities, restaurants have shown themselves able to adapt to consumer trends. Some companies have already pivoted to healthier, fresher menu options.
Potential Impact on Alcohol Consumption
Evidence is emerging that GLP-1s can treat alcohol addiction.
The Future of Obesity Treatment
Morgan Stanley Research now estimates the global market for obesity drugs could reach $150 billion at its peak in 2035, an increase from a previous forecast of $105 billion. The adoption of weight-loss drugs is likely to accelerate in a pattern similar to structural changes in the technology cycle, such as the introduction of smartphones.
Ongoing drug trials are seeking to demonstrate, in the next several years, if GLP-1 drugs are effective at treating and/or reducing rates of obstructive sleep apnea, heart failure, NASH (nonalcoholic steatohepatitis) and MASH (metabolic dysfunction-associated steatohepatitis), chronic kidney disease, peripheral arterial disease, joint replacement, osteoarthritis, Alzheimer’s, cancer and all-cause mortality.
The Role of Primary Care Physicians
is currently the biggest market in the world for obesity drugs, with about 8 million patients. “For the product to reach high levels of penetration, we believe primary care physicians (PCPs) will need to become higher-frequency prescribers,” Flynn says. “This will take some time as PCPs have not historically dealt with drugs that require frequent changes in dosage, with accompanying check-ins, until the patient reaches the full dosage. For the rest of the world, the growth prospects are even better. suggest high patient demand.
The Importance of Ongoing Research and Development
An important takeaway from the SELECT trial is that the meaningful benefits from GLP-1s were achieved with only a 9% loss of body weight, on average. There are GLP-1 drugs commercially available now, and new iterations currently in trials, with even more significant average weight loss. More weight loss could translate to potentially better clinical outcomes.