In this podcast, Motley Fool analyst Karl Thiel joins host Ricky Mulvey to check in on the GLP-1 landscape. They discuss:
- How weight loss drugs actually work, and how big-name prescriptions differ from each other.
- What investors need to know about Ozempic's and Mounjarno's patent cliffs.
- The scenarios in which Novo Nordisk and Eli Lilly are actually undervalued.
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A full transcript follows the video.
This video was recorded on March 01, 2025
Karl Thiel: There is this number that keeps getting thrown around, and that is that this is going to be a $150 billion annual market. Now, I feel that it's one of those numbers that's become thoughtless and is not really getting reexamined. A lot of assumptions go into that about how widely these are covered by insurance, about how long people end up staying on some of these drugs and a number of other factors. If you assume that Lilly and Novo Nordisk continue to dominate the market, and you assume it really does go to $150 billion, well, Lilly starts to grow into that valuation, and they start to look pretty reasonable just a few years out.
Mary Long: I'm Mary Long, and that's Motley Fool analyst Karl Thiel. Weight loss drugs like Ozempic and Mounjaro have dominated the news cycle for the past couple of years now, but other GLP-1 drugs have been on the market for the past two decades. Still, the more recent growth of these drugs has a lot of investors very optimistic, and there are other opportunities in this market beyond injections that are currently under development. My colleague, Ricky Mulvey caught up with Karl to check in on the state of weight loss drugs and the science behind them. They also discuss the material differences between key versions of different weight loss drugs, concerns about side effects, and the role of telehealth in prescribing GLP-1s, plus how retail investors ought to approach this still-growing space.
Ricky Mulvey: One of the great societal shifts of the past decade, and I would say, into the next decade is the introduction of weight loss drugs. They've driven sales growth for big pharma companies, including Novo Nordisk and Eli Lilly. For example, this past year, the sales of obesity care products for Novo rose by more than 50% and Eli Lilly's Mounjaro rose by 60%. Right now, an estimated one in 20 American adults are on weight loss drugs. Karl, as we get started, that's the number salad. But what do you make of all of these results and the exploding popularity of GLP-1 drugs?
Karl Thiel: It's remarkable, but there's a lot of subtlety behind those numbers that you just talked about, and I'm sure we'll get further into it. But one right off the bat is that you mentioned one in 20 people being on these drugs. About one in eight people have tried them, and that already tells you something really important there, because a lot of people have tried them and are no longer on them. These are not perfect drugs, and I think there's a lot of push to make improvements on them. At the same time, you could argue that a lot more people should be on them than already are, given the state of the obesity epidemic just in this country and the knock on health effects of that, never mind people with actual diabetes, which is who these drugs were originally designed for.
Ricky Mulvey: Speaking of the design of the drug, how did GLP-1 drugs actually work?
Karl Thiel: GLP-1 it's a natural hormone fit that everybody makes in their own body. It's released from the small intestine. When you eat, it binds to receptors in the pancreas, and it stimulates insulin production. It's just part of the natural process of appetite and satiety. It slows gastric emptying. It signals the hypothalamus to suppress hunger, which is all great, so you're making your own free GLP-1. The thing is, human GLP-1 has a half life of one or two minutes, and that's the problem. The GLP-1 drugs that people take have a half life on the order more of like 5-7 days. It's stimulating the same receptor. It's doing the same thing that your natural GLP-1 does, but it acts much longer. As an interesting little side point, the structure of the GLP-1 drugs was originally inspired by the venom of the Gila monster. [laughs] The reason I think that there was some interest in that is that the Gila Monster only eats 5-10 times a year. It makes its own version of GLP-1, which is quite a bit different has a much longer half life, and that was the structure that inspired some of the current drugs.
Ricky Mulvey: When you look at the big drugs, Ozempic, Wegovy, Mounjaro, are there material differences in how these work, or are they all offering the same thing?
Karl Thiel: There are some material differences. Ozempic and Wegovy are both semaglutide. They both have the same active ingredient in them. Mounjaro and Zepbound, the two Lilly drugs also have the same active ingredient. That one is tirzepatide. But those two drugs differ. Both of them offer a GLP-1 agonist, so something that mimics basically GLP-1. But the Lilly drugs, Mounjaro and Zepbound, also have a second hormone agonist in it called GIP which stands for either glucose-dependent insulinotropic polypeptide or gastric inhibitory polypeptide, depending on who you're talking to.
Ricky Mulvey: One of the exciting things about these drugs is they don't just help with weight loss. There's some preliminary examples that folks with addictions may be able to use GLP-1 drugs to curb those addictions. Are you seeing strong evidence for that, or is it anecdotal at this point? What other impacts are you noticing?
Karl Thiel: They're actually being studied in clinical trials for some of this. Things like alcohol addiction or even drug addiction. The approvals haven't come through, so I guess, you can't say that all the evidence is in, but I would say it is more than strongly anecdotal that there is an impact here. It makes sense. These drugs are actually sometimes called endodontics. They basically are to some extent, taking away some of your interest in food and in your brain, that interest with indulgence plays out in other ways as well. The idea that there is an addiction role here is not entirely surprising.
Ricky Mulvey: Those are the side beneficial cases, but the side effects also have some people worried. I've seen criticisms from some health influencers that really these GLP-1 drugs should be reserved for extreme cases. Some of these side effects could include gastrointestinal issues, mood changes, insomnia, and there's a concern about them being prescribed increasingly to children, rather than just going all out on the diet and exercise route. Now that these drugs are increasingly popular, are the concerns about the widespread negative side effects playing out as these are prescribed to millions of people?
Karl Thiel: You used the word extreme when you were talking about side effects, and that's a loaded term, and it's pretty interesting. What you will see over and over again in the clinical trials is that the companies will talk about mild to moderate side effects and side effects that resolve over time, things like that. From a clinical standpoint, most of the gastrointestinal side effects, which are certainly the most common ones, are not extreme. But they can be for some people. Moreover, what counts as extreme to a clinician is not the same as [laughs] what necessarily counts as extreme to an individual taking these drugs. You find that over 50%, by most measures of people stop taking these drugs within a year, and by two years, it's 75%, 80% of people aren't taking them anymore. Now, unfortunately, a lot of the studies that are coming up with those numbers aren't necessarily breaking down why people are going off the drugs.
Certainly, insurance and financial factors are playing into a lot of that. But that's not the only reason. Side effects are a significant issue for having patients adhere to these drug regimens and if they don't know, you're going to see the benefits of them go away. That's an area where I think there's a lot of room for improvement. But more specifically on the issue of children, I think that's certainly a question that hasn't been answered yet. I think a lot of doctors are hesitant to do that. But the idea of what is extreme and what isn't is something that I think plays out in a number of issues.
Ricky Mulvey: Maybe serious side effects would have been a better way of putting it. I'm trying to get you excited, Karl, as we talk about the opposition and the people in favor of these drugs, but you didn't want to take the bait there. I get it. One of the more recent developments is that the FDA has announced the end of a shortage of semaglutide products. This impacts the compounding pharmacies in a way, but what does this headline mean for especially the big pharma companies like Eli Lilly and Novo Nordisk?
Karl Thiel: Compounding pharmacies have been around forever, but it's not something that a lot of people had even, I think, heard of until the last couple of years. What it means is maybe not exactly what meets the eye. A lot of people have maybe heard of the company Hims & Hers. It's a publicly traded company that has had quite a meteoric rise of its stock, so it's gotten a lot of people interested. They just announced that they were going to stop selling the approved doses of semaglutide, and they've already, I believe, stopped with tirzepatide, and the stock came crashing down. That should have come as no surprise to anybody who was paying attention. It was inevitable that FDA was going to announce the end of the shortage of semiglutide products. However, the reason the compounding pharmacies exist is to provide people with drugs who cannot use the normally manufactured versions. What Hims & Hers is going to do and what other compounding pharmacies will probably continue to do is provide the drug anyway, but to people whose doctors say they can't take the approved doses or they're allergic to some other ingredient, propylene glycol or something like that in the manufactured drugs, and so they need their own custom version of it. While Hims & Hers is certainly forecasting a decline in their sales of GLP-1 drugs, they're not expecting it to go to zero.
Ricky Mulvey: What you're saying is that Hims & Hers, the online pharmacies can still sell this drug. Is there a version of this where they totally can't sell compounded GLP-1 drugs?
Karl Thiel: There's a lot of gray area here and there's a lot of legal back and forth. But generally speaking, compound pharmacies are going to be allowed to continue selling the drug if they're offering something that the manufacturer doesn't offer. That is because you need to be able to serve patients and honestly, there is actually probably an argument to be made that in some cases, people need to really fine tune their doses of these drugs, that the given manufactured doses aren't necessarily the exact right fit for everybody, and some people do need to fine tune doses in between what the manufacturers are offering. It could continue to be a significant business.
Ricky Mulvey: One of the things I worry about with these online pharmacies, and this came from a conversation I had with Johann Hari last year. He's the author of Magic Pill, which described the development and his journey with these weight loss drugs. He talked about the effect of these drugs on folks with eating disorders, and this is what he had to say about it. "These drugs are probably saving my life. If you take these drugs and you had a BMI higher than 27, it lowers your risk of a heart attack by 20%. Staggering and that's just one of the many health benefits of reducing or reversing obesity. Equally, there are people with eating disorders who will be killed by these drugs. I'm really worried if we don't regulate these drugs, I can explain how we'll have an opioid like death toll of young girls." Do you think he's right, or do you think that this fear is overblown?
Karl Thiel: Eating disorders are something that have impacted people in my life. It's something I know a fair bit about, and I have also thought about this. I definitely take this really seriously. At the same time, what he's saying is not without some anecdotal evidence behind it, but it's also basically speculation. There is almost zero real data at this point on this. I imagine there will be over time, but right now, that data just pretty much doesn't exist. In fact, these drugs are being looked at in almost the opposite way, so for things like treating binge eating disorder or bulimia. I do think it's a concern. I absolutely do. You certainly hope that when these drugs are prescribed, there's a reason that you have to go through a prescriber. Somebody should be making an evaluation about whether it's inappropriate. I think a lot of telehealth complicates that picture, and so that might be something that does emerge as a problem over time, but right now, we just don't really have the evidence of what's going on.
Ricky Mulvey: I think the concern is if you're not going to a doctor that's seeing the physical changes or you're able to lie about your weight, there will be ways to game the system that could potentially hurt people with that addiction. But I understand what you're saying with the other types of addictions and disorders that it could help.
Karl Thiel: On top of that, somebody can start to suffer from an anorexic type eating disorder while still being overweight. It is very complicated and unfortunately, real awareness with treating eating disorders is still fairly uncommon. It's something that a lot of doctors are not especially good at. If a problem emerges with this, I wouldn't be totally shocked by it. Right now, we just don't have the numbers behind it.
Ricky Mulvey: Let's get to the patent protection because when drug makers make a blockbuster drug, they only have a certain amount of time to capitalize on it before generics can be made off of it. The patents for Ozempic are set to expire in 2032 in the US. Mounjaro is 2036. When you look at these patent cliffs, how does that impact Novo Nordisk and Eli Lilly, and what should their investors keep in mind?
Karl Thiel: Generally speaking, when a drug goes off patent and generic competition comes in, the sales of the original branded drug plummet extremely rapidly on the order of 80 or 90%. What's going to happen here depends on a lot of things. To some extent, you're already seeing that these drugs, I should point out, are not the first GLP-1 drugs to hit the market. In fact, the first one to hit the market was a drug called Exenatide. It was approved in 2004 or 2005. These been around for 20 years. That first drug, it was not nearly as potent or as effective as the current generation, but it recently went generic. Also, so did another GLP-1 compound called liraglutide, which is sold under the brand names Victoza and Saxenda. The Victoza version, the version that's used for diabetes, also recently went generic.
You could see some impact there, and in fact, we've talked about Hims & Hers. That's one of their strategies is to try to push people toward liraglutide instead of semaglutide. But it's been interesting to watch pricing of these drugs. Generally speaking, drug makers price very aggressively. They tend to increase prices over time. That's happened a tiny bit, just by a couple of percent for these brands like Ozempic and Mounjaro. But in fact, Lilly in particular, has been pretty aggressive about its pricing strategy, and they've actually dropped some prices and offered some different dosing options. The concern really it's not even so much about generics. It's really about, I think, addressing people who don't have insurance and who are just paying out of pocket and also compounding. They've started to offer, instead of just the auto injector pens, they've offered the drugs and vials at reduced prices. It's interesting to see that strategy going forward, where they really know they're addressing a big out of pocket population. 2032 is still a pretty long way away and so what's really going to matter is if there are substantially better drugs around by then. In which case, it may not matter so much that these go off patent.
Substantially better, right now, a lot of companies are trying to push for drugs that result in even more weight loss. But I think you see from the amount of discontinuation, it's really, I think, adverse events that are going to define what makes these drugs better for a lot of people, if you really find that they are easier to take for long periods of time.
Ricky Mulvey: One of the ways that the drug makers are trying to innovate is by introducing more weight loss pills. We've been talking about injections so far. But Eli Lilly right now has $550 million worth of, pre launch inventory for its weight loss pill that it's hoping to bring to market. What are you seeing in the preliminary results for that? Do you think these could replace the injections?
Karl Thiel: I'm going to nerd out on you a little bit here, just because [laughs] it's really interesting what they're doing. Orforglipron, which is the drug that they are hoarding $550 million from, even though they don't have the Phase 3 results on it yet, that is what's called a small molecule drug. It is a pill, but it is a non peptide agonist. That is really interesting because this exact drug does not exist in the commercial market yet in any form, for any disease, to my knowledge. All these drugs are what are called peptide drugs. They're short proteins and the reason that they don't work very well as pills is because if you swallow a protein, your body breaks it down. It can't really handle the acid environment of the stomach. It doesn't go through the stomach wall into the bloodstream very well. There's lots of reasons that it's really hard to make a peptide work as a pill. Now, some companies have done it.
You can do all kinds of things to a pill form of a peptide to make it work and in fact, there is a Novo Nordisk version of semaglutide called Rybelsus that does exactly this, but it doesn't work all that well, and it has a lot of side effects. A number of people are working on pills for weight loss, but they mean really different things by them. It makes a big difference whether you mean, I'm taking a peptide and making it work as a pill or I am just making a small molecule drug that is not a peptide. That is the case with this drug, orforglipron. It is a non peptide agonist. They're not the only ones that are working on this. There are some others, but if it works, it's really important because those drugs are much easier to manufacture. You can do things like make $550 million worth of it and store it away because it has a [laughs] nice long shelf life and should work much better in terms of absorption and other things that you want out of a pill. On the other hand, we haven't yet seen the final data on them. The way they're working as small molecules go, they're actually rather complex, and they have to really bind into a big, flexible pocket on a class of receptor called the G protein-coupled receptor. It's complicated. There's a chance that they could have higher rates of, say, off target effects, which could mean higher side effects. That's the thing you're really going to have to look for in the Phase 3 study. Obviously, Lilly feels very confident about this.
Ricky Mulvey: Investors are also feeling pretty confident about Eli Lilly. I'm a shareholder, but I'm a little concerned. It trades at 75 times earnings. Hims & Hers, which we've talked about, is more than 100 times earnings. The online pharmacy is around six-ish times sales. It's a younger growing company. What are the scenarios you think that these stocks are a bargain in retrospect? What are the examples maybe where the market is right about these price tags?
Karl Thiel: Lilly had about $16.5 billion of sales in 2024 of Mounjaro and Zepbound combined. I think they're looking at something like, $28 billion in 2025. I think estimates are running around there. There is this number that keeps getting thrown around, and that is that this is going to be a $150 billion annual market. Now, I feel that it's one of those numbers that's become thoughtless and is not really getting reexamined. A lot of assumptions go into that about how widely these are covered by insurance, about how long people end up staying on some of these drugs and a number of other factors. If you assume that Lilly and Novo Nordisk continue to dominate the market, and you assume it really does go to $150 billion, Lilly starts to grow into that valuation, and they start to look pretty reasonable just a few years out.
I will say that I do think Lilly is pretty clearly the best positioned company in this space right now. There's no reason to think that Lilly and Novo won't have the lion's share of the market over the next few years and probably Lilly in a somewhat better position than Novo. If that all plays out and it really does ramp like this, then that price could look reasonable. Now, there's a lot of uncertainty about this because it's so competitive. There are so many people gunning to do this. The drugs themselves are questionable in how long people keep using them. There's a whole lot of moving parts that could change the picture. We're going to have to see how it shapes up.
Ricky Mulvey: There is a version where there's some irrational exuberance going on, which is something that I have noticed in myself as well when I've looked at these companies. This is something that I'm intensely optimistic about, and I'm not the only person in the market that feels that way. How do you think retail investors should approach this trend? Is there a best of the bunch, a basket approach? Take the distributors, but not the drug makers, short candy companies? What should we be doing here? [laughs]
Karl Thiel: I think a basket approach in this case, if you're interested in it makes some sense because I think if you're going to pick one company, pick Lilly or Novo Nordisk. Honestly, I like Novo Nordisk a little bit better just because even though I don't think they're quite as well positioned, they are a heck of a lot cheaper, and I think people are a little pessimistic about them versus being extremely optimistic about Lilly right now. In other words, if things don't go perfectly, I think it's going to hurt Novo a lot less that it's going to hurt Lilly, and if things go really well, I think they both benefit. But I also think if you're interested in some companies that could be huge home run winners from here, yeah, maybe consider taking a basket approach because things are just changing so quickly that it's really hard to look forward five or six years and say exactly how it's going to work out. I think there are a number of interesting companies out there that are playing in this space. But a less risky way to do it, say, would be to add in some other large pharma companies that have other things going for them, like Pfizer, for instance.
I talked a little bit ago about non peptide agonists and Lilly's orforglipron that they're working on. Well, Pfizer is also working on one called Danuglipron. It's had some clinical questions along the way, so I'm not completely confident in it, but it's also certainly something that Pfizer is pushing forward on very aggressively. That could certainly end up being a player, and Pfizer is otherwise looking fairly cheap right now. It's a reasonable investment and a good dividend. Roche is another company that's very active in this space and could end up being a player and again, has a lot more going for it, so you're not putting all your eggs in one basket.
Ricky Mulvey: Outside of the big pharma companies, Lilly, Novo Nordisk, Pfizer, what are some of the companies we should be looking at? What's the competitive landscape looking like for these GLP-1 drugs?
Karl Thiel: There are smaller players gunning for a role in this, too. Certainly, one that gets a fair bit of attention is a company called Viking Therapeutics. They have a drug that's quite similar to Mounjaro in that it works on the same mechanisms. It's GLP-1 plus GIP, just like Mounjaro. They are working on both an oral version of it and an injected version of it. Moving into Phase 3 should be very soon with the injectable version. They could be out in the not too distant future with a version of that. One of the attractive things about them is that particularly with the oral version, looked like it had a very favorable side effect profile. It might actually be much easier for people to take. They maybe have a ecosystem in which you could start on their injectable and move to their oral for long term maintenance. That's an interesting company. There's another company called Structure Therapeutics that is also working on a non peptide small molecule, but there are other ones coming along all the time. Lilly has partnered with a company called Laekna, which I think is in Hong Kong, that they're looking at other things that you can do with these drugs.
For instance, maybe when people tend to lose a lot of weight, they also tend to lose a lot of muscle mass. That's another area that you can look at is can you preserve muscle mass while people are losing weight? That's something I know Lilly is looking at with this company further down the road. There is another company called Metsera that is looking at really extended dosing. There's a lot of players in this space.
Ricky Mulvey: As we zoom out, are there any surprising knock on economic effects that you're seeing? I remember I think it was last year, one of the airlines said that maybe it'll help them with fuel efficiency as more Americans lose weight and they're carrying less weight on their passenger airplanes. That seems like a little bit of a bank shot, [laughs] but are there any economic effects that you've noticed from these drugs becoming more popular?
Karl Thiel: I think it's a little bit hard right now to see it on a populationwide basis. It's probably happening, but I don't know that you're going to see it quite yet. As you zoom in, you will see that if you look at households where you know if people are specifically on these GLP-1 drugs, they are buying less food. You've seen companies like General Mills and Conagra are actually launching new product lines that are basically aimed at GLP-1 users. It'll be smaller portions of products with boosted fiber and protein content for them, specifically to address the needs of GLP-1 users. You've seen it in a few specific areas. Intuitive Surgical, for instance, is a company that makes a robotic surgical instrument. They've said that bariatric surgeries, for instance, have dropped quite significantly. They're seeing less of that because people are opting to go on these drugs rather than get bariatric surgery. Areas like that, I think, over time, will you start to see cardiovascular health increase in the country. It would make sense given the impact of the drugs, that data is going to take a while to show up.
Ricky Mulvey: One of the most interesting effects to me is how these big food companies are reacting because a lot of the people who take these drugs become more interested in whole unprocessed foods. The response has to include large manufactured ultra processed foods. We'll see. I'm skeptical about the uptake from GLP-1 users for some of these offerings from the big food companies, but we'll see. Karl, as we wrap up, as we look to the year ahead, are there any key weight loss trials that you're keeping an eye on that our listeners should keep on their radar?
Karl Thiel: Yeah, another really important one for Lilly is a drug called retatrutide sometimes known as triple-G. Again, another thing that companies are doing as they try to improve on these drugs is find different mechanisms. Lilly has a drug that not only targets GLP-1 and GIP, like Mounjaro, but also targets glucagon. That's the triple-G. That's going to read out later this year, and what we've seen so far is that it appears to be even more potent than Mounjaro. We mentioned orforglipron. That's going to have results late in the second quarter and then some other Phase 3 results later in the year. Then another important one is Novo Nordisk's amycretin. That is their oral drug, which we will see enter Phase 3 this year. We're probably not going to actually see results this year, but that is their bet to have a follow on to semaglutide. Again, it's something that looked very promising in Phase 2, but we'll have to see how it plays out, especially as we see more side effect information come out.
Ricky Mulvey: Karl Thiel, appreciate you being here. Thank you for your time and insight.
Karl Thiel: Thanks.
Mary Long: As always, people on the program may have interest in stocks to talk about, and Motley Fool they have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance contact follows Motley fool editorial standards and are not approved by advertisers. Motley fool only picks products that it would personally recommend to friends like you. For Ricky Mulvey and Karl Thiel, I'm Mary Long. Thanks for listening. We'll see you all on Monday.
