‘Turbocharged’ $160bn market for obesity drugs by 2030

4 minute read

This new, higher estimate will raise again if makers can overcome supply bottlenecks.

Over 2.4 million Australians with obesity may be using Ozempic and other GLP-1 weight-loss drugs by 2030, a new Morgan Stanley analysis predicts. 

But supply remains the “gating factor”, said the analysts. 

Obesity currently affects over one billion people worldwide and 31% of Australian adults

As the narrative around obesity shifts, with greater recognition among policymakers and healthcare professionals, in tandem with the rising popularity of weight-loss drugs GLP-1 agonists such as Ozempic, multinational investment bank Morgan Stanley has re-evaluated the global obesity market. 

Supply-demand modelling, courtesy of the investment bank, suggests that the global obesity market will likely grow to US$105 billion (around $164 billion) by 2030. 

This is a significant increase from earlier estimates of US$77 billion and an apparent underestimate if giants Novo Nordisk and Eli Lilly, who are expected to control 84% of the obesity-drug market by 2035, can circumvent supply issues in the coming years, said the analysts. 

Australia, like the rest of the world, has faced long-standing supply shortages for weight-loss drugs, including Novo’s diabetes turned weight-loss wonder drug Ozempic, which are expected to continue into 2024. 

Novo’s weight-loss drug Wegovy has yet to reach the Australia market, despite garnering TGA approval in January this year. 

The only PBS-subsidised GLP-1 agonist, Ozempic, is currently accessed by only 0.7% of the Australian population, despite the over 30% obesity prevalence among adults, said Morgan Stanley. 

Even without reimbursement, demand for these high-efficacy obesity drugs has remained “unprecedented”, said the analysts. 

“Novo says it has never seen such high willingness among patients to pay out of pocket for a medication.” 

If supply constraints are resolved in the coming years, the bank estimates, “under a more bullish scenario”, that the obesity market could reach as high as US$144 billion by 2030. 

“Supply is the gating factor, while evidence of benefits in associated health conditions could turbocharge demand,” reads the analysis. 

According to the investment bank, capacity for filling and packaging the autoinjector pens used to administer the drugs and for manufacturing drug ingredients remain the major bottlenecks. 

To address these constrictions, Novo and Lilly are expected to spend over $50 billion between 2022 and 2028 building their supply chains for GLP-1 products. 

Subject to the control of supply and funding constraints over the coming years, the analysts hypothesised that market penetration could reach 40% in Australia – in line with the rate of statin use for hyperlipidemia – by 2030. 

This could affect almost 2.4 million patients and amount to an estimated $8.5 billion in revenue for wholesalers, or cost to the government should it be subsidised. 

The analysts said that they expected the funding of GLP-1s by the Australian government would take time. 

The bank predicted two main areas of downstream effect on the uptake of obesity medication: healthcare, and food and drink demand. 

Interestingly, the extended life expectancy associated with obesity reduction was expected to have a positive impact on the medical technology market, as “healthcare spend is significantly higher in the later years of life”. 

The mounting pressure on the healthcare system may push healthcare provision towards a preventative model. 

“Growing rates of obesity worldwide combined with rising longevity point to a mounting financial burden on healthcare systems,” read the analysis. 

“This could force a rethink in budget allocation from a ‘treatment model’ to early screening and prevention.” 

The bank’s consumer analysts predicted Australia would be the only food market in Asia-Pacific expected to be moderately impacted by GLP-1 medication. 

“While obesity medications may have a negative long-term impact on some players in the food ecosystem, judging by the US experience, the implications for the Asian consumer space should be relatively muted.  

“This reflects not just lower obesity rates, but also different cultural and consumer behaviors, in addition to idiosyncratic regulatory and insurance hurdles. 

“Australia is the only market where our consumer team expects a moderate impact.” 

According to the analysts, alcohol and restaurants, particularly fast-food outlets, are likely to be the most affected. 

Woolworths, Coles and former Woolworths offshoot the Endeavour Group – an alcohol, hotel and gaming operator – may be the most affected. 

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