During the Spring Festival, “How Can Jia Ling Lose 100 Pounds” hit the headlines, making diet pills popular.

In fact, before Jia Ling, diet pills had been popular for a long time. In 2022, Musk tweeted “intermittent fasting plus simeglutide reduction, successful weight loss”, bringing the diet drug GLP-1 into the public eye.

Photo Source: Internet

The huge room for imagination about diet pills has also caused related stocks to explode over and over again. The American company VKTX, which developed the GLP-1/GIP receptor dual agonist, once surged 1.5 times in 2 days due to weight loss data that exceeded expectations.

A-share diet pills will also not let go of any hype. Many pharmaceutical companies and dealers suspected of being involved have harshly reaped a wave of sharp dividends.

No way, this track is really fascinating.

Since the 21st century, the number of overweight people in the world has doubled that of the previous century. The proportion of people who are overweight in the US has been rising year after year. At the same time, chronic diseases such as cardiovascular disease caused by being overweight have also become a problem that the public has to face.

However, why did the obesity problem that has persisted in recent decades wait for almost a year to be hyped up in the market?

01

Currently, the world's most popular diet drug simeglutide (injection) weight loss indications have been on the market for less than three years, with sales exceeding 4.5 billion US dollars.

Lilly's tiverpotide weight loss indications were approved on November 8, 2023, and sales soared to US$176 million in less than a month after launch.

The diet pills market is in high demand. How much market space is there?

According to data from the World Obesity Map, more than 2.6 billion people worldwide were affected by overweight/obesity in 2020, and it is estimated that more than 4 billion people will be affected by 2035, and the obesity rate will rise from 14% in 2020 to 24% in 2035. Among them, the number of overweight/obese people in China is close to 200 million in 2023. The annual growth rate of adult obesity in China is expected to reach 5.4% in 2020-2035, and the annual growth rate of childhood obesity is as high as 6.6%.

GLP-1, called glucagon-like peptide-1, is an intestinal insulin-promoting hormone secreted by L cells in the human gut. It can stimulate natural insulin secretion, reduce appetite, and reduce food intake, thereby lowering blood sugar levels. The new GLP-1 drug approved worldwide is mainly used to treat type 2 diabetes. Among them, liraglutide and simeglutide have fewer adverse effects and better weight loss effects, and have been developed to treat obesity.

At the same time, GLP-1 receptor agonists have other beneficial effects on organs such as the heart and liver, and have curative effects on chronic diseases such as cardiovascular disease. Taking simeglutide as an example, in addition to lowering sugar, cardiovascular disease, and weight loss, Novo Nordisk's indication layout also includes research expansion on 22 indications such as NASH, Alzheimer's disease, cardiovascular disease, and breathing, which can be described as having huge market space potential.

However, there are only a few mainstream GLP-1 drug manufacturers, such as simeglutide, liraglutide, and terpotide. They already occupy a total of 90% of the global anti-obesity market and share nearly 6 billion US dollars of cake (2023 market size).

In view of the development prospects of GLP-1 drug development with multiple indications, institutions are also continuously raising market size expectations for diet pills.

Citibank raised the forecast scale for 2035 to $71 billion from the previous $55 billion. Morgan Stanley and Berenberg expect the global diet pills to reach 77 billion US dollars and 85 billion US dollars in 2030, while institutions such as J.P. Morgan Chase, Goldman Sachs, and BlackRock will increase the size of the diet medicine market to 100 billion US dollars.

The scale of these predictions has room for growth of more than 10 times compared to the current one.

In 2023, Yao Wang Pharmaceutical, which has the highest sales in the world, had sales of 25 billion US dollars, a growth rate of nearly 20%. However, the market is anticipating that it will be difficult to maintain the days when K drugs rise to the top of medicine. Mainly, simeglutide (sugar reduction+weight loss) has grown strongly since its launch. Sales reached US$21.2 billion in 2023, an increase of 94% over the previous year, and is expected to become the world's top drug in 2024.

Faced with a vibrant diet medicine market, who wouldn't want to share a slice of the pie?

02

Currently, Eli Lilly and Novo Nordisk's market capitalization has exceeded 700 billion US dollars and 500 billion US dollars respectively, ranking the world's largest and second-largest pharmaceutical companies by market capitalization.

Lilly also became the 7th largest company in the world by market capitalization after Microsoft, Apple, Nvidia, Amazon, Google, and Berkshire, putting pressure on many of the biggest players in the global consumer or technology industry.

In 2023, Novo Nordisk's production capacity of simeglutide was insufficient, and sales exceeded expectations, causing its stock price to rise 55% in 2023.

Eli Lilly also increased 61% over the same period, mainly due to the fact that tiverpotide has better clinical data than simeglutide and has greater marketing potential.

Since 2024, with the announcement of sales results of Novo Nordisk Smeglutai and Eli Lilly's terpotide, the two giants' stock prices have continued to rise to new highs, rising 21% and 34%, respectively.

On the other hand, looking at A-shares, the diet medicine industry chain market has followed the speculation of overseas markets in recent rounds, and has even been hyped up even more.

The first round includes GLP-1 polypeptide APIs such as simeglutide and CDMO companies, such as Nuotai Biotech, Hanyu Pharmaceutical, and Shengnuo Biotech.

The second round includes materials companies related to the GLP-1 diet medicine industry chain, such as Haofan Biotech and Jinkai Biotech.

In the third round, as Novo Nordisk's performance exceeded expectations, GLP-1, a diet drug formulation, began to be hyped up, but domestic companies did not market diet drugs. The market mainly hyped up companies such as peptides and simeglutide generic drugs, including Changshan Pharmaceutical, Borui Pharmaceutical, and Shuanglu Pharmaceutical.

According to recent readings of excellent VKTX data, the market continues to speculate on Borui Pharmaceuticals, Zhongsheng Pharmaceutical, etc., mainly that multi-target clinical data will be better, and the two A-share companies mentioned above have the same mechanism of action targets (GLP-1/GIP) as VK2735.

But in these few rounds of the diet pills market, since these companies had no performance support, the stock price was like a roller coaster. They were unable to get rid of the cycle shackles like Novo and Eli Lilly, and continued to rise unilaterally.

03

Although compared with the global market forecast of 100 billion US dollars for GLP-1 drugs, the domestic market is definitely not as good, but with a large population base, demand is not at all inferior to overseas, and the long-term domestic GLP-1 drug market is also expected to reach tens of billion yuan.

For those few players, this cake is appealing enough.

Which companies have highlights?

Looking at the global market, it is difficult to shake the market position of Eli Lilly and Novo Nordisk in the short-term diet pills market.

On the one hand, the curative effect was excellent. The average weight loss effect of Eli Tiletilbotide decreased by 26.6% in 84 weeks, and Novorod Smeglutide Wegovy (2.4 mg) lost 16.9-18.2% in 68 weeks. In the previous comparison of the weight loss effects of simeglutide and liralutai, the weight loss of simeglutide reached 15.8% in the 64th week, while liraglutide lost 6.4% during the same period. On the other hand, judging from the method of use, it is more convenient to use tirpotide and simeglutide. They are all weekly preparations, and patients are more dependent on their use.

In addition to weight loss, the expansion of multiple indications for tirpotide and simeglutide has also received market attention.

In 2024, Eli Lilly will release the latest clinical trial data for OSA/NASH/cardiovascular indications, Novo Nordisk will also announce the progress of simeglutide in multiple AD/chronic indications, and the oral version of simeglutide for weight loss is expected to read complete data in 2024. Multiple indications and longer-term clinical expansion of drugs are expected to continue to open up market space for GLP-1 drugs in the future.

According to sales guidelines, Eli Lilly and Novo Nordisk expect sales growth of 18%-22% and 18%-26% in 2024. Currently, Eli Lilly and Novo Nordisk's PS valuation is 18 times and 14 times, respectively, and the corresponding PE valuation is 60 times and 40 times, respectively. Although it has exceeded the target values of most analysts in the market, given the popularity of the diet pills market and the possibility that GLP-1 drugs will continue to expand as multiple indications expand, their stock price trend may still be difficult to say.

Domestically, GLP-1 diet pills that have already been marketed are mainly Huadong Pharmaceutical's liraglutide biosimilar (formerly Yenuo and Nord) and Renhui Biotech's benaglutide (innovative drug), which were marketed in June and July 2023, respectively.

Since their launch, the market has not been optimistic about sales of these two products, mainly because they are not as good as simeglutide in terms of efficacy or long-term efficacy. Although simeglutide is currently only approved in China as an injectable and oral formulation for diabetic indications, this does not prevent excessive use in the market. According to reports, simeglutide and tiverpotide weight loss indications have been submitted domestically in June and August 2023, respectively.

Potential replacement expectations make the development prospects of liraglutide and benaglutide, which are already on the market, unfavorable, which is why the stock prices of these companies are often roller coasters.

Relatively speaking, the domestic GLP pharmaceutical industry chain, led by simeglutide, and GLP innovative pharmaceutical companies may receive more attention from the market.

The original simeglutide drug patent will expire in 2026. Currently, no less than 5 domestic pharmaceutical companies have deployed simeglutide generic drugs to enter clinical phase III. However, generic drug companies often seize market share through price wars, making it difficult to stand out from the competition. Innovative drugs have the opportunity to seize the market through better efficacy.

In the short term, the domestically produced GLP-1 innovative drug is progressing the fastest, and is expected to take the lead in marketing to seize market share. Cinda Biotech's diet drug Maxidol (GLP-1R/GCGR dual agonist) applied for listing with the State Drug Administration in February 2024 and is expected to be approved in the first half of 2025. Judging from the clinical results, Maxidopeptide 9mg lost 18.6% of weight in 48 weeks. The effect is relatively superior to simeglutide, second only to tirpotide, and is expected to compete on the same stage with the two giants in the domestic market.

Most of the other domestically produced innovative diet drugs are still in the clinical stage. In the A-share market, it is difficult for most diet drug companies to have performance support. More are speculating on clinical data readings and overseas mapping. For example, recent overseas mapping is mainly Borui Pharmaceutical and Zhongsheng Pharmaceutical, which have the same target as VIKING.

On the upstream side of the GLP-1 industry chain, global GLP drug sales will be about US$30 billion in 2023. As terminal products continue to be rapidly released, upstream APIs and reagents in the peptide industry chain, as well as midstream CDMO companies, are expected to usher in market expansion.

Among them, peptide API manufacturer Hanyu Pharmaceutical has received a total of 175 million yuan in US liraglutide generic drug orders since 2023. In a survey, Nootech Biotech indicated that it will supply the R&D needs of overseas and domestic customers for simeglutide generic drugs, and signed a 100 million US dollar contract with overseas customers in 2023.

Due to the expansion of GLP-1 drug weight loss indications, the short-term production capacity supply of simeglutide and terpotide is insufficient. The market is concerned about whether upstream GLP drug API companies can accept orders for Novo Nordisk Smeglutide or Eli Lilly's telpotide. However, in reality, 90% of the value of Novo Nordisk's Simeglutai APIs are not outsourced; therefore, domestic API manufacturers and CDMO manufacturers do not participate in the Novo Nordisk Smeglutide industry chain; it is more about the R&D needs of generic drug manufacturers.

The key component of Eli Lilly's tiverpopeptides is outsourced. Currently, it is quite clear that Pharmacom Kangde received an order. Previously, in September 2023, Pharmaceutical Kangde announced an increase in CDMO production capacity, and peptide production capacity will double in 2024. Meanwhile, Gloria & Jiuzhou Pharmaceutical have the ability to accept orders for peptides.

04

summed

Currently, research and development of global diet drugs based on GLP-1 targets is heating up. As of February 2024, there were 220 GLP-1 targets in the global research pipeline, involving 154 companies, covering 107 indications. Among them, there are 130 single-target drugs, 70 dual-target drugs, and 20 three-target drugs.

Therefore, it is easy to predict that in the next few years, the GLP-1 diet drug market will be flooded with a large number of biosimilar drugs and innovative me-too drugs. Prices of products will be drastically reduced, making it difficult for most pharmaceutical companies to recover R&D expenses.

Domestic companies want to gain market share and maintain a competitive advantage. Products must not only advance faster in the development and marketing of innovative drugs, but also seek unique or leading advantages in the direction of long-term use, optimization, and oral administration. There are so many difficulties here that not everyone can make it to the end.

This has also led to future GLP-1 diet pills likely to be the next PD-1 farce, but until then, at least many companies are likely to continue to make a lot of money in a round of roller coaster hype.

Therefore, there are many opportunities for this track in the future, but the risks will definitely also be huge. Apart from the necessary professional investment and research capabilities, luck may also be an important factor.