How big could the weight loss market be?

In October 2023, Goldman Sachs published a report sizing the weight loss market at $100bn. Just several months later that estimate was $130bn. Rising estimates like this is what is driving the market value of weight loss stocks. They do leave the question – what does Tema believe to be the potential size of the weight loss drug market?

In simple terms, the obesity market size is established by three variables – obesity rate and population, penetration rate of those taking weight loss drugs, and pricing. Taking each in turn, for the US and outside US market, this blog builds up a potential market forecast, what could unlock this potential, and what some of the risks are.

Key takeaways:

• Tema believes the obesity market could be $500bn by 2030, the biggest pharmaceutical market in the world.
• The obesity market could unlock as more and more of the health benefits of weight loss drugs like GLP-1s are proven in clinical trials.
• Newer drugs may improve on current treatments and unlock shortages if a non-peptide oral works.
• Underpinning the potential is a huge out-of-pocket market – the largest of its kind.[1]
• There are risks to the weight loss industry from genericization of current key drugs and budgetary pressures.
  
  

Obesity rate

There are an estimated 1bn obese individuals globally, confirmed by a recent Lancet study, defined as people with BMI above 30. If one includes overweight, the total population today is 2.6bn. The World Obesity Atlas estimates that if nothing is done by 2035 there will be nearly 2bn obese individuals and over 4bn obese and overweight individuals, a staggering 46% of the globe’s population at that point[2]. For the US alone by 2030 the forecast is for 122m obese adults, an obesity rate of 45%.

Penetration rate

Today Novo Nordisk estimates that only 1-2%[3] of the global obese population are on medical intervention, such as GLP-1 Wegovy. To calibrate where we believe this might end up it helps to look at other chronic diseases. In the US ca. 100m people have high cholesterol and 39m take statins – a near 40% penetration rate. In fact, up to 50% of Americans with atherosclerosis take statins[1]. Penetration rates for treatment outside of the US tend to be much lower, especially in countries with poor healthcare systems.

Pricing

Pricing is a controversial topic. GLP-1 drugs cost range from $12,000-16,000 per year[4], for Wegovy and Zepbound. However, the real price paid by commercial payers is far lower and is currently estimated at roughly $5,000 - $6,000 per year or more than a 50% discount to list price. Price of course also drives access – the cheaper these drugs are the more payers cover them. The price paid by medical systems in other countries is often much lower still, often 80% discount to the US.

Putting it all together into an obesity market size

It is helpful to think about the US and non-US markets. In the US pricing and penetration rates are higher but, the population is naturally smaller. Outside the US the population of obese adults is far larger but the propensity to take treatments and pay for them is much lower.Note: by 2030. Source: Tema analysis as of July 2024. This chart is hypothetical and for illustrative purposes only. This chart does not imply any future performance.

What could unlock this market?

The key drivers to unlocking this market are:

• Health benefits of weight loss drugs. Here we already have substantial data in hand showing clinical benefits including diabetes (the original use case of GLP-1s), cardiovascular outcomes (Novo’s SELECT trial), chronic kidney disease (Novo’s FLOW trial), liver disease (Eli Lilly’s SYNERGY-NASH trial), heart failure (Novo’s STEP-HFpEF trial), obstructive sleep apnea (SURMOUNT-OSA). These are some of the largest obesity-associated health conditions, of which there are more than 200. It is not beyond the realm of possibility that, like statins, weight loss drugs come to be used in primary prevention. There is also early evidence and ongoing confirmatory trials in Alzheimer’s (Novo’s Evoke trial), Parkinson’s, and even cancer. One underappreciated potential for weight loss drugs could be addiction[5], where trials have started in, for example, alcohol abuse disorder, and early evidence suggests they could work. Addiction kills more Americans than cancer or heart disease and only 4% of people receive any form of medication. The basic fact is that someone with a normal BMI has an almost 80% chance of reaching 70, with a BMI of 40-50 that chance is 50%[6].
• Resolving the supply situation. GLP-1 drugs are peptides, which is a chain of 30 amino acids. These biological molecules are hard to manufacture requiring billions of investments and many years to get capacity up and FDA-certified. Despite their best efforts Eli Lilly and Novo see demand outstripping supply into the far future. One potential unlock could be an oral non-peptide GLP-1 drug that is substantially cheaper and easier to manufacture.
• New drugs. New obesity drugs, beyond Ozempic/Wegovy, are working on the key drawbacks of GLP-1 namely tolerability. If these work it would expand the market by leading to higher adherence and hence higher market potential. A large part of the pipeline is also devoted to addressing niches – such as more potent drugs for specific co-morbidities.

Could this number be bigger?

Some drivers could potentially raise these estimates.

• We exclude children and adolescents. The analysis above excludes the non-adult populations. There are 14.7m youths that have obesity[7] and a total of 175m globally, a segment that is estimated to grow the fastest.
• We exclude overweight individuals. In our analysis, we focus only on the obesity rate. We exclude all overweight individuals defined as having a BMI of 25-30. Wegovy and Zepbound are approved in anyone who is overweight with a medical condition, but most payers don’t cover this population. This population alone could be 90m individuals by 2030 in the more lucrative US market[8].
• The out-of-pocket market. When asked whether they would pay for Ozempic 50% of respondents said they would pay >$100 and 5% said they would pay >$1,000. The motivations here go beyond health and into aesthetics – being thin. Stifel estimates that this market alone could be worth anywhere between $70 - $200bn. In terms of innovation, the potential for a muscle-gaining/sparing and weight-loss drug would likely add further fuel to this already large potential market.

What are the risks to our obesity market size estimates?

• Semaglutide goes generic in 2032. Genericization is part of pharmaceutical markets and it is likely that once patents expire there will be generic entry driving prices down. The offsets to this force will be difficulty in manufacturing and new drug innovation.
• Affordability. For health systems, including private insurance, the cost of these drugs is upfront while the benefits accrue over many years. Someone has to pay the cost of these weight loss drugs, which we estimated to be $500bn by 2030. This creates an affordability issue which means coverage is tightly controlled likely limiting the potential growth rate. For government payers, budgetary constraints are so acute that the position has been not to cover these drugs at all, despite mounting clinical benefits.

Summary

Even on fairly conservative assumptions we believe the weight loss industry could reach a $500bn potential market size by 2030.