Copycat drugmakers will be low-key obesity winners
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Aimee Donnellan
LONDON, Sept 25 (Reuters Breakingviews) -Generic drug makers are getting ready to take a bite out of the booming weight loss market. Firms like Teva Pharmaceutical TEVA.TA and Sandoz SDZ.S have started to launch the first copycats from the class of drugs which include Novo Nordisk's NOVOb.CO hugely successful Ozempic and Wegovy.History suggests they may be a big problem for incumbents, and a good way for investors to bet on obesity.
Novo Nordisk and Eli Lilly LLY.N are reigning supreme in the obesity market. The Danish group’s share price has nearly trebled since 2021, when it launched its GLP-1 obesity drug Wegovy, which mimics a hormone that suppresses appetite. It’s now worth over half a trillion dollars. Total obesity sales, including Eli Lilly’s Zepbound, are expected to reach $150 billion by 2033, according to BMO Capital Markets.
But the clock is now ticking on the patents that underpin these miracle remedies. The older versions of these drugs, which are less effective in treating obesity, have already lost exclusivity and are now being copied by the likes of Teva and Sandoz. The next crunch point will be in 2026, when semaglutide, the key ingredient in Novo's Wegovy and its prototype Ozempic, comes off patent in Canada. It's the second biggest market for GLP-1s, the class of weight loss drug that includes Wegovy. A successful generic in Canada would make it easier to crack the critical U.S. market, where patents expire in the next decade. It may even help U.S. lawmakers to drive down prices before that.
The fate of Humira illustrates quite how dramatic the arrival of generic drugs can be. The anti-inflammatory medication made by $341 billion AbbVie ABBV.N hit peak sales of over $20 billion in 2022. But since last year copycat pharma groups have grabbed nearly a fifth of the market, and AbbVie’s Humira revenue fell by a third in the first six months of the year to just $5 billion. Apply that same market share to obesity, and there’s a $30 billion revenue opportunity up for grabs over time. If Sandoz, which is already working on a semaglutide generic, could win even a third of that, its revenue would double from its level in 2023.
Novo Nordisk CEO Lars Fruergaard Jorgensen is confident he can manage this generic assault by launching new and improved products. His next big hope is CagriSema, which is similar to Wegovy but expected to be more effective. But the problem is Wegovy and Ozempic are already very effective, offering users up to 15% weight loss. Future drugs may only offer marginal improvements, and so struggle to compete against cheaper generics.
For now, shareholders are not pricing in the threat. Novo Nordisk is valued at over 30 times its expected earnings in 2024, whereas Sandoz is worth a mere 13 times, according to LSEG data. The looming emergence of generic obesity drugs means that gap is likely to narrow.
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CONTEXT NEWS
Sandoz plans to launch a generic version of semaglutide, the key ingredient in Novo Nordisk’s diabetes drug Ozempic and obesity treatment Wegovy in Canada in 2026.
Teva Pharmaceutical launched the first generic of Novo Nordisk’s diabetes drug Victoza, part of the same GLP-1 class of drugs as Ozempic and Wegovy, in June.
In 2022, Novo Nordisk settled a patent infringement dispute with Sandoz, allowing the Swiss group to launch a generic version of Victoza in 2024.
Generic GLP-1 obesity drug makers trail Big Pharma https://reut.rs/3ZE0SzY
Editing by Neil Unmack and Streisand Neto
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