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Morgan Stanley says that global obesity sales in 2030 could reach $54B, driven by Eli Lilly (NYSE:LLY) and Novo Nordisk (NVO) (OTCPK:NONOF), while other large-cap pharma players closely watch their dominance amid emerging data from new biotechs.
Obesity, defined as a body mass index of over 30, affected more than 650M adults worldwide in 2016, with a nearly threefold rise in the prevalence since 1975, the World Health Organization points out. The WHO identifies obesity as the abnormal or excessive accumulation of fat that causes risk to health.
The condition, classified as a chronic disease by the American Medical Association in 2013 and the European Commission last year, “is on the cusp of moving into mainstream primary care management,” Morgan Stanley analysts wrote in a research note last week.
The team led by Mark Purcell likens the current obesity market to the mid-to-late 1980s market for hypertension therapies, which expanded to a $30B opportunity by the end of the 1990s. Citing a bottom-up model and conservative pricing assumptions, the firm contends that the global obesity sales could reach $54B in 2030, propelling the condition to one of the top 12 therapy areas, up from the current $2.4B.
According to Morgan Stanley, multiple factors could start to unlock the potential of the obesity market in the next six months, including an interim data readout for Novo’s (NVO) FDA-approved weight loss therapy, Wegovy (semaglutide), set for 3Q 2022.
The landmark study SELECT will demonstrate a 27% decline in the risk of heart attacks, strokes, and cardiovascular deaths for the GLP-1 receptor agonist, the analysts wrote, calling the event “a key factor to improve obesity market access.”
Purcell and the team also think that the removal of supply constraints on Wegovy in 3Q 2022 could unleash the underlying demand for the therapy in 2H 2022. In December, Novo (NVS) disclosed that production issues at a contract manufacturer could impact the U.S. supplies of Wegovy in the first half of 2022.
In other predictions, Morgan Stanley projects that over time, a quarter of obese people will engage with physicians (up from 7% currently), and 55% of the patients will receive a new anti-obesity medication.
As for individual companies in their obesity model, the analysts see significant upside potential for Lilly (LLY), with $22B in total revenue attributed to the U.S. pharma giant.
The firm has an above-consensus stance on Lilly’s (LLY) tirzepatide, which is already approved in the U.S. for diabetes. In April, Lilly (LLY) disclosed late-stage data to demonstrate the weight loss benefit of tirzepatide in patients without diabetes.
Compared to $11.7B revenue for Novo (NVO), Morgan Stanley reiterates its above-consensus 2030 obesity sales forecast for Lilly (LLY) at $6.5B and issues an Overweight recommendation for the stock, classified as a “Top Pick” of the firm.
In addition, Purcell and analysts think that the large-cap pharma players with a commercial foothold in cardio-metabolic diseases could look for in-licensing to break the “duopoly” of Novo (NVO) and Lilly (LLY) in obesity.
The analysts highlight that biotechs such as Altimmune (ALT), Zealand Pharma (ZEAL) (OTCPK:ZLDPF), Hanmi, Regor Therapeutics, Sciwind Biosciences, and vTv Therapeutics (VTVT) are set to generate proof of concept data for their weight loss medications over the next 6–12 months.
Asian biotechs Chugai Pharmaceutical (OTCPK:CHGCF) (OTCPK:CHGCY), Innovent Biologics (OTCPK:IVBIY) (OTCPK:IVBXF), and Swiss biotech PolyPeptide Group offer revenue opportunities in diabetes prior to the SELECT readout given their partnerships with Lilly (LLY), the analysts added.
Meanwhile, the bullish market dynamics ahead of the SELECT data prompt the firm to increase the 2024-29 obesity sales forecasts for Novo (NVO) by more than 26% and raise its recommendation on the Danish drugmaker to Overweight from Equal-Weight.
Last quarter, Cowen and Guggenheim also upgraded Novo (NVO), citing the potential of Wegovy and favorable data from the SELECT trial, respectively. The upgrades came after the company more than doubled the 2025 sales forecast for its obesity franchise during its Capital Markets Day in March.
Image and article originally from seekingalpha.com. Read the original article here.