James TullochJohn, great to see you. Thank you very much indeed for for joining us today. Today's topic is that of weight loss drugs, which is a subject which has garnered an ever increasing amount of attention of of late, particularly as things like social media and a great awareness generally of how of related conditions to to to obesity have increased awareness and and increased demand. So perhaps you could begin by explaining a little bit about the the the background and the context here. How have these drugs come about, and how long have they been in development?
Yeah. So thanks, James. It's it's great to
be here to talk about this. They've been around really since the mid sort of nineteen eighties, but it wasn't until the the mid nineties or thereabouts that the sort of commercial pharmaceutical industry started to get involved. And initially, these GLP-one drugs, as they're known, were being used for diabetes. But it became clear because they suppress the appetite in the patients so effectively, it actually has become clearer that there might be an even bigger market for them in weight related conditions such as obesity.
James TullochRight. Okay. And and where are we at now in terms of efficacy? What benefits can these drugs have for weight loss, both at the moment and thinking about the the next generation of drugs potentially in the pipeline?
Yeah. So historically, they've not been terribly effective, and the the side effects have been a bit unpleasant and they've been quite difficult to administer. But actually, in the last four or five years, we've had the advent of of some some newer therapies, some injectable drugs actually, for example, Wegovy and Ozempic, which people may have heard of, where the weight loss expectation is somewhere in the region of fifteen percent for the average patient there, and the side effects are generally quite manageable. Now, the next generation of drugs, which are sort of available now, but becoming increasingly available over the next twelve months or so, we'll be aiming for 20% or more weight loss. And again, with quite a good tolerability profile.
Now, are also, those are all injectables, there are also pill form drugs, orally administered drugs that are down the pipeline. They tend to be a little less effective than the injectables, and they tend to have slightly worse side effects. But again, for many people, that will be a much more preferable option, a weekly pill versus a daily injection. But I think the overall point is that there is a range of of these drugs and therapies being devised, patients will have an increasing amount of choice as we go through the next decade or so.
James TullochSure. Okay. So some potentially really significant benefits for for public health there. And One of the reasons there's so much excitement about these drugs at the moment is the potential benefits they can seemingly have in a whole host of related comorbidities to both obesity and diabetes. And it's not just the obvious conditions, is it?
That's absolutely right. The the moment, I mean, it's early days, so we are just beginning to see evidence and early data, that these drugs can also have a beneficial impact on people with all sorts of conditions. So they will range from things like liver disease, kidney disease, a whole range of cardiovascular conditions as you might expect, but also things like Parkinson's and Alzheimer's, ADHD, sleep apnea, alcoholism, I could go on. I mean, there are in the region of two hundred co morbidities associated with obesity that these drugs could potentially benefit. So actually, they are a little bit expensive at the moment, but the cost benefit starts to look very good if you if you take into consideration that they're treating multiple conditions at the same time.
James TullochSure.
And I can see a situation where these drugs become a bit like statins are today, where they become almost automatically offered to people who reach a certain age, for example, because of the long term health benefits they bring.
James TullochYeah. Okay. So sometimes you're really exciting developments in the pipeline, but of course, it would be remiss of us not to consider the potential risks. Now, we've said these drugs have been in development for quite some time, so perhaps some of the most significant side effects have potentially been overcome. But thinking about the drugs currently available, are the side effects, both short and long term, well enough understood? Yes,
I think they are. I mean, up until now, lot of the discussion and a lot of the intention of the pharmaceutical industry has been about getting that weight loss number up. But when you get to 20% or so, the benefits to the patients are already very substantial. So actually then it becomes more about managing side effects. Now at the moment, most people find these drugs very tolerable.
There are gastrointestinal side effects that people have. They can be managed through reducing dose and so on, they tend to soften over time anyway, but generally speaking, they are very manageable, certainly in the context of the health benefits that they bring. Now, are these are these are new drugs, so there are still, you know, some early indications of longer term side effects that might not be so welcome. For example, some evidence of bone density loss in certain patients as well. But again, the evidence isn't isn't isn't conclusive on that yet.
So we will we will see as time goes on. But, you know, I would say the other area is about quality of weight loss. So at the moment, if you, you know, you take one of these drugs, you're looking to lose say 15% of your weight. Yeah. Actually, one third of that will be muscle loss, and two thirds will be fat loss. So again, treatments and therapies and and combinations of drugs and so on are being experimented with to try and move that balance more in favor of fat loss versus muscle.
James TullochYeah. Okay. Okay. And what about the wider moral implications here? It strikes me there's a fairly obvious difference between the the medical requirement for these drugs and potential cosmetic demand that there might be. So what are the key environmental, social and governance or ESG metrics that you as an equity analyst have to consider when looking at pharmaceutical companies operating in this space? Yes.
So I think there's there's, you know, there's several areas that we would focus on. Mean, the one is that the first one, sorry, is these are these are quite expensive drugs. We're talking many hundreds of dollars per month, really. Now that will change over time as the current generation of drugs moves out of patent, which will take five to ten years. Okay.
They will then become much more affordable and probably much more widely available as well. But at the moment, we're in that phase where the pharmaceutical company that spent billions of dollars developing them obviously needs to recoup some of that.
James TullochYeah. Sure.
Yeah. So that will change over time. I think the other point you're making is that, yes, people are using these for cosmetic purposes. That's not what they're designed for actually. But inevitably, even though it's that they're very regulated, so you, for example, in The UK, you will require a prescription in order to get hold of these drugs. There are people who find ways around it. Now, I think they're very much in a minority, and I
James Tullochthink it's important to stress that the companies that we invest in here at Trinity Bridge are developing these drugs for genuine medical need. Okay. Okay. And thinking about those companies that we are potentially investing in the market opportunity here, who are the major players in this market? How big do you think the market can can ultimately become? And can supply keep up with the demand? Yes. So it it's already a big market, and
it's gonna become a very big market. The expectations are that it'll be worth between a $150,000,000,000, perhaps even $200,000,000,000 by the time it gets to the mid 20 thirties. So this is a very large market. At the moment, there are two dominant players. One is Novo Nordisk, which is a Danish company, and the other is Eli Lilly, which is a US company.
But between them, they have effectively got a duopoly at the moment. But it's important to recognize that behind them, there are other large pharmaceutical companies developing rival drugs in obesity and in diabetes, actually. They are at earlier stage in in clinical testing. So in reality, that means they're between three and five years away from actually coming to the market. So at that point, the the the the range of available drugs will broaden out.
I think, you know, one final point to mention on that is that you mentioned supply. These are very large markets. It therefore requires tens of billions of dollars worth of of capital expenditure in order to build manufacturing, your distribution to be able service this market. So in reality, it'll be a market that I think is serviced by four or five global pharmaceutical companies over time.
James TullochOkay. And to try and bring things right up to date, John, thinking about the prevailing backdrop as as things stand at the moment. Clearly, the the potential policy agenda of the current US administration looms large over financial markets at the moment. So what do you think a a Trump presidency means for for the pharmaceutical industry? Yes. It's a very
good question. It's a difficult one to answer because Trump policies do tend to change from day to day. But at the moment, there seem to be two areas they're focusing on. One is a proposal for a pharmaceutical specific tariff. So any pharmaceuticals being imported into The US will be will incur a tariff.
And I guess what that means reality is that that drug pricing in The US will will be pressured upwards. Now, the other policy they're going for is to try and reduce the premium that US patients pay for their drugs versus the rest of the world. That premium has been there for a very, very long time, and successive administrations have tried to reduce it. The Trump administration will try and do the same. That would therefore put some downward pressure on pricing.
So it's not quite clear where it all ends out. I unfortunately, I think the the impact of of either or both of those policies will be to reduce availability of the best and cutting edge drugs to US patients. Okay.
James TullochWell, it's a fascinating topic and and one certainly alive with with opportunity. John, wonderful to get your insight. Thank you very much indeed for joining us today.
It's great to be here. Thanks very much.