Exchange-traded funds (ETFs) that invest in obesity drugs have sputtered over the past month. The global obesity drug market is dominated by Novo Nordisk's Wegovy and Eli Lilly and Company's Mounjaro. As competition in obesity drugs has intensified recently and concerns about deteriorating earnings have been raised, ETFs are also seen as underperforming.
◇ Obesity ETFs slide steadily over the past month
According to the Korea Exchange (KRX) on the 22nd, ETFs in Korea that invest in obesity drugs include KB Asset Management's "RISE Global Obesity Industry TOP2+," Mirae Asset Global Investments' "TIGER Global Obesity Drug TOP2 Plus," and Samsung Asset Management's "KODEX Global Obesity Drug TOP2 Plus."
Obesity ETFs launched in quick succession in Feb. 2024, drawing investor interest. Recently, however, the mood has cooled somewhat. The closing price of "RISE Global Obesity Industry TOP2+" fell 4%, from 10,615 won on the 21st of last month to 10,235 won on the 21st of this month. Over the same period, "TIGER Global Obesity Drug TOP2 Plus" and "KODEX Global Obesity Drug TOP2 Plus" each fell 2%.
Obesity ETFs hold global pharmaceutical corporations such as Novo Nordisk and Eli Lilly and Company as constituents. The two corporations' share prices are currently diverging. On the New York Stock Exchange, Novo Nordisk's closing price fell 7% from the 21st of last month to the 20th of this month. Eli Lilly and Company rose 6% over the same period.
What split the stock trends was the growth of obesity drugs. In the second quarter this year, Novo Nordisk posted revenue of 17 trillion won, up 7% from a year earlier. Over the same period, Eli Lilly and Company's revenue was 32 trillion won, up 48% year over year. For Novo Nordisk, combined sales of Wegovy and Ozempic, treatments for obesity and diabetes, were 11 trillion won. For Eli Lilly and Company, sales of the obesity drug zepbound and the diabetes drug Mounjaro were 21 trillion won. With Eli Lilly and Company gaining the upper hand in the second quarter, a gap is also emerging in stock performance.
Brokerages say second-half results will determine the fate of obesity ETFs. Choi Bowon, a senior analyst at Korea Investment & Securities Co., said, "Novo Nordisk's earnings outlook this year fell short of expectations." Choi added, "While the overall market fell last month and healthcare also underwent a correction as part of that, healthcare did not fall much more than other sectors."
◇ China, India, Canada… patents expire in succession
According to market research firm Fortune Business Insights, the global obesity drug market is expected to grow from 10 trillion won last year to 94 trillion won by 2034. As the market expands, latecomers are jumping in and competition is intensifying. Wegovy and Mounjaro have shifted their rivalry from injections to oral obesity drugs. In addition, Amgen is developing an injection-type obesity treatment that can be administered once or twice a year, while Roche is developing an oral obesity drug. If the preliminary battle for obesity drugs focused on how much weight they could shed, the fight is now about how convenient they are, how few side effects they cause, and how long the effects last.
Patent expirations for obesity drugs and the emergence of generics are also pressuring prices lower. The active ingredient in Wegovy, semaglutide, will lose patent protection this year in India, Canada, and China. In March, Indian drugmaker Eris Lifesciences introduced a generic at about one-eighth the price of Wegovy. Patents are reported to expire in Korea in 2028 and in the United States in 2031.
Not only overseas but also domestic corporations are developing obesity treatments. Celltrion(068270) is developing an obesity treatment that acts on four targets, including the glucagon-like peptide (GLP)-1 hormone. It plans to present animal study results at a related conference in Nov. this year and, if there are no major issues, aims to enter clinical trials next year. HK inno.N(195940) is conducting phase 3 clinical trials for an obesity drug in Korea, and Ildong Pharmaceutical(249420) is also developing an oral obesity drug. Hanmi Pharmaceutical(128940) plans to introduce Epe, a Korea-tailored obesity drug, by year-end.