Ozempic Gold

Multi-Asset Portfolios fund manager Will McIntosh-Whyte tries to give up sugar, but it turns out he wasn’t sweet enough. Will it turn him onto the next-generation weight-loss drugs?

By 19 October 2023

I had planned to give up sugar this month. Just to see if I could. I’m not overweight or pre-diabetic, but I do have a proper sweet tooth. The type that had me stealing KitKats out of my friend’s kitchen as a child (my mum kept ours in the top cupboard out of reach), and as an adult would still allow me to eat a whole Colin the Caterpillar – if the guilt didn’t hold me back. There’s an element of addiction to it. Something about eating a meal leaves me inevitably headed to the treat cupboard for something sweet, and fruit doesn’t cut it.

Perhaps it’s the recent excitement around weight loss drugs that got me thinking about my own dietary habits and needlessly punishing myself as we enter the winter months. The newly approved injectable treatments for diabetes and weight loss developed by Danish firm Novo Nordisk and American pharma Eli Lilly have taken the US by storm. Known to most people as Ozempic (but there’s also Wegovy and Mounjaro), these drugs rose to fame earlier in the year mainly through social media as celebrities from Elon Musk to Sharon Osbourne and Jeremy Clarkson admitted to injecting themselves to lose weight.

Ozempic was originally a drug developed to tackle diabetes, yet it has been shown to have a remarkable effect on weight loss as well. The drugs mimic a gut hormone called GLP-1 (glucagon-like peptide) that helps maintain normal blood glucose levels by stimulating the pancreas to release insulin. It has also been shown to suppress appetite, as well as anecdotally to reduce addictive/compulsive behaviours.

Lots of Unanswered Questions

The trial as a weight loss drug showed remarkable success, with patients losing nearly 15% of their body mass versus those on a placebo (who lost 2%). It’s important to note that alongside taking the drugs, patients also undertook ‘lifestyle changes’, including a calorie deficit and 150 minutes a week of activity. There was no third group of those on the drug who didn’t also change their habits. This is a very important point, as those in a weight loss trial may be more committed to weight loss than the average person. How successful is this drug in helping people lose weight if they don’t exercise or run a calorie deficit? Having said that, the fact that the drug suppresses appetite would certainly suggest patients are more likely to reduce their calorie consumption. And the impact on addictive behaviours may mean less inclination for unhealthy, addictive junk food.

Side effects are also an important consideration. During the study these were noted as nausea and diarrhoea, with 10% of those taking the drug having serious ‘gastro-intestinal events’ and 5% dropping out of the study. Further to this, there are potential risks around thyroid cancer (there is what is known as a ‘boxed’ warning of this on the prescription), and the drug is being investigated for potential links with increased risk of self-harm and suicide. Any longer-term impacts from ongoing usage may not be known for some time. Of course, there are side effects with most drugs, and many of these potential issues may only impact a small number of users. However, anecdotal evidence (quite limited, I hasten to add) suggests some people on it feel a bit ‘meh’, taking no enjoyment out of food at all. The drug apparently decreases our brain’s creation of dopamine – often produced in response to activities that make us feel good, including being released in response to exercise.

Then there’s the issue of how long you need to be on the drug. In the trial, the weight loss was achieved in about a year. Can patients then come off the treatment and keep the weight off? Or does it need to be taken forever? Again, there’s anecdotal evidence on both sides, with some claiming the effects have remained and others saying that, since stopping, they have put the weight back on and more.

The question of ongoing usage leads us nicely into cost. Currently the drug costs about $10,000 a year in the US (and much less – but still spicy – in Europe and the UK). This is likely to come down, but assuming it remains relatively high, who’s going to pick up the tab? In the US, insurance companies will ultimately decide whether they will cover this treatment for obesity in the hope it reduces their bills down the line for the various other health issues that obesity can lead to. If the bill is $10,000 for a year the maths make sense. If it needs to be an ongoing treatment, at what point do the maths fail?

The Next Big Thing?

These drugs have had a remarkable effect on the stock market. The share prices of the drugmakers have rocketed more than 65% in the past 12 months, and you can see why with the potential for millions of patients to take a drug at $10,000 a year. There have also been a number of casualties in the market as investors panic over the consequences of an en masse rollout of these drugs. Diabetes monitoring companies, like our holding Dexcom, which fell 30% over the third quarter, have borne the brunt. But medtech businesses more widely have felt pain as the market assumes less need for continuous glucose monitoring, artificial heart valves, knee replacements, etc, in the face of a slimmer population. There’s no doubt there’s going to be an impact on many of these companies, but my sense is that the share price moves have been overdone as investors take no chances and sell.

The impacts of these drugs have been extrapolated even further, with investors considering the implications of reduced appetite (hurting restaurants and consumer goods). Reduced compulsive behaviour is bad news for tobacco, gambling and alcohol stocks. Packaging companies have also been in the firing line because of concerns that volumes will fall. Meanwhile, airlines are set to profit from lower fuel costs in the face of a slimmer passenger base. Presumably clothing retailers will benefit as millions of people require a whole new wardrobe. Maybe not Jacamo.

There’s no doubt that these drugs are exciting, and hopefully they will help improve the lives of millions of patients. But I think you need to be wary of taking this too far. There are plenty of risks around the rollout of the drug, not least whether the side-effects will be worth bearing for people – about 30% of patients abandon the drug in the first year – half of those because of the side effects, according to research reports I’ve read. Over two years, other studies show fully half the patients quit the drug. Whether that’s because they were successful or not, who knows! And if the physical side effects aren’t an issue, then maybe the reduction of enjoyment in everyday life might be more than people want to sacrifice for weight loss.

If this drug really does penetrate deep into populations, the consequences could reach far and wide: helping mitigate climate change, fight world hunger, get people back into the work force and improve government finances by increasing taxable incomes and reducing healthcare costs – what a drug! The optimist in me hopes so; the cynic in me remains doubtful.

As for my month’s abstention from sugar, that lasted exactly two days until my wife brought home a big box of chocolates. So while that failed miserably, I’m not quite reaching for the Ozempic yet!

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