A three-letter acronym called ‘GPT’ was among the most talked about terms in 2023 when it came to tech space. Not far away was a similar term - ‘GLP’ weaving a similar magic in the pharma domain. Short for Glucagon-like peptide-1, the GLP-1 drugs serve as appetite suppressants and hence lower calorie intake. As pharma majors proceed at a brisk pace to seize this opportunity (USD 100bn+ by 2035), the popular opinion is that it will eat into the earnings of the food and beverage makers. However, players from the food and beverage industry seem unperturbed.
GLP-1 drugs are proving to be a driving factor for pharma majors
Fervor aided by climbing obesity rates: The need for lifestyle changes over the recent years is a strong impetus to the underlying growth of such drugs (market size to grow by nearly 15x in the next 10 years). Obesity rates are on the rise across genders & age groups and are not expected to slow down. Rates among US adult population has increased by more than 10pp over the last two decades with more than a third of them currently obese.
Strong market potential on offer: Indications that the GLP-1 drugs, which have traditionally been consumed by those with diabetes, were starting to aid in weight loss were an opportunity that pharma majors have seized. There have been more than 10 major launches in the last 20 years, while sales of top three GLP -1 drugs have more than doubled in 2023.
Niche segment attracting investor interest - both public and private: The potential for GLP-1 drugs has induced listed companies into fast tracking progress by taking the inorganic route. Private markets are equally interested in riding the wave of the GLP-1 obesity drug.
Strong market momentum: Stock prices soared by more than 40% in 2023 for listed pharma majors (Novo Nordisk and Eli Lilly) who own the top GLP-1 drugs.
Private market deals on the rise: Along with a few key acquisitions by the listed players, last year also saw multiple rounds of funding by VC firms in small players who operate in the weight loss space.
The market remains positive on this upcoming trend as noted by growing share prices of select pharma players. The benefits that are to ensue in the future are expected to be at the expense of the consumer staples sector given that the drugs would reduce calorie intake. Offerings related to ’binge eating’ is touted to be the most impacted of all and includes the likes of confectionaries, soda beverages and salty snacks.
Will these drugs prove to be a disruptor for consumer staples?
