Many say that a fair complexion can hide flaws, but being overweight can ruin everything. For many people, obesity may be the number one appearance killer, and in the medical field, it's known as a critical cause of common illnesses like cardiovascular disease and diabetes.

Losing weight through diet and exercise is an effective way to improve not only physical appearance but also reduce the risk of illness - making it a win-win situation. However, expressing determination on social media without achieving goals has become a trend among those who wish to lose weight.

The challenge is that losing weight requires either decreasing caloric intake or increasing energy consumption through exercise, and with tempting food choices and the pains of exercising, most people tend to choose the former. From a psychological perspective, this answer may be clear.

While going against human nature may work in the short-term, relying solely on self-discipline to lose weight is difficult in the long-term. This is why finding ways to use drugs or other external factors to control weight may be essential. Weight-loss drugs are commonly known, although most are exaggerated and hard to trust, leading to difficulties in forming a consensus.

Following Tesla founder Elon Musk's revelation on social media in October 2022 that he lost 18 pounds in a month due to fasting and Wegovy (a semaglutide-based weight-loss product), along with endorsements from other celebrities, Wegovy and similar products have rapidly gained popularity in the United States.

The weight-loss drug market is a vast industry with many related companies listed on the capital market. The rising popularity of weight-loss drugs has garnered attention for the entire industry chain. In this article, I will provide a detailed overview of the GLP-1-based weight-loss drug industry and cover the following topics:

1. How do weight-loss drugs work?

2. What is the market outlook for weight-loss drugs?

3. What is the competitive landscape for weight-loss drugs?

4. A comparison of two major weight-loss drug giants.

1. How do weight-loss drugs work?

As mentioned earlier, the key to weight loss is simple: eat less and move more. Weight-loss drugs target the "eat less" aspect by curbing appetite with medication, since relying solely on willpower to control food cravings can be difficult.

The critical component in these weight-loss drugs is GLP-1 insulin, a hormone initially used to treat diabetes due to its ability to lower blood sugar levels. Over time, it has proved to be a versatile solution.

Numerous academic studies have confirmed that GLP-1 promotes satiety, reducing food and water intake. In other words, under the influence of GLP-1, individuals feel full sooner, leading to lower appetite and reduced food intake - a perfect recipe for weight loss.

However, GLP-1 breaks down easily in the body, resulting in shorter efficacy. To solve this problem, GLP-1RA was developed, which is an artificially synthesized version of GLP-1 that is less likely to break down, has a longer duration of action, and can be used to treat both diabetes and obesity.

According to Healthline, currently, there are 9 GLP-1RA drugs approved in the US market, with semaglutide being the most widely used. As a GLP-1RA medication, semaglutide interacts with the brain's appetite control center to induce feelings of fullness, making it the go-to weight-loss drug. The brand name of Novo Nordisk's semaglutide-based weight-loss product that Musk shared on social media is called Wegovy.

2. What's the prospect for weight-loss drug market?

Obesity is a widespread issue in society and can have adverse effects on both appearance and health.

Recent studies have demonstrated that weight loss is crucial for not only treating obesity but also for related diseases such as cardiovascular disease, diabetes, and stroke. According to the World Health Organization, over 750 million people worldwide suffer from obesity, and it accounts for 5% of global deaths annually.

To address this issue, an increasing number of obesity medications are covered by medical insurance plans. According to Morgan Stanley's reports, in the US, for instance, around 40 million out of 110 million overweight adults have access to relevant drugs through their insurance plans. This has broadened the range of individuals who use weight-loss drugs and has boosted the growth of the weight-loss drug market.

According to Morgan Stanley's predictions, the US market will likely dominate the global obesity market in the future. The market size is expected to grow from $2.4 billion in 2022 to $77 billion in 2030, with an impressive annual compound growth rate of over 50%.

GLP-1 may play an important role in the obesity market. GLP-1 is not only utilized for weight loss, but it has been used frequently to treat diseases such as diabetes. According to Global Market Insights, the market size for GLP-1 drugs is expected to increase from $22.4 billion in 2022 to $55.8 billion in 2032. Semaglutide is predicted to dominate this market and is expected to have a significantly higher growth rate than the overall growth rate of the GLP-1 market.

3. What does the competitive landscape look like?

Since GLP-1 drugs, led by semaglutide, have such incredible potential in the obesity market, which companies are poised to benefit from this trend? Currently, there are nine approved GLP-1 drugs available according to Healthline, but most are only authorized for treating diabetes. Novo Nordisk's Wegovy and Saxenda are the only two approved for weight-loss purposes until November 2023.

However, in early November 2023, Eli Lilly's Tirzepatide (marketed under the brand name Mounjaro) was also approved by the FDA for weight-loss therapy and is expected to enter the market soon. Its weight-loss drug indication will be marketed under the brand name Zepbound.

Morningstar projects that Novo Nordisk and Eli Lilly will be at the forefront of the GLP-1 drug market in the coming years. Novo Nordisk has already established a significant presence in the weight loss medication market, benefiting from its early entry with strong brand recognition, extensive distribution channels, and robust production capacity. Eli Lilly, on the other hand, is making strides with its clinically superior drugs and is expected to surpass Novo Nordisk. By 2023, projections suggest that Eli Lilly will hold a 40% market share, slightly ahead of Novo Nordisk's 36%.

Furthermore, pharmaceutical giants Pfizer and Amgen are not far behind, with promising GLP-1 drugs in clinical development. If their trials and commercial strategies succeed, they are projected to claim about 3% and 4% of the market, respectively, by 2032.

4. A tale of two giants

Novo Nordisk and Eli Lilly have long been titans in the diabetes care sector, and now they're both carving out new growth narratives in the obesity treatment market. Their development paths are remarkably similar, and their current market capitalizations rank them as the top two in the U.S. pharmaceutical industry by value. How do these two behemoths fare when we compare their past performances from a fundamental perspective?

Looking at their financials, Novo Nordisk and Eli Lilly have comparable revenue scales in 2022, both ranging between $25 billion and $30 billion. However, Novo Nordisk has seen a relatively faster growth rate in the past two years. Between 2020 and 2022, Novo Nordisk's annual compound growth rate for revenue and net profit stood at approximately 9.9% and 6.9%, respectively. In contrast, Eli Lilly's figures were 7.8% for revenue and 0.4% for net profit.

According to the latest quarterly reports, Novo Nordisk's year-over-year revenue and net profit increased by 28.9% and 56.0%, respectively. Eli Lilly's revenue grew by 36.8% year-over-year, and although it reported a net loss due to one-time charges, its operating profit saw a significant leap of approximately 76.1%, surpassing Novo Nordisk's overall growth rate.

In terms of profitability, looking at shareholder returns and net profit margins, Novo Nordisk's ROE (Return on Equity) and net margin in 2022 were 72.0% and 31.4%, respectively, outperforming Eli Lilly's 63.6% and 21.9%.

In terms of market capitalization and valuation, Novo Nordisk boasts a market cap of $450.37 billion, while Eli Lilly's stands at $581.65 billion. Calculated using 2022's net profits, their P/E ratios for the last fiscal year（PE LFY） were 56.2x for Novo Nordisk and 88.8x for Eli Lilly, positioning Eli Lilly with a notably higher market valuation.

To summarize, GLP-1 weight loss drugs work by reducing appetite and consequently decreasing food intake.

The potential market for obesity treatment is vast, with many people seeking to manage health risks associated with being overweight and to enhance their physical appearance, creating a significant market opportunity for weight loss medications.

Industry forecasts suggest that the weight loss medication market will be led by Novo Nordisk and Pfizer, with Pfizer and companies like Amgen also positioned as potential key players.

In a comparison of the two weight loss drug giants, Novo Nordisk has been outpaced by Eli Lilly in terms of revenue growth, yet it surpasses Eli Lilly in profitability. Novo Nordisk also has a lower market capitalization and valuation relative to Eli Lilly.