The global market for obesity drugs is expanding. Our U.S. Pharma and Biotech Analyst Terrence Flynn discusses what’s driving the next stage of global growth for GLP-1 medicines.

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Terrence Flynn: Welcome to Thoughts on the Market. I'm Terrence Flynn, Morgan Stanley's U.S. Pharma and Biotech Analyst. The market for obesity medicines is at an inflection point, and today I'll focus on what's driving the next stage of global growth.

It's Thursday, June 5th at 2pm in New York.

GLP-1 medicines have been viewed by many stakeholders as one of the most transformative medications in the market today. They've exploded in popularity over the last few years and become game changers for many people who take them. These drugs have large cap biopharma companies racing to innovate. They've had ripple effects on food, fitness, and fashion. They truly are a major market force. And now we're on the cusp of a significant broadening of use of these medicines.

Currently the U.S. is the largest consumer in the world of GLP-1s. But new versions of these medicines suggest that this market will extend beyond the U.S. to significantly larger numbers of patients globally. On our estimate, the Total Addressable Market or TAM for obesity medications should reach $150 billion globally by 2035, with approximately [$]80 billion from the U.S. and [$]70 billion from international markets.

Now this marks a meaningful increase from our 2024 forecast of [$]105 billion and reflects a greater appreciation of opportunities outside of the U.S. We think obesity drug adoption will likely accelerate as patients and providers become more familiar with the new products and as manufacturers address hurdles in production, distribution, and access.

Current adoption rates of GLP-1 treatments within the eligible obesity population are about 2 to 3 percent. This is in the U.S., and roughly 1 percent in the rest of the world. Now, when we look out further, we anticipate these figures to surge to 20 percent and 10 percent respectively, really driven by five things.

First, after a period of shortages, supply constraints have improved, and the drug makers are investing aggressively to increase production. Second new data show that obesity drugs have broader clinical applications. They can be used to treat coronary heart disease, stroke, hypertension, kidney disease, or even sleep apnea. They could also potentially fight Alzheimer's disease, neuropsychiatric conditions, and even cancer.

Third, we think coverage will expand as obesity drugs are approved to treat diseases beyond obesity. Public healthcare coverage through Medicare should also broaden based on these expected approvals. Fourth, some drug makers are successfully developing obesity drugs, in pill form instead of injectables. Pills are of course easier to administer and can reach global scale quickly. And finally, drug makers are also developing next gen medications with even higher efficacy, new mechanisms of action, and more convenient, less frequent dosing.

All in all, we think that over the next decade, broader GLP-1 adoption will extend well beyond biopharma. We expect significant impacts on medical technology, healthcare services, and consumer sectors like food, beverages, and fashion, where changes in patient diets could reshape market dynamics.

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