Ozempic commercials are, at this point, ubiquitous and while that’s an anecdotal example, it also represents confirmation that obesity drugs are the next big thing in the pharmaceuticals industry.
Owing to the points that the market for weight loss drugs is massive and obesity is a major health problem – treatable at that – there are investment implications. That makes exchange traded funds such as the VanEck Vectors Pharmaceutical ETF (PPH) increasingly relevant.
The $431.72 million PPH, which tracks the MVIS US Listed Pharmaceutical 25 Index, is home to several pharmaceuticals companies that are already asserting themselves in the weight loss arena or soon will. For investors, that’s important because Morgan Stanley estimates that by 2030, the market for obesity drugs will be worth at least $77 billion.
Further enhancing the allure of PPH as an avenue to profiting from more weight loss drugs coming to market are expectations that significant portions of related revenue will be generated outside the U.S. PPH answers that call because more than 37% of its components are ex-US firms and many of the fund’s domestic holdings are multi-national companies.
Other Obesity Drug Factors to Note
Another point in favor of PPH on the weight loss front is that these pharmaceuticals are gaining greater acceptance among clinicians.
“A greater understanding among physicians of obesity’s root causes and the benefits of treating it to prevent associated illnesses, such as heart disease, has driven record levels of interest,” notes Morgan Stanley. “This, in turn, has fueled consumer demand, setting up the new class of appetite-suppressing drugs to surpass initial estimates for blockbuster growth.”
Word of mouth is helping and that extends beyond the aforementioned frequency of Ozempic commercials.
“Social media activity documenting transformative weight loss, together with the establishment of affordable insurance coverage more quickly than anticipated, has helped drive demand for obesity medicines beyond our expectations,” says Mark Purcell, Morgan Stanley European Biopharmaceuticals analyst.
For investors considering PPH as a way of tapping into a potential weight loss drug boom, the fundamentals are compelling. As noted by the World Health Organization (WHO), more than 750 million people around the world are living with obesity. In the U.S. alone, that figure is 110 million. Throw in an expected increase access to obesity drugs, PPH’s fundamental appeal is enhanced.
“Along with the availability of new medicines, policies to further increase access should also help increase the number of people seeking treatment. In the U.S., a bipartisan effort to establish Medicare coverage for the treatment of obesity continues to make progress,” concludes Morgan Stanley.
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