Impact investing: How GLP-1 drugs could affect sectors outside healthcare

A drug designed for diabetes — and increasingly used in weight control — has the potential to change the economics of not just healthcare, but many other sectors. Regnan’s MAXIME LE FLOCH explains

• GLP-1 diabetes and weight-loss drugs could have broad economic impact
• Find out about Regnan Global Equity Impact Solutions Fund
• Making Money and Making Change: Watch a webinar with Regnan’s Tim Crockford and former RBA deputy governor Guy Debelle

OBESITY has been a major medical problem for decades, and is fast turning into a crisis with forecasts that half the global population will be significantly overweight by 2035.

The US Center for Disease Control and Prevention says one in five children and one-third of adults already struggle with obesity.

Obesity triggers a range of ailments, from diabetes, high blood pressure and heart disease, to sleep apnoea, psychological issues and musculoskeletal conditions. 

The development of GLP-1 drugs — initially for treating type-2 diabetes and now for obesity and weight loss — has the potential to change not just outcomes for patients, but the economics of healthcare, argues Maxime Le Floch, an analyst with Regnan’s impact investment team.

Regnan is a global responsible investing asset manager distributed in Australia through Pendal and Perpetual Group.

Find out about

Regnan Global Equity Impact Solutions Fund

Read more

It’s very early days, but there is the potential for demand among medical practitioners such as heart surgeons and orthopaedists, he says.

That means investors in healthcare, and beyond, should consider the impact of GLP-1.

“GLP-1 drugs could have a market-wide impact because they have the potential to lower patient populations for a range of conditions.”

Le Floch adds that most of the impact though won’t be seen for several years.

How they work

Danish company Novo Nordisk (which Regnan invests in) and global pharmaceutical giant Eli Lilly are the two dominant manufacturers of GLP-1 drugs. 

They mimic glucagon like peptide-1 (GLP-1), an incretin hormone that’s released after eating.

“GLP-1 drugs slow gastric emptying, increases satiety and reduces appetite,” Le Floch says.

“They also reduce glucagon and increase insulin secretion, at the level of the pancreas, which underpins glycaemic benefits in diabetics. It’s essentially a key regulator of the body’s response to eating.”

New studies

Demand for GLP-1 is strong and keeping up supply is already a challenge.

The health benefits from recent studies could further exacerbate the supply challenge.

“There was a recent study on cardiovascular risk using NovoNordisk’s GLP-1, and the results were far better than expected. The reduction in cardiovascular risks were in line with cardiovascular drugs.

“There was also a recent trial on chronic kidney disease. The trial was stopped early because of the success of GLP-1.

“Does this mean we will need less kidney dialysis?” Le Floch asks.

The health benefits, if proven, are obvious.

The impact on the healthcare industry — and everyone operating in it from clinicians to suppliers of medical devices and artificial joints — could also be enormous, Le Floch argues.

Beyond healthcare

And it goes beyond healthcare.

US retail giant Walmart recently said it saw “a slight pullback in overall basket” due to GLP-1 drugs slowing food-shopping demand.

“And that comment comes very early in the GLP-1 lifecycle,” Le Floch says. “Less than one per cent of the US population has been on some kind of GLP-1 drug.”

Some food categories are particularly exposed to the impact of GLP-1.

For example, 20 per cent of US adults account for 70 per cent of ice cream consumption, and 9 per cent account for more than a third of confectionary consumption.

“We are still in the early days of obesity treatment getting widely adopted.

“But if people take the drug, change their eating habits, and decrease their risk of developing medical conditions associated with obesity, that could have a real impact on the wider economy.”

About Maxime Le Floch

Maxime is an analyst with Regnan’s impact investment team. He focuses on Regnan Global Equity Impact Solutions Fund. Maxime has more than 10 years of experience in sustainable investment. Before joining Regnan he was an investment analyst with Hermes where he helped launch and manage the Hermes Impact Opportunities Equity Fund.