The demand for weight loss miracle drugs is exaggerated, to the point where even the previous generation GLP-1 products for diabetes are in short supply.
The shortage of the miraculous weight-loss drug is becoming increasingly severe.
The nationwide shortage of the weight-loss drug Semaglutide has caused a chain reaction, even affecting the outdated product Liraglutide, leaving the FDA with a headache.
Since last year, the trend sparked by Semaglutide has led to a rush of purchases by weight-loss enthusiasts, quickly resulting in product shortages. The weight-loss version of Semaglutide (Wegovy) is in short supply, prompting many obese patients to turn their attention to diabetes medications, causing the diabetes version of Semaglutide (Ozempic) to also face shortages.
This situation has had a widespread impact on the medication of the diabetic population in the United States. Some doctors have had to revert to prescribing the previous generation GLP-1 product Liraglutide (Saxenda). Patients have gone from receiving one injection per week to one injection per day, significantly increasing their suffering while reducing the effectiveness of the treatment.
However, as the popularity of Semaglutide continues to rise, the pressure on diabetes patients is increasing, and the demand for Liraglutide (Saxenda) in the United States is gradually reaching a breaking point.
By this month, even Liraglutide (Saxenda) has started to experience shortages in the U.S. market.
Excessive demand for weight-loss drugs leads to supply shortages of previous generation diabetes products
According to the latest drug shortage list from the FDA, due to the surge in demand, the supply of Liraglutide (Saxenda) will be limited until the end of 2023. The problem of drug shortages for diabetic patients will become increasingly severe.
According to a statement from Novo Nordisk sent to FiercePharma, the company sees "significant growth" in the market demand for Saxenda.
Although the company is shipping all available injections to wholesalers and retail pharmacies, it is expected that "many patients will still have difficulty obtaining Saxenda prescriptions in 2023 and beyond."
It is worth noting that in the U.S. market, current laws prohibit medical insurance coverage for weight-loss drugs.
This means that weight-loss drugs, such as the weight-loss version of Semaglutide, Wegovy, are entirely self-funded products in the U.S. market. Without insurance, the cost of using Wegovy could exceed $16,000 per year.
Although this weight-loss drug is heavily advertised, for most potential users, obtaining the medication in the short term is almost out of reach.
On the other hand, the current penetration rate of weight-loss drugs represented by Wegovy indicates that there is still a huge market potential in the United States.
Especially recently, more than 10 members of Congress have proposed the "Treatment and Reduction of Obesity Act," which aims to strengthen government support in combating the obesity epidemic and include obesity in the scope of medical insurance coverage. Manufacturers such as Novo Nordisk, Eli Lilly, and Boehringer Ingelheim have all expressed strong support for the passage of this bill. In the midst of the booming trend of weight loss drug usage, it's like pulling another new trigger, the demand for weight loss drugs in the US market will further rise.
Demand is there, but production capacity falls short
Demand is promising, but Novo Nordisk's production capacity is lacking, and the production capacity issue directly drags down Novo Nordisk's performance growth.
In 2022, the production capacity of semaglutide weight loss version Wegovy was almost limited throughout the year, with priority supply to the US market. Sales increased by 346% YoY, reaching approximately $874 million. The US market accounted for 99% of the sales.
In the previous 2021 annual report, Novo Nordisk stated that the demand for semaglutide's active pharmaceutical ingredient (API) had reached four times that of 2019.
Even though the product is selling well, Novo Nordisk remains conservative in terms of capacity expansion and surprisingly slow in terms of API outsourcing.
In June of this year, Novo Nordisk announced a major expansion plan for its Danish factory, worth up to $2.3 billion, but the factory will not be able to produce API until 2029. What's even more surprising is that the additional capacity from the factory expansion will not all be provided to semaglutide.
In the Q1 2023 earnings report, Novo Nordisk indicated that it will add two Wegovy CMO (contract manufacturing) production lines this year. Judging from the company's actual actions, GLP-1 targeted drugs will continue to face shortages globally for a long time.
Building in-house production lines is costly, and peptide companies prefer outsourcing to CDMOs
Semaglutide is a peptide drug. Large-scale production of peptide drugs has high barriers, so pharmaceutical companies usually choose to cooperate with CDMO/CRO companies in the early stages of research and development. On the one hand, this is due to the high production barriers, and on the other hand, the unique production process of this type of drug prevents the use of small molecule drug and biopharmaceutical research and production equipment, making outsourcing a more economical choice.
According to Polypeptide's announcement data, in 2020, as much as 65% of the global peptide API market was obtained through outsourcing. Therefore, peptide CDMO manufacturers with compliant large-scale capacity and generic drug API suppliers are expected to benefit significantly from the continuous increase in GLP-1 drugs.
The competition in the domestic GLP-1 drug research and development pipeline is fierce.
Jianzhi Research mentioned in the article "减肥药厂商比减肥患者更焦虑 | 见智研究" that the rapid growth of WuXi AppTec's business related to new molecular entities is precisely due to the continuous development demand for GLP-1 peptide drugs. In its 2022 earnings report, CStone Pharmaceuticals for the first time separated its TIDES business, which includes peptide and oligonucleotide CRDMO, from its Chemistry business. The TIDES business generated a revenue of 2.04 billion RMB in 2022, representing a YoY growth of 158.3%. It is expected to continue to outperform the Chemistry business in terms of growth in the next two years.
CStone Pharmaceuticals forecasts a 74% growth in its TIDES business in 2023. The major growth driver in the TIDES business is the market for GLP-1 peptides used in diabetes and weight loss treatments.
Recently listed on the A-share market, Haplo Biotech specializes in peptide synthesis reagents and product services, with CStone Pharmaceuticals being its largest customer. Its second largest customer, Luxembourg, acts as a trading partner and includes Novo Nordisk among its end customers. The company also benefits from the wave of GLP-1 drug development.
The following chart shows Haplo Biotech's supply situation to its top five customers. 
In addition to the strong demand for new drug development, the demand for peptide production will continue to grow as the patent expiration of GLP-1 drugs approaches, leading to the development of biosimilars (generic drugs).
One example is the liraglutide biosimilar, Lirupin (trade name), developed by Huadong Medicine, which has recently been approved for weight loss indication in China. Lirupin is the first domestically approved GLP-1 drug for weight loss indication.
In conclusion, the competition in the GLP-1 market is indeed becoming increasingly fierce, but the shortage of supply remains the biggest issue at present. In the short term, the performance of leading companies such as Novo Nordisk and Eli Lilly will still depend on production capacity allocation.