A US pharmaceutical company went to a $1.5 trillion valuation last week, joining a club that up until now had been exclusively occupied by artificial intelligence businesses.
The company was Eli Lilly, which sells the weight loss drugs Mounjaro and Zepbound. Its share price surged 40 per cent after reporting that sales of the pharmaceuticals had more than doubled in the latest quarter.
Being worth over $1 trillion only happens when investors think something world-changing is going on. This is what they rightly think is happening with AI, although they’re possibly over-excited about the money to be made from it.
(To get a sense of what a trillion dollars is, consider that a million seconds ago was last week, a billion seconds ago was early 1994 when Paul Keating was prime minister and a trillion seconds ago it was around 30,000BC, when Neanderthals shared the planet with homo sapiens.)
And yes, the world is changing as a result of Eli Lilly’s drugs and Novo Nordisk’s earlier Ozempic and Wegovy, in a different way than AI and robots, but maybe as significantly.
Changing the way we eat
Last week the agriculture-focused Rabo Bank’s research division published a paper that concluded “weight loss medications mark a turning point for food consumption”.
“What started as a breakthrough in diabetes care is now redefining obesity treatment and accelerating a shift from lifestyle management to medical intervention. The scale of these shifts is still evolving, but the direction is clear: eating patterns are changing, and no category is immune.”
Rabo quoted a US study that showed households with at least one user of these medicines reduced their grocery spending by six per cent within six months.
A study of Australian sales data published in November found that since May 2020, total sales of these drugs in Australia increased almost 10-fold, reaching about half a million units each month in 2024/25, despite significant disruptions to access during shortages, with around 200,000 people now using them.
What are these drugs?
Ozempic and Wegovy are the brand names for semaglutide, which was approved as a treatment for Type 2 diabetes in 2017 by the US Food and Drug Administration and then again in 2021, for weight loss. It’s a peptide that mimics a hormone called glucagon-like peptide-1 (GLP-1), so they’re called GLP-1 RAs, or receptor agonists (an agonist is something that produces a physiological response), and are administered by an injection.
Mounjaro and Zepbound are known as tirzepatide, also injected, but it’s different to the GLP-1 RAs because it is both a GLP-1 and a Gastric Inhibitory Polypeptide (GIP) receptor agonist. It’s an analogue of gastric inhibitory polypeptide (GIP), which is a human hormone that stimulates the release of insulin from the pancreas.
GIP, sometimes called Twincretin because it has a combined action with GLP-I receptors, is a human hormone that stimulates the release of insulin from the pancreas.
Apparently, Mounjaro works better with GIP receptors and has been shown to be more effective for weight loss, possibly because of its combined action with GLP-1.
All of these drugs control obesity by making people feel less hungry, but Dr Tamara Milder, an endocrinologist with UNSW, told me they also directly produce an improvement in cardiovascular and kidney health on top of the benefits from weight reduction.
That’s because GLP-1 receptors are not just in the pancreas and brain, where the weight loss effect happens, but also in the heart and in blood vessels. Activation of these receptors can lead to several independent benefits, separate from losing weight, including:
• GLP-1 RAs have been shown to enhance the function of the lining of blood vessels, which improves blood flow and reduces the risk of atherosclerosis (hardening of the arteries).
• They exert systemic and local anti-inflammatory effects and can directly modulate the progression of atherosclerosis.
• Studies suggest direct benefits on the heart muscle cells (cardiomyocytes), such as reducing oxidative stress and inhibiting cell death, which can protect against myocardial injury (like during a heart attack).
• GLP-1 RAs can lower blood pressure via the kidneys.
There are downsides
So they seem to be general wonder drugs that also help you lose weight, but there are side effects. Michael Falster from the population health centre, also at UNSW, told me these can include nausea, vomiting, diarrhoea, and constipation in some patients.
Falster says the main problem with these medications is that when you lose weight, you lose muscle and some bone density along with the fat and when you go off them, and you put fat back on, you don’t regain muscle or bone, so you can end up weaker and more fragile, as well as back at your old weight.
Nevertheless, obesity is such a huge problem globally, and difficult for individuals to control. A drug that helps you achieve it without gastric surgery is very appealing.
As a result, sales are skyrocketing as shown by Eli Lilly’s trillion-dollar market cap.
But these drugs are also expensive, as Eli Lilly and Novo Nordisk make the most of their duopoly patents while they have them. Governments are under a lot of pressure to subsidise these drugs, not just for the treatment of diabetes but also for obesity and heart disease.
In Australia, Ozempic costs about $150 a month and has been put on the Pharmaceutical Benefits Scheme (PBS) at $31.60 per script, but it’s tightly limited to treating Type-2 diabetes. The patient must have tried several other treatments first and the clinician must call a PBS hotline for approval before writing the script.
Wegovy (starting price $260 per month), Mounjaro and Zepbound (both about $700 a month) have been knocked back by the PBS because they cost more and might need to be taken for life, whether it’s for diabetes or weight loss. This medication is a very long-term outlay.
The cost-benefit argument
A strong argument has been made that subsidising these drugs will save money in the long term by reducing cases of obesity and heart disease. In Australia, the problem is that the federal government would have to cough up for the subsidy, but the state health systems would get the benefit.
Policy in the United States is also messy.
Medicare (the federal programme for those over 65) covers GLP-1 drugs for the treatment of Type 2 Diabetes and will probably cover their use for cardiovascular risk reduction in people with obesity/overweight.
Private Insurance coverage is a patchwork. Some private employers and insurers cover GLP-1s for obesity, but most have dropped coverage because of the cost.
So, as with health care in the US generally, access is determined by a patient’s employer, state, or specific insurance plan, creating vast inequality. What’s more, the US has the highest list prices globally for the drugs.
The US Congressional Budget Office (CBO) and independent researchers have analysed the cost of allowing Medicare to cover anti-obesity medications, including GLP-1s. High uptake with no discounts would lead to an annual cost equivalent to more than $US1 trillion ($1.5 trillion).
Numbers like that send treasury officials hiding under their desks.
The prices should soon come down, though, either because governments negotiate them down or because of competition.
Three weeks ago, the US government announced a deal with both Eli Lilly and Novo Nordisk to slash the prices of all four drugs from about $1,500 a month to $550, if they’re bought through TrumpRx.com, a government website that will launch in January.
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Next-gen drugs
As for competition, there is an unsurprising frenzy of research going into finding other versions of GLP-1 receptor agonists that don’t breach the Novo Nordisk and Eli Lilly patents.
Amgen is working on a once-a-month injection instead of once a week. Zealand Pharma is in phase three trials for a dual agonist (GLP-1 + glucagon). And Pfizer and Roche have multiple oral candidates taken in pill form. A few others are targeting the amylin hormone that signals satiety.
As with AI and climate change, this new era of easy weight loss through drugs is just getting started and has a long way to go.
All we can know at this point is that it will make some people a lot of money and change human civilisation in some way.
But unlike AI and climate change, this one is not expected to kill us and may do quite the opposite.
Alan Kohler is a finance presenter and columnist for ABC News and also writes for Intelligent Investor.