The Favorite New Drug For The Rich & Famous

Shane Anthony has Type 2 diabetes. And for the last few years, he's managed the condition using a drug called Ozempic, which helps people with diabetes keep blood sugar levels in check.

But since October, he hasn't been able to get his hands on the drug.

This isn't an isolated incident, either. Thousands of people with Type 2 diabetes haven't been able to find Ozempic. There's been a massive shortage of this groundbreaking — and relatively new (approved in December 2017) — diabetes drug.

Not because of rising rates of diabetes. Instead, it's because of its weight loss benefits… becoming Hollywood's favorite (and not so secret) expensive new SlimFast diet.

For example, Elon Musk admitted the drug helped him shed over 30 pounds...

Comedian and television host Chelsea Handler has admitted to taking the drug to help her slim down. And a number of other famous people have admitted to using the drug to quickly shed pounds.

You see, the generic name of Ozempic is semaglutide.

And during Ozempic's pre-approval studies, researchers noticed a remarkable side effect: people lost weight. For example, one study showed that the average losses for those receiving one milligram a week of semaglutide were:

• Nearly 10 pounds lost over 30 weeks.

• Nearly 5% overall body weight lost.

• Waist size shrank 1.6 inches.

This side effect helped people with type 2 diabetes because excess weight is a major risk factor. Among other health benefits, weight loss can lower blood sugar and blood pressure and reduce the need for other diabetes medications.

Thus, the "magic weight loss" drug had finally been found...

In June 2021, the FDA approved a higher dosage of semaglutide called Wegovy to help manage weight in adults with obesity or who are overweight with at least one weight-related condition (such as high blood pressure, Type 2 diabetes, or high cholesterol).

This under-the-skin injection is the first approved drug for chronic weight management since 2014.

And to say it's been a hit might be an understatement. Between social media, like TikTok, and celebrities sharing their testimonies about how semaglutide helped them shed unwanted pounds, the drug took off…

But the sudden popularity of semaglutide is only part of the story... Its origins deserve a little time in the limelight. After all, it involves the venomous poison of a Gila monster...

^{From Gila Monster Venom To A $16 Billion Market}  

You see, semaglutide is a type of drug called a GLP-1 agonist, which stands for glucagon-like peptide.

The name isn't super important. Just know that GLP-1 agonists are a group of drugs that helps folks with Type 2 diabetes improve blood sugar control and help with weight loss.

Now let's get back to how Gila monsters fit into all of this...

Gila monsters are large venomous lizards native to the Southwestern United States and the northwestern Mexican state of Sonora. They can grow to more than 20 inches long. They aren't aggressive, but if cornered, they strike quickly.

As a quick aside, wildlife educator and YouTube star Nathanial "Coyote" Peterson got bit by one, and even though he's been bit and stung by nearly every animal out there, he said the Gila monster bite was the worst pain he'd ever felt in his life. You can watch the video of him getting bit here.

When a Gila monster strikes, it doesn't inject venom into your bloodstream like a snake. Instead, as the lizard gnaws at you, its venom secretes from salivary glands, runs down grooves in its teeth, and slowly enters your open wound.

Not only does the bite cause excruciating pain, but some victims also experience swelling, vomiting, high blood pressure, and even breathing difficulties. Gila monster venom can also inflame the pancreas.

Dr. Eng’s Groundbreaking Discovery

In the late 1980s, Dr. John Eng was just an endocrinologist working at a Veterans Administration Medical Center in New York, treating people for diabetes and other hormone-related diseases.

On the side, he was a scientific researcher working in the laboratory of Dr. Rosalyn Yalow, a 1978 Nobel Prize winner for inventing a method to find novel hormones in different animal species.

Dr. Eng came across what he thought were very interesting studies done in the early 1980s by gastroenterologists at the National Institutes of Health, who noted that the venom in certain snakes and lizards caused inflammation of the pancreas, where insulin is made.

Of particular interest was the hormone in the venom of the Gila monster.

As it turns out, the toxic venom would lead to a medical breakthrough that would change the lives of tens of millions of people around the world.

In 1992, Eng discovered a compound in the venom that had never been documented. The new compound, which Eng named exendin-4, was similar to a type of hormone that occurs naturally in our bodies called glucagon-like peptide-1 (GLP-1).

GLP-1 isn't insulin. But it does help regulate blood sugar. When blood sugar levels are high, GLP-1 promotes insulin secretion from the pancreas. And when blood sugars are at normal levels, GLP-1 doesn't have this effect.

However, GLP-1 degrades in the body quickly. A diabetes patient would need to inject natural GLP-1 every couple of hours for it to be effective.

This is where the miracle compound within the Gila monster venom comes in... Exendin-4 acted like GLP-1 but didn't degrade nearly as quickly. Eng had discovered a longer-lasting version of GLP-1 that would be the basis for a revolutionary diabetes (and weight loss) drug.

Of course, nothing is as easy as it seems. Dr. Eng worked at a VA hospital, and they aren't exactly interested in funding research for a diabetes drug.

Long story short, Dr. Eng spent his (and his wife's) retirement savings filing for a patent on this compound. Once patented, he went on a road show speaking at events to talk about his discovery, hoping to find a big pharmaceutical company that would listen.

They finally found a suitor in Amylin Pharmaceuticals. Drug giant Eli Lilly (LLY) was also interested in exendin-4. He licensed the patent and made millions of dollars. Exenatide, a synthetic version of exendin-4, would be sold under the brand name Byetta. The FDA finally approved it in 2005 for treating Type 2 diabetes.

More important, Eng's work spawned an entire class of GLP-1 drugs, which has ballooned into a market valued at over $16 billion.

And this month, I'm recommending a global leader in diabetes treatment. It's the same company that manufactures the wildly popular Ozempic and Wegovy drugs. And it has a pipeline chock full of GLP-1 drugs, including the first GLP-1 drug in pill form.

With the shocking rise in obesity and diabetes rates around the world, the opportunity is immense.

Hollywood’s Favorite Weight Loss Drug Maker

I call it “America’s Hidden Pandemic.” Others simply call it: diabetes.

Diabetes is closely linked with obesity. Since obesity has been on a startling rise (more on this in a second), diabetes has followed closely in its shadow.

Now I don't how else to say this... but we have gotten fatter as a nation over the past several decades. Data from the U.S. Department of Agriculture suggest that the average daily intake in the U.S. in 1970 was around 2,100 calories. By the early 2000s, per-capita consumption had reached nearly 2,600 calories daily. It doesn't help that processed foods and sugar intake have also surged.

Americans have been consuming more calories. Meanwhile, we are less active. The shift toward lower-activity jobs and increased sitting time is a large factor.

The bottom line is that we have an obesity epidemic...

A person is typically considered obese if his or her body mass index ("BMI") is more than 30. BMI is a simple calculation using height and weight. It is far from perfect… For example, a short, muscular male might register as obese despite having a low body-fat percentage.

But the BMI gives us a benchmark to compare over time. And the trend is undeniable. Adult obesity in the U.S. (the percentage of adults with a BMI of 30 or greater) has more than tripled since the 1960s.

In the early 1960s, roughly 13% of people were considered obese. The most recent data — released in June 2021 — showed that obesity in adults (over age 20) jumped to 42%.

We are quickly closing in on nearly one-half of American adults being obese. This is a public health crisis... And it's going global.

According to the World Health Organization, the worldwide prevalence of obesity has tripled since 1975. Now, more than 650 million adults worldwide live with obesity — around 13% of the global adult population.

It seems that this "miracle" weight-loss drug came to market at the perfect time... and the maker of this drug, Novo Nordisk (NYSE: NVO), is in the driver's seat of helping solve this global epidemic.

The discovery of insulin was a true-life saver (a story for another day). And as word of its discovery spread worldwide in 1922, August Krogh — a Danish Nobel laureate in physiology — and his wife Marie, a medical doctor diagnosed with diabetes, obtained the rights to manufacture and sell insulin in Scandinavia.

The following year, Krogh co-founded Nordisk Insulin Laboratorium, which became Novo Nordisk.

Today, Novo Nordisk is the global leader in insulin production, with a nearly 45% market share.

You may have heard about insulin pricing in the news recently. It's a hot-button topic for politicians... and earlier this year (2023), fellow pharmaceutical giant Ely Lilly (NYSE: LLY) slashed its insulin prices by 70%. It also announced an expansion of its Insulin Value Program that caps patient out-of-pocket costs at $35 per month.

Novo Nordisk followed suit and announced it would slash some of its insulin products by up to 75%. These prices will go into effect on January 1, 2024.

That's great news for folks with diabetes who need insulin. On the flip side, it's not great news for investors... I mean, nobody wants to see profits and margins get slashed.

Of course, politicians being politicians, they don't ever tell the whole story (or the truth).

You see, there are two main types of synthetic insulin: human insulin and modern insulin.

Human insulin is made in the lab, but its chemical structure is nearly identical to the insulin produced naturally by the pancreas. Modern insulin has a slightly different structure, giving it special qualities — such as being long-lasting or fast-acting.

Human insulin is cheap… even free for some people.

Novo Nordisk has offered a Patient Assistance Program ("PAP") since 2003. The PAP provides free insulin to eligible patients without insurance, some Medicare patients, and those ineligible for Medicaid. In 2018, nearly 50,000 Americans received free insulin from Novo Nordisk through this program.

Not only that, but Novo Nordisk's human insulin has also been available at Walmart (NYSE: WMT) for about $25 per vial for the past 15 years. (People with diabetes typically require between one and six vials per month.) And in 2017, Novo Nordisk partnered with CVS Health (NYSE: CVS) to bring affordable human insulin to tens of thousands of pharmacies in the U.S.

Modern insulin is more expensive… as it should be. That incentivizes companies like Novo Nordisk to invest billions of dollars in research and development ("R&D") to develop modern insulin and other drugs.

A Dive Into The Financials

Novo Nordisk did nearly $25 billion in sales last year (the company reports in Danish kroner, but we're converting to U.S. dollars). That was an 11.7% growth over 2021.

The company's diabetes and obesity-care drugs make up 88% of its sales. The biopharmaceutical unit, which produces drugs that treat rare diseases like hemophilia and growth hormone disorders, accounts for the remaining 12%.

Its biggest (current) money-maker is its modern insulin products (the long-acting stuff) like Levemir and Tesiba. However, insulin sales decreased by 5% in 2022 over 2021 and will likely continue to decrease.

That's because the future of diabetes care (at least for Type 2 diabetes) is GLP-1 products. The company's GLP-1 products for diabetes (Ozempic and Victoza) saw sales jump by 56% in 2022 over 2021.

Its obesity care products (aka Hollywood's latest drug craze) saw sales skyrocket 101%.

On its $25 billion in sales, the company had over $7.8 billion in net income or earnings per share of $3.45. Cash from operations came in at $11.1 billion, a 27% increase over the year prior. That also gives the company a cash operating profit margin of 45%, which is phenomenal. As a reference, anything over 20% is considered great.

Once we account for capital expenditures of $2 billion, we are left with more than $9.4 billion in free cash flow, a 22% improvement over 2021.

So, the bottom line is Novo Nordisk is a $274 billion company that generates $25 billion in sales, $7.8 billion in net income, and $9.4 billion in free cash flow.

And it's not slowing down anytime soon.

The Future Of Diabetes & Weight Loss Drugs Is A Real Catalyst

As I mentioned, the GLP-1 market is now a $16 billion-plus market, up from just $8 billion in 2018. And according to Research and Markets, it's expected to reach $24 billion by 2027.

More and more often, doctors are turning to GLP-1 drugs to help manage early and mid-stage Type 2 diabetes. They're safe and effective at controlling blood sugar levels. Plus, a welcome side effect of these drugs is weight loss.

Novo Nordisk is the GLP-1 market leader. Its GLP-1 market share is 55%, up from 50.5% in 2020.

Its first successful GLP-1 drug was Victoza, approved by the FDA for Type 2 diabetes in 2010. It's a once-daily injection. The compound in Victoza is called liraglutide, a successor of Dr. Eng's exendin-4.

It did about $1.9 billion in sales in 2022, but sales have declined over the years. This isn't a major problem because Novo Nordisk developed an even better drug: semaglutide.

Novo Nordisk's patent on semaglutide won't expire until 2031. And its first semaglutide drug, Ozempic, sold more than $8.7 billion last year. This is a weekly injection, as opposed to the daily injection of Victoza.

The company then came out with a semaglutide tablet, called Rybelsus. This is huge because popping a tablet is much more convenient than sticking yourself with a needle every week.

In September 2019, the FDA approved Rybelsus to treat Type 2 diabetes. It's available in 43 markets. The company doesn't break out Rybelsus sales, but we know that between Ozempic and Rybelsus, Novo Nordisk is dominating the GLP-1 market for diabetes. Market share climbed 2.2% from a year ago to 55%.

And remember, that's just diabetes... its obesity segment is on fire right now with Wegovy — a stronger dosage of Ozempic — and Saxendra, its first-generation obesity drug.

The bottom line is that the massive tailwinds from its market-dominating GLP-1 drugs should provide nice tailwinds for years. And who doesn't want to invest in the company solving the world's diabetes and obesity problem?

Disclaimer: Investing in stocks carries risk. This should not be construed as financial advice. Do your own due diligence. I’m just a regular guy hoping to help a few people learn more about stocks and investing through entertaining and educational stories.