Monday, 12 August 2024 Reading time : 3 minutes

Ozempic, Wegovy, Mounjaro and Zepbound: These are the names of the drugs that promise a quick and easy way to shed unwanted pounds. Originally developed to treat diabetes, they have become lifestyle products. The market is currently dominated by Novo Nordisk: in 2021, the Danish company launched the first drug that only needs to be injected once a week instead of once or twice a day. The business with weight-loss drugs has been booming ever since, with US pharmaceutical giant Eli Lilly Eli Lilly emerging as Novo Nordisk's biggest rival.

But there are also companies out of the limelight that are benefiting from the euphoria surrounding the weight-loss drugs. One of them is Bachem. Based in Bubendorf in the canton of Basel-Landschaft, Bachem specialises in the production of complex peptides, which are used in the coveted drugs. The Swiss company claims to be one of the world leaders in this field and expects the global market for complex peptides to double by 2031.

Strong market position
Drugs such as Wegovy (Novo Nordisk) and Zepbound (Eli Lilly) are based on so-called GLP-1 receptor agonists, which mimic the body's own hormone GLP-1 (glucagon-like peptide 1). GLP-1 is produced in the human body in response to food intake and triggers various mechanisms that, among other things, regulate blood sugar levels and reduce the feeling of hunger. However, because the hormone is quickly broken down, its effects are short-lived. GLP-1 receptor agonists aim to mimic and prolong these effects. Bachem claims to be one of the world leaders in this field and expects the global market for complex peptides to double by 2031.

Pharmaceutical supplier Ypsomed is also active in the weight-loss market. The company is based in Burgdorf, Bern, and produces injection systems, among other things. In September last year, Ypsomed won a major contract from Novo Nordisk to supply auto-injectors, according to Reuters. The pens are intended for Novo Nordisk's second-generation GLP-1 drugs, which are currently being tested. Ypsomed expects to generate revenues from this supply contract from 2025.

Global health crisis
The drugs are a response to an acute health crisis. «Obesity has reached epidemic proportions», writes the World Health Organization (WHO) in its action plan to combat the disease. According to WHO data, around 43% of adults worldwide are overweight and 16% are considered obese. Since 1990, the prevalence of obesity in adults has more than doubled. The WHO defines the condition as a body mass index over 30. 

Clinical studies suggest that GLP-1 not only helps people lose weight, but also reduces related conditions such as heart failure symptoms and the risk of heart attack and stroke, according to «Science». The journal of the American Association for the Advancement of Science has therefore honoured GLP-1 drugs with the «Breakthrough of the Year 2023» award. 

High investment
For the companies involved, lucrative major contracts are not without risk. Ypsomed, for example, experienced this in 2022. At that time, Eli Lilly unexpectedly cancelled a collaboration that would have paved the way for Ypsomed to enter the US market for insulin pumps. This was a major setback for the Swiss medtech company. 

Bachem is also investing heavily in expanding its capacity to handle the orders. In the previous year, the company spent almost CHF 270 million on expanding its production facilities, Bachem announced in its media release on the annual results. This corresponds to almost half of total sales in 2023.

For the time being, however, the market for weight-loss drugs is facing capacity constraints. In its half-year results, Novo Nordisk stated that periodically supply difficulties are to be expected worldwide. Although the pharmaceutical giants are also expanding their production capacity, it usually takes years before they are operational, the Financial Times summarises – in the meantime, companies such as Novo Nordisk and Eli Lilly are increasingly relying on suppliers to meet demand. 

Barrier Reverse Convertible on Swiss Pharmaceutical Suppliers
9.50% p.a. BRC on Bachem and Ypsomed
Barrier: 75%
Valor: 135804810

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