Originally developed for diabetes treatment, the discovery of GLP-1 therapeutics as a weight loss drug and a potential solution to the global obesity epidemic has led to its rapid adoption and ascendancy compared to the discovery of Viagra for erectile dysfunction, a drug that was originally intended for high blood pressure, but found other commercial uses.
Similar to the subsequent hype and surging popularity that Viagra received, enthusiasm and demand has flourished for four main weight loss drugs: Ozempic and Wegovy from Novo Nordisk (NVO) and Zepbound and Mounjaro from Eli Lilly (LLY). Novo Nordisk and Eli Lilly have become the decisive leaders in the weight loss drug market, but not without its own set of consequences. The insatiable global demand has led to shortfalls in supply and production capacity, leading to investment in factory expansions and company partnerships.
Naturally, there are a lot of reasons to be excited about the growth potential and purported dominance of NVO and LLY at this developmental stage of the weight loss drug industry. That said, the market is far from mature, with ample room for disruption with only four weight loss drugs formally approved by the FDA. Within the Roundhill GLP-1 & Weight Loss ETF (OZEM), there are many underappreciated companies of various sizes from around the world competing to develop weight loss drugs, employing alternative mechanisms for treatment, diverse methods of administration, and varying dose frequencies.
Let’s meet a few of them.
Source: Bloomberg, Roundhill Investments, as of June 30, 2024. Holdings subject to change.
Viking Therapeutics (VKTX) is a $5.8 billion biotech company that primarily focuses on the development of therapeutics for patients suffering from metabolic and endocrine disorders. VKTX’s weight loss drug, a GIP and GLP-1 receptor agonist formally known as VK 2735, recently met its primary endpoint in phase 2 FDA trials. The company is also working towards a variant of VK 2735 that can be taken orally. Viking is now working with the FDA to determine next steps for the drug’s development.
Recently, Arrowhead Pharmaceuticals (ARWR), a $3 billion biotech company based in California, presented preclinical data on an RNAi-based (RNA interference) medicine targeting obesity and weight loss. While still in its nascent stages of discovery, the potential of ARO-INHBE as a revolutionary alternative that addresses obesity and certain diseases through gene silencing and gene suppression has produced hopes that ARO-INHBE can start clinical studies in late 2024.
In the weight loss space, there are also investment opportunities abroad. Based in Denmark, Zealand Pharma (ZEAL DC) is a $9 billion biotech company that researches and develops medicines for treatment of gastrointestinal, metabolic, and other diseases. One of Zealand’s weight loss drugs is called Survodutide and is in various phases of development globally. Survodutide is being studied for the treatment of type-2 diabetes mellitus, obesity, and non-alcoholic steatohepatitis. Notably, there has been increased enthusiasm for Zealand’s early-stage weight loss drug known as Petrelintide, an innovative drug that treats obesity through a hormone known as amylin.
A recent addition to OZEM, Caliway Biopharmaceuticals (6919 TT) is a Taiwan based biotechnology company valued at around $2.7 billion. A global operator in the healthcare industry, Caliway recently closed enrollment for its phase 2 trial in the United States for its weight loss drug known as CBL-514. Clinical studies are also underway in Australia. The drug is a lipolysis stimulant that is administered via injection, with the goal of reducing subcutaneous fat.
From Osaka, Japan, OZEM holds a position in Shionogi & Co Ltd (4507 JP), a roughly $11.5 billion pharmaceutical company. Shionogi is actively developing an orally administered weight loss drug under the name of S 309309. Beginning in June 2023, the phase 2 trial for S 309300 is currently underway in the U.S.
Each of these companies have their own unique sets of opportunities and challenges ahead as their respective drugs undergo various stages of clinical studies and trials. Naturally, there will be advances and setbacks the weight loss drug industry matures, creating a necessity for a selective and deliberate investment process. As the weight loss landscape evolves, so will the holdings of OZEM, Roundhill’s GLP-1 & Weight Loss fund. Investing with OZEM, investors gain exposure to a specialized, actively managed portfolio of global health care innovators researching state-of-the-art treatments to overcome the global obesity epidemic.
Click here for full fund holdings.
Investors should consider the investment objectives, risk, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about Roundhill ETFs please call 1-855-561-5728 or visit the website at www.roundhillinvestments.com/etf/OZEM. Read the prospectus or summary prospectus carefully before investing.
Health Care Companies Risk. Health care companies, such as companies providing medical and healthcare goods and services, companies engaged in manufacturing medical equipment, supplies and pharmaceuticals, as well as operating health care facilities and the provision of managed health care, may be affected by government regulations and government health care programs, increases or decreases in the cost of medical products and services and product liability claims, among other factors. Many health care companies are heavily dependent on patent protection, and the expiration of a company’s patent may adversely affect that company’s profitability. Health care companies are also subject to competitive forces that may result in price discounting, may be thinly capitalized and susceptible to product obsolescence.
Pharmaceutical Companies Risk. The Fund may have significant exposure to pharmaceutical companies in connection with its investments in GLP-1 & Weight Loss Companies. Pharmaceuticals companies may be affected by industry competition, dependency on a limited number of products, obsolescence of products, government approvals and regulations, loss or impairment of intellectual property rights and litigation regarding product liability. Pharmaceutical are subject to competitive forces that may make it difficult to raise prices of their products and may result in price discounting. The profitability of some pharmaceuticals companies may be dependent on a relatively limited number of products. The research and development costs required to bring a new product to market are substantial with no guarantee that the product will ever become profitable. Many new products are subject to gaining the approval of the U.S. Food and Drug Administration (“FDA”), which can be long and costly. Many pharmaceutical companies are heavily dependent on patents and intellectual property rights. The loss or impairment of these rights may adversely affect the profitability of these companies. Pharmaceuticals companies may also be subject to extensive litigation based on product liability and similar claims.
Biotechnology Companies Risk. The Fund may have significant exposure to biotechnology companies in connection with its investments in GLP-1 & Weight Loss Companies. Biotechnology companies invest heavily in research and development which may not necessarily lead to commercially successful products. Biotechnology companies are subject to increased governmental regulation which may delay or inhibit the release of new products. The effects of high development costs and increased regulation may be exacerbated by a company’s inability to raise prices to cover costs because of managed care pressure or price controls. Many biotechnology companies are dependent upon their ability to use and enforce intellectual property rights and patents. Any impairment of such rights may have adverse financial consequences. Biotechnology stocks, especially those issued by smaller, less-seasoned companies, tend to be more volatile than the overall market. Biotechnology companies can also be significantly affected by technological change and obsolescence, product liability lawsuits and consequential high insurance costs.
Concentration Risk. The Fund is concentrated in the industry or group of industries comprising the health care sector. The Fund may be susceptible to an increased risk of loss, including losses due to adverse events that affect the Fund’s investments more than the market as a whole, to the extent that the Fund’s investments are concentrated in the securities and/or other assets of a particular issuer or issuers, country, group of countries, region, market, industry, group of industries, sector, market segment or asset class.
New Fund Risk. The Fund is a recently organized investment company with a limited operating history. As a result, prospective investors have a limited track record or history on which to base their investment decision.
Roundhill Financial Inc. serves as the investment advisor. The Funds are distributed by Foreside Fund Services, LLC which is not affiliated with Roundhill Financial Inc., U.S. Bank, or any of their affiliates.