GLP-1 agonists—a new class of drugs that help lower blood sugar and promote weight loss—are revolutionizing the treatment of Type 2 diabetes and obesity. With these approvals alone, they have already achieved blockbuster status and are well on their way to becoming tomorrow’s top-sellers.
Even better, emerging evidence suggests the same class of drugs could have benefits beyond Type 2 diabetes and obesity, addressing everything from heart to liver health. So, not surprisingly, Goldman Sachs and other investment managers believe they could become a $100+ billion opportunity by 2030.
Let’s look at different options to participate in the potential upside, as well as some key risk factors to keep in mind.
Who Makes GLP-1 Drugs?
Several drugs target GLP-1 receptors, ranging from semaglutide (Ozempic and Wegovy) to tirzepatide (Mounjaro). While there are subtle differences between these drugs, they all target the same GLP-1 receptor to trigger the release of insulin, reduce hunger, and delay emptying of the stomach.
Several public companies have been developing these drugs since the 2010s, including:
- Novo Nordisk (Ozempic, Wegovy)
- Eli Lilly (Mounjaro, Zepbound)
- Sanofi (Adlyxin, Lyxumia)
- GSK (Tanzeum)
- AstraZeneca (Byetta, Bydureon)
How to Invest in GLP-1 Drugs
Several publicly traded companies are developing GLP-1 agonists, but it can be challenging to build a portfolio and maintain allocations over time. Fortunately, several exchange-traded funds (ETFs) have ready-built exposure to the nascent class of drugs.
The most popular ETFs include:
- GLP-1 & Weight Loss ETF (OZEM) offers exposure to a handful of companies in the space, including several non-U.S.-traded equities that may be challenging for investors to purchase on their own. The fund carries a modest 0.59% expense ratio.
- Amplify Weight Loss Drug & Treatment ETF (THNR) offers more diverse exposure than OZEM to both GLP-1 makers and enablers. As a result, it’s less of a pure play but has more diversified exposure. And it has the same 0.59% expense ratio.
- Tema Obesity & Cardiometabolic ETF (HRTS) is an actively-managed fund focused on GLP-1 and broader therapeutics in the cardiometabolic space. These include companies pursuing more than just GLP-1 receptors and include areas like gene editing. With 45 holdings and a 0.99% expense ratio, it’s both more diversified and expensive than its rivals.
If you’re looking for very targeted exposure, OZEM offers the best pure-play, but those seeking more diversification may want to consider THNR instead. And, of course, self-directed investors may also prefer to invest directly in the handful of companies with GLP-1 agonists on the market.
ETFs with GLP-1 Exposure
These ETFs are sorted by their AUM, which ranges from $2M to $65M. They currently do not pay any dividends and have expenses between 0.59% and 0.99%.
| Name | Ticker | Type | Actively Managed? | AUM | YTD Total Ret (%) | Yield | Expense |
|---|---|---|---|---|---|---|---|
| Tema Obesity & Cardiometabolic ETF | HRTS | ETF | Yes | $64.9M | 7.1% | 0% | 0.99% |
| Roundhill GLP-1 & Weight Loss ETF | OZEM | ETF | No | $28.7M | N/A | 0% | 0.59% |
| Amplify Weight Loss Drug & Treatment ETF | THNR | ETF | No | $2.3M | N/A | 0% | 0.59% |
Are GLP-1 Stocks Overvalued?
The stock market has a well-known tendency to overreact. For example, when the internet promised to change the world, dot-com stocks soared to stratospheric heights. While the internet did change the world, the money didn’t start flowing until much later.
The pharma industry is a little different—most money is made at the onset before patent expiration. But, even when patent protections exist for a specific compound, competitors can target similar compounds with similar effects and erode market advantages.
So, what does this mean for GLP-1 stocks?
The overall GLP-1 antagonist market could be worth $100 billion by 2030, but the winners won’t necessarily be the first drugs to market.
Despite the uncertainty, investors have plowed money into many of today’s leading GLP-1 makers, sending their valuations to sky-high levels.
For example, in May 2024, Morningstar analyst Karen Andersen, CFA, raised her fair value estimate of Novo Nordisk to $86.00, but current prices remain sharply higher than her increased valuation at around $147.00. She sees GLP-1 sales at Novo Nordisk increasing to nearly $75 billion by 2031, but current prices don’t account for expected price declines or competition.
ETFs can help mitigate these issues by providing exposure to the broader space. So, for example, if Eli Lilly overtakes Novo Nordisk, you have exposure to both companies rather than placing a company-specific bet on success.
Other Potential Risks
The Blue Cross Blue Shield Association analyzed 170,000 pharmacy and medical claims between July 2014 and December 2023 and found that 58% of patients didn’t complete a prescribed 12-week course of liraglutide or semaglutide. And nearly one in three people stopped taking the drugs within a month—a period too short to see the benefits.
The potential side effects of these treatments could lead some patients to abandon them in favor of other less-effective treatments or no treatment at all.
The Bottom Line
GLP-1 agonists represent a revolution in Type 2 diabetes and obesity treatment, and they could have potential well beyond these indications. But with many companies working in the space, investors may wish to temper their company-specific enthusiasm. Instead, ETFs could offer diversified exposure to the industry’s overall growth.
