Morgan Stanley cites MedTech impact from weight loss drugs

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Billions of dollars in sales across various MedTech markets will be at stake if there is a broader acceptance of weight loss drugs developed by Novo Nordisk (NVO) and Eli Lilly (NYSE:LLY), Morgan Stanley argued in a research note last week.

Novo Nordisk’s (NVO) GLP-1 receptor agonist Wegovy is already approved in the U.S. for obesity, and Lilly (LLY) is advancing its diabetes medication Mounjaro that targets both GIP and GLP-1 receptors towards a weight loss indication before the year-end.

Morgan Stanley analyst Terence Flynn estimates that Mounjaro and Wegovy, along with Novo’s (NVO) next-gen obesity drugs such as Cagri-Sema, can rake in nearly $25B in sales in 2030.

Flynn said that if these weight loss drugs can lead to efficacy levels achieved from bariatric surgery, there will be improved outcomes across a range of health conditions. He added it would impact the demand for some of the bestselling MedTech devices currently used for these conditions.

Areas at risk of potential GLP-1 impact include total knee replacement (TKA), respiratory care devices known as CPAP machines, intra-ocular lenses (IOL) used in cataract surgery, continuous glucose monitoring (CGM) devices used for diabetes as well as dialysis, and heart failure devices.

According to Morgan Stanley, the disruption from GLP1 agonists to MedTech could be in billions as these markets generated ~$30 – $40B in sales in 2022. The impact will be even more significant if NVO’s and LLY’s GLP-1 agonists bring in sizable cost savings across the healthcare system, leading to wider coverage.

However, the firm acknowledges that its predictions, based on published studies and market data, could be too early, and there are many unknowns, including questions over the safety and efficacy of weight loss drugs with longer-term use.

CPAP machine makers such as ResMed (RMD) and Philips (PHG) (OTCPK:RYLPF) are heavily exposed to the rising popularity of GLP-1 agonists, Morgan Stanely argues, noting that obesity is the main reason behind obstructive sleep apnea where CPAP devices are indicated.

Even Johnson & Johnson (JNJ), Stryker (SYK), and Zimmer Biomet (ZBH) are not immune from the upcoming GLP-1 wave. According to Morgan Stanley, total knee replacements, one of the markets they target, are likely to have a mid-level exposure to GLP-1s as weight loss drugs can reduce the need for such surgeries.

The market for intra-ocular lenses, where companies such as Alcon (ALC), Johnson & Johnson (JNJ), and Bausch + Lomb (BLCO) dominate, has a lower level of exposure to GLP-1 agonists as the main reason for cataracts is aging, while weight loss can cut its risk.

Using 2022 data, Morgan Stanely projects GLP-1 receptor agonists can cause a $2.2B dent in the markets for CPAP devices/ consumables globally, assuming the highest level of drug uptake and maximum effect on procedures.

Meanwhile, the global impact on total knee replacements and IOL procedure markets are estimated at more than $500M and $20M, respectively, at the high end of the firm’s forecasts.

Other drugmakers advancing weight loss medications include Pfizer (NYSE:PFE), Amgen (NASDAQ:AMGN), Altimmune (ALT), vTv Therapeutics (VTVT), Rhythm Pharmaceuticals (RYTM), and Viking Therapeutics (VKTX).