Preface

We passed the one-year anniversary of our first GLP-1 piece on July 11th. Happy one-year birthday to our adorable little collection of longs and shorts.

Our initiation on our GLP-1 L/S basket and thematic primer can be found here:

As of the one-year mark on 7/12/2024, the GLP-1 basket was up +85.12%.

The first week of it’s second year of existence, however, has been a wild ride for most areas that have seen significant momentum - the GLP-1 Basket was no exclusion. I view this volatility as due almost solely to the momentum factor unwind and having very little to do with the fundamental thesis. 

Last week saw the GLP-1 basket drawdown from its highs by ~6%.

When we look at the performance year-to-date, though, it puts that volatility into perspective a bit. The prior week, our basket was up +48% YTD, at the end of June it was only up 38%.

Ending last week, it’s up 42.7% - certainly not the end of the world (although the reaction to LLY and NVO’s drawdown would have you thinking it was). This is simply the nature of momentum, but there was some interesting discussion surrounding the drawdown that I felt deserved elaboration.

There have been some valid reactions to new developments - primarily concerning the competitive landscape in light of Roche’s oral data. I think LLY & NVO have more upside before that begins eating into returns but luckily we also own a decent amount of Roche, so this was a positive development for us.

Overall, our GLP-1 thesis is still sound and right for the right reasons.

That being said, this field is advancing quickly and it’s time for a check-in on the relevant areas. I’d be lying if I said that last week didn’t put a bit of the fear of god in me, so I believe that provides a natural opportunity to get ahead of some areas where I believe market commentary will be focused out to the end of the year (“skating to where the puck will be”, so to speak).

In this article, we’ll be updating on the competitive environment we first detailed in our initial primer. It will be pretty comprehensive, so don’t feel shy about skimming!As we have been hammering quite hard, the key to unlocking real GLP-1 secondary effects and the massive 100M US market for effective weight loss drugs to combat the obesity epidemic is dual pronged, involving:

1. Increased Insurance Coverage

2. Effective Oral Preparation

That aspect is the same as it has always been, so let’s go ahead and see if we’re any closer to either of them…

These two factors work hand in hand to ultimately result in a cheaper alternative that is significantly less supply constrained and sees wider adoption. That is the bull case for our “Second-Order Effects”, after all - those materialize most significantly when the penetration in the patient population is highest.

Therefore, our awareness currently must be on monitoring new drugs which could provide a putative alternative to the current duopoly (as well as drugs that could reinforce the duopoly by resulting in either NVO or LLY or both having an oral alternative).

Furthermore, we must monitor the progression of generic drugs. Last time we discussed the GLP-1 environment we touched on the situation with HIMS and other compounding pharmacies being able to provide compounded Semaglutide due to its shortage list status.

In this article, we’ll compound that discussion (no pun intended) a bit more by looking forward at the IP landscape - something that will become increasingly important. We’ll also look at the most promising of the “future giants” of GLP-1s.