Biotech equity research analysts Andy Hsieh and Matt Phipps join group head Tim Lugo to discuss the latest developments in GLP-1s for diabetes and obesity treatment, including the emergence of oral therapies and the profound weight loss results seen in recent datasets. The conversation also covers the commercial trajectory of drugs like semaglutide and tirzepatide, the potential for market growth, and the challenges of patient retention and reimbursement, concluding with a look at the future of the field, including the exploration of new mechanisms and the focus on quality of weight loss.

Podcast Transcript

All right, welcome back to Biotech Breakthroughs. I'm Tim Lugo, the head of biotech equity research here at William Blair. I also want to welcome two of our analysts from our biotech equity research team. Welcome back Andy Hsieh, I know we've had discussions with you in the past and, also welcome to Matt Phipps, who is now up here for his first time.

The topic today is GLP-1s. Kind of an update. We've spoken in the past, I think maybe six, eight months ago, mostly around GLP ones and their impact on diabetes after the American Academy of Diabetes conference. Andy, I know a lot has occurred in the field since then. So, let's start with you. Maybe give us quickly a background on your research coverage and what has mostly occurred in the space over the past few months since we last spoke.

Yeah. There's a lot of things going on in this space. It seems like every day there is something new. In terms of the field, we've seen, several data sets looking at oral formulation. Obviously, that provides convenience for patients. There's some sort of periodicity associated with behaviors. So, you wake up every single morning. This is kind of your routine. And for these so-called needle-phobic individuals, that also avoids the option of self-injection. So, there's a lot of focus on oral therapies in the field. So that provides another optionality. There are also data sets that are coming out that basically showed very profound weight loss in a in a short period of time.

So yeah, there's just a lot of excitement and momentum in the field. There's a lot of directions, still a lot of room for improvement despite all the progress we've seen in the past couple of years.

And Matt you did have an upgrade of a certain stock. And, you know, they do have some GLP-1 data coming, I think, later in the year. Can you talk about your thoughts on the GLP one, class and maybe some areas for improvement.

Yeah. Tim, Thanks for having me on. It's fun to join you guys here doing this.

So, there's obviously, as Andy has said before, there's so much going on in this GLP-1 space where you've had just advancements. It's not something where we just want to be hitting GLP-1. At this point we're looking at, what else can you combine with that? How can you try to change the presentation or administration in order to improve the patient experience as well? So, I think that's where the field is trying to go. And you know, there's one drug in development that's called MariTide, is the kind of generic name for it, which I think does hold some real promise to, again, change the administration frequency for patients.

And so right now, the currently approved GLP-1s, especially for the obesity side of things, require a weekly injection. And, you know, it's a pen. I'm not saying it is, onerous by any means, given the size of the injection and the auto injector pen that they use. But at the same time, if you could go to monthly or quarterly, I think that does provide significant advantages, especially when I sit back and look at this, there's been a couple of recent surveys out that a third of patients about discontinued GLP-1 because of the side effects.

And if you think about someone getting a weekly injection, that's every week they're going to have, about a day of pretty meaningful nausea or vomiting or other GI side effects, and while we definitely still need to see the data from the phase two trial of MariTide because there were clear questions on the safety profile from phase one, which we can get into if we really want to.

But, you know, if you could have a day or two of nausea every quarter, I think, again, that the overall time of feeling sick for getting the benefits of the weight loss and not feeling hungry and things like that creates a better experience for the patient.

So, my whole thought there is if this really does play out, you have the ability to keep patients on therapy longer, which again, a lot of surveys show patients usually don't stay on more than 6 to 9 months. Currently.

And that's really a requirement in my mind to grow this market as big as everyone thinks it can be. Because if, you know, if you have patients on therapy, but most people are only on for 6 to 9 months, and you're kind of getting this constant cycling of new patients on. Yes, obviously, if there's still a lot of demand it’s still a big market, but you're not going to hit these kind of enormous estimates that are being thrown out there of, you know, tens and tens of billions, 50 billion plus.

So anyways, I think that's a key thing as we look at this next round of data readouts, is it something that a patient is going to want to stay on longer term?

So, the idea is that MariTide will extend the dosing to once a quarter, maybe once a month? But that nausea, rate will only occur for 1 or 2 days during that dosing. Is that the idea?

Yeah, that's the idea. And it's been a controversial topic, to be honest. But if you look at the phase one data, they did have high rates of nausea and vomiting when they started at a high dose. And so, they didn't use titration because it was just a phase one initial study. Every other GLP-1 uses some kind of titration scheme where you start out with a lower dose to sensitize patients, and it shows that reduces your nausea and vomiting going forward.

But even with this one high dose, all but 9% of the nausea events, I believe, were in the first injection and the symptoms for about 48 hours, maybe 36, 48 hours for the symptoms. So again, yes, you're going to still have nausea and vomiting. And I think that's largely unavoidable for the GLP-1 class.

We'll see if, you know certain things might be able to lower those rates. But still, it seems like it's just something that's going to happen. And it's a matter of, okay, how many total days are you feeling sick throughout your dosing cycle? And if you're only giving it quarterly, even if you do have a day or two. So maybe your initial injection, you have two days of not feeling good versus just one for a weekly, you know, you're still going to have a total reduced time.

And it's also interesting, not to get too in the nuances of it, but everyone assumes, okay, you're giving a higher dose of something and you're going to have this kind of Cmax driven adverse event profile and that GI toxicities. But for the MariTide drug it was, you don't reach Cmax until day seven, day six something like that.

And yet the adverse events you know the GI effect started happening in the first, you know 8 to 12 hours.

Yeah. That's interesting. I did do a little bit of prep before we, hopped on to this podcast. Street Consensus has the GLP-1 class going from 29 billion last year to 90 billion by 2030.

How much of that is driven by any of these orals or any of these once a month/once a quarter dosing drugs in your mind, or is that just what's currently approved? What's currently on the market?

What we can look at is some of the big pharmas out there, they've basically said that 30% of the market will be kind of dominated by orals, so it gives you a sense of where the market reception will be.

In terms of all the other sales, it's basically kind of beyond obesity. Right? So we've seen a trial called “select” basically looking at cardiovascular risk reduction for semaglutide and basically showing about a 20% risk reduction compared to placebo. And so that's kind of this layering strategy that companies have built. So building on a base of diabetes, kind of the first episode of GLP-1 that we talked about, going maybe higher dose, you see more profound weight loss.

And then another layer you have potentially sleep apnea. You have kidney function preservation because it's well known that with higher, blood sugar the kidney function will decline over time. And then just basically this layering and layering strategy that will basically get into the projections that you spoke about.

So, it's kind of beyond just the formulation convenience, obviously that will bring some patients, otherwise not being cared for or on drug. But also, there's an expansion of indications as well.

And for semaglutide, I was surprised when I looked at the 2023 sales numbers. Not just in terms of how big it is now, but it's still only indicated for diabetes. The others are, you know, adding obesity on to their labels. How much is semaglutide is diabetes versus weight loss. You have a sense of that, or do we just not have that granularity yet because maybe we hear about the kind of rumors about Hollywood. So, someone is on semaglutide and shows up to the Academy Awards. Is this a real effect? Is this really going out into the community for, obesity and reimbursement? Or, you know, how much of this is diabetes versus obesity in in your thoughts?

I guess for obesity, it’s a little harder just because they are more recent approval. So tirzepatide, which is like the dual agonist. Right? So, it targets both the GLP-1 pathway and also GIP, it was approved just last year. Late last year. So, we only saw a full quarter of launch for tirzepatide so far. So, we're basically in the very first part of the first inning.

But overall, if you look at the population, you know, obesity will be a major driver just because of the epidemiology. So, I think that's kind of the trajectory that we're seeing commercially.

So tirzepatide became a $5B drug like that.

Tim, I think it's pretty easy to get big numbers when you try to go from, like, a top down modeling approach of, like, okay, you know, what's the, you know, there's plenty of data out there about how many people in the US, in other countries have high BMI of over 30, if you want to make that the cutoff, maybe even make it a little lower than that, you know, that's a very high number. Right? And so, it doesn't take a lot of penetration into that to get these large sales numbers. Now, you know, again, I think it depends on, are, you know, are you really keep based on therapy or are they cycling like I mentioned earlier. And, you know, there was Kaiser Family Foundation poll that just came out today, I believe, that showed already about 1 in 8 people in the US, according to this poll's polling numbers, has already tried a GLP-1, and that's higher the numbers you know, almost a quarter of patients for actually that are, you know, truly obese. And then almost half of patients who have diabetes. Now obviously there's older GLP-1 medicines that they could have been on. So maybe not the most recent ones. But I think that goes to show that you're having this large demand and uptake kind of in certain areas. And, whether it be, you know, on the coasts or in certain populations. But again, a lot of people not staying on and a lot of people maybe also with problems with reimbursement through, you know, Medicare and until just recently, until you have that cardiovascular outcomes data on your label doesn't sound like they'll be able to reimburse it.

So that also creates a big pocket of patients that, you know, hopefully will be able to start coming out of these therapies for those who need it. So ultimately, you know, there's plenty of room to grow. But also, I think we need to acknowledge that if we can't keep patients on therapy or, you know, if they don't stay on these drugs very long, I don't see how you hit that $90 billion number.

That's often why I wonder is how much durability of these markets is going to be related to managed care versus outcomes. You know, we have obviously, the flag trial looking to, you know, 20% risk reduction for cardiovascular events. That's fantastic. Now are we going to reimburse? How broader is reimbursement for these for obesity or for these cardiovascular risks? Do we know is managed care is broadly reimbursing these?

A major drug sponsor has put out that data, actually. So, if you look at, commercial payers in the United States, it's probably about 50, 60% covered. There is anecdotal evidence, depending on, who you talk to about either increasing or decreasing coverage. So, entities basically start covering it. And they, they realize the expenditures were just outpacing their internal projections. So, they have to scale back.

So yeah, it's about 50, 50 to 60%. If you look at the, the kind of commercial pay market, government pay market is about 10% currently. And, you know, kind of going back to Matt's, discussion about Medicare not being able to reimburse drugs for obesity, that's a big part of that.

So, if one eighth of tried a GLP-1 tried it already and cycled through it, what inning do you think we're at for this market? Obviously, you know, the numbers suggest that it's still growing significantly. I've heard from one of the, let's call it large Midwest pharmas that, I've heard that the total market is, $100 billion or so. And that's kind of been the number batted around, I think from some of the BD groups. So where do you think, Matt, we are in terms of the market penetration for these?

You know, it's easy to say that we're still somewhat in early innings. And I don't know if I'm going to pick it as, like, third, fourth innings. Something like that. But there's two main things. One is new, new mechanisms coming into play. Right. And so, yes, GLP-1s do work well. We’ve seen the benefit now in cardiovascular outcomes even and in across a number of indications, like sleep apnea and kidney and chronic kidney disease. But there are a lot of people who they don't work for or, you know, maybe feel that they need to lose more weight. We also see a pretty rapid rebound in a lot of patients who stop therapy. So, all these things are, on the one hand, limitations of the current therapies, but on the other hand, create opportunities for new therapies, whether it be something that has a different mechanism. So therefore, it is driving different efficacy, whether it be in patients who didn't respond to the GLP-1 by itself, or maybe patients who stop responding, or something that could be used as a maintenance therapy or something like that to try to maintain the weight loss after, you know, stopping the GLP-1 has a better tolerability profile or something like that.

So, there's still a lot of room to grow and there's a lot of different ways, I guess, that pharma companies are looking to address those challenges. One thing that's generated a lot of excitement recently is the ability to try to kind of spare the muscle loss that we see with GLP-1s.

And there's a lot of companies that are looking at ways to do that so that, okay, maybe your composition of weight loss is better when you're on the GLP-1. And don't lose as much muscle, maybe when you come off it, your basal metabolic rate is still a little bit higher because you have this muscle mass. And that will hopefully allow you to better maintain that weight longer term or, you know, do something else to help you kind of maintain that weight loss longer term.

Yeah. I definitely would echo that. I know of a private company looking at this. An apelin receptor agonist, which is being studied in combination with one of the, very successful, GLP-1s. And I know that they're very much focused on not only greater weight loss, but also higher quality weight loss. And apparently the FDA is really coming around to looking at quality of weight loss endpoints. So, I'm, very interested in that and that program and I guess the some out of settings also are being used in combination maybe that leads to Andy, what are you looking for in terms of the next few months in terms of interesting data points coming out? I know you followed the orals really closely.

Yeah. There's, there's an oral small molecule. So, I guess the excitement is this…So when people talk about orals, there are two formulations. One is basically kind of a reformulation of these peptide drugs that's on the market. So, Tim, you kind of mentioned semaglutide and tirzepatide. They're basically peptide, backbone. And it's difficult, relatively speaking, compared to another modality, which is small molecules in terms of manufacturing. And you've seen a lot of kind of consolidation and focus on manufacturing in the field to just make sure that, you know, you can actually meet the demand that's out there. So the small molecule, beyond just having the oral convenience is also there's a benefit in terms of the ability to manufacture, you know, sufficient supply.

So, when you're talking about, a condition that affects millions of people, obviously manufacturing is top of mind. And having the ability, to use small molecule modality to drug what's conventionally thought of as a peptide receptor, that's a really giant leap forward in terms of scientific progress.

So, yeah, so we'll see more, data coming from that field, you know, in terms of the weight loss, people are also looking at using that in terms of diabetes as well. And then, you know, it's basically the same evolution as a peptide field. So can you add different receptor agonism on top of just having GLP-1 activity, can you add GIP, can you add apelin, can you add glucagon as well. So, there's a lot of directions that you can go. And going back to what Matt had said, I think, looking maybe beyond just couple of months, in the future direction, a lot can be learned from just the weight loss curve, right? You basically have this initial drop and then the plateau. Right? So, what's happening is you have this disequilibrium initially. You have energy expenditure that is higher than energy intake. Right. And so, most of that GLP-1 disequilibrium is really from the slowing or reduction of energy intake.

So, I think the future direction is really how do you think about energy expenditure. And a lot of companies are looking at that as a way to really prolong or amplify that weight loss and potentially having longer durability as well.

You know, I've heard anecdotally that when they're being dosed, physicians are recommending weight training essentially to combat that quality of weight loss issue that we've seen. I know when I look at these other more anabolic type of products,- what's your current thoughts around quality of weight loss, Matt? Are these being incorporated into some of the trials?

I was just gonna say, Matt is a perfect person to answer this because he's our fellow Ironman.

Days past, Andy, days past.

And shout out to the ASCO run that you host every year at the ASCO conference.

It’s a fun run every year. Yeah. Let me know if you want to join.

Look, it's clear that patients do lose muscle mass. They also lose bone mineral density, and they lose fat mass. But that is going to happen with bariatric surgery as well.

There is the part of that that is just if you decrease your energy consumption that much and you start to lose so much weight, your body's going to kind of adjust to come off. And now the problem is if you also don't change other lifestyle things or you have to moderate that by again, maybe weightlifting, maybe trying to incorporate more protein in your diet or whatever.

Maybe your doctor recommends on that side. It shouldn't be getting medical advice. But yeah, there is a clear, it's pretty easy to see, okay, if you could make it so that a patient is just losing more fat mass and maintaining some of that lean mass, you know, it makes sense that they'd come out the other side of this and probably better condition than if they lose, you know, a third fat mass or a third lean mass, two thirds fat mass.

And now you have lowered your basal metabolic rate and you come off it and now, you know, have an ability to almost regain muscle fat or regain fat faster. So, the quality of weight loss is a clear interest to physicians and investors. I do think we need to see a little bit more clarity from the FDA.

You know, people are kind of having these conversations about, is the FDA comfortable with that and other regulatory bodies or where they want to see something more functional and endpoints? And there is a phase two trial coming out, a drug called the bimagrumab, which is kind of involved in the myostatin and activin pathways combined with semaglutide. That's a phase two trial. But again, look and see okay, is this what is the composition of weight loss. Could you maybe lead to more fat loss over time. Because you're again, you’re kind of maintaining a higher basal metabolic rate and maintaining that muscle. And so, in the end you're losing more fat ultimately. Or is it just kind of you still lose a lot of fat, but you maintain the muscle.

And so, we'll see what that trial shows and also what the next development steps will be for that asset. If it works.

I think with that, we're at around time. So, thanks for joining us on, this edition of William Blair Thinking and, you know, we'll probably circle back sometime later in the year to talk about the GLP-1 class, because it's a fascinating class. It’s growing incredibly. It's having impacts across all of our, not just health care, but across even, you know, retail, and the restaurant ecosystem. So, I know that, you know, I know that there's a lot of interest in, hearing the latest on the class. So, thank you so much for joining.