Welcome to Thoughts on the Market.
I'm Terence Flynn, Morgan Stanley's U.S. pharma and biotech analyst.
Today, how cheaper GLP-1 obesity medicines could reshape access, pricing and supply chains, and what the first generic markets may signal for Europe and the US.
It's Monday, July 13th at 10am in New York.
And it's 3pm in London.
Around 1 billion people live with obesity worldwide, including over 100 million in the US.
Right now, the introduction of the first lower-cost generics of semaglutide, a GLP-1 medicine, in some international markets could have consequences on affordability and demand.
Thibault, what are the first countries seeing the introduction of semagenerics?
What are the current dynamics, and why should global investors pay attention?
Sure.
So far, generics are being introduced this year in three countries, in India, Canada, and Brazil.
And if we look at India, this is the first market where the generics are being introduced.
The patent for somaglutide expired in March 2026.
And 13 companies have launched 26 generics across different formulations auto-injectors, vials and pills which prices lower than the branded drug.
And because the India market was quite under-penetrated for GLP-1, we are seeing affordability-driving volume expansion.
In Canada, two generics have been launched so far.
Four other generics are waiting for approval and more are being filed.
And finally, in Brazil, one generic was approved last month and we are expecting these generics to be launched in Brazil in July.
And 17 other generics are in different stage of regulatory review in Brazil and we would expect more to enter the market by the end of this year.
And the reason why we focus on these markets is because we believe they could provide a blueprint for what could happen later in the US and in Europe, in particular for Canada, which shares some characteristics with Europe and the US.
And the pattern for somaglutide will expire in Europe in 2031 and in the US from 2032.
Great.
Maybe on the India front, I know that's at the leading edge.
What happened with patient demand when price came down?
Sure.
So what we saw in India is a surge in volume when generics were launched.
And the volume in April 2026 were already six times higher than the volume in February.
And that expansion has been driven mostly by this generics launch, which captured 80 of somaglutide volume in April.
And our India team expect that the GLP-1 market in India will actually expand in value from 125 million in 2025 to more than 1 billion by 2030, despite lower prices as we see greater volume and greater adoption of GLP-1s in India.
The other thing, you know, you and I have discussed is the supply chain.
And one of the questions is the ability of some of the generic manufacturers to scale semaglutide.
So maybe talk to us about the current capabilities and could we see bottlenecks in the supply chain formation here?
Yeah, sure.
So there are three key elements to watch on the supply chain.
The first is the active pharmaceutical ingredient, or API, and that's the semaglutide molecule itself.
The second element is the device and the device components.
And the third element is the fill and finish, which is basically putting all of these things together.
On the API side.
So somaglutide molecule, we believe there will be no bottleneck in supplying for generics as we see a handful of large Chinese companies out of China building multi-ton capacity for thermaglutide.
So we believe there will be no shortage of API to supply the generic supply chain for injectables.
On the device.
These are the same device companies that are supplying the branded version of semaglutide and other GLP-1s for the device that are also supplying the generic makers.
And we are seeing meaningful investments being made.
So we don't believe there will be a bottleneck here.
Where we could see a bottleneck emerging is on the fill and finish side.
Fill and finish requires highly controlled clean room space to minimize contamination.
It requires regulatory approval, and it takes up to three years to build fill and finish capacity.
That's where, if there is not more investment being made over the next few years, there could potentially be a bottleneck emerging for the generic companies.
Terence.
While somaglutide generics will definitely represent a challenge for the existing branded version of this GLP-1, there are some insights in these emerging dynamics that suggest that tirzepatide, the other GLP-1, could be less at risk.
Can you touch a bit on some of these dynamics?
Absolutely.
So just to remind listeners that semaglutide targets a pathway called GLP-1.
Terzepatide actually targets two pathways.
The first is GLP-1 and the second is GIP.
And there are some data comparing these molecules, both in type 2 diabetes and obesity.
And terzapatide gives not only better efficacy, but also improved tolerability.
And so what you're seeing in some of the ex-US markets is segmentation, where there are some consumers that are willing to pay a premium price for Terzepatide.
Our team in Brazil has done a lot of work on this front, looking at this dynamic.
And we expect that to play out in many geographies.
So, despite the entry of lower cost generic versions, we think you will still see segmentation of the market between differentiated brand and the lower cost generics.
And that as a result, you will continue to see branded growth.
In the U.S., right now, market share is about 60% in favor of terzepatide.
And so, again, you're seeing differentiation between these two molecules.
And beyond the introduction of generics GLP-1s, there are other dynamics in the industry that are driving this market.
And the introduction of oral drugs this year has been a big topic.
Terence, what are your views on the role that orals could play on the market?
Yes, as a lot of people are probably aware, many of the existing GLP-1 medicines are injectable.
And so those are delivered once a week with a needle.
But there are now additional oral options of these GLP-1 medicines.
They started off first for type 2 diabetes, but they have now broadened into obesity as well, following some recent FDA approvals.
And what we're seeing is that the introduction in the US so far is expanding the market.
So the majority of people that are taking the oral versions of these medicines are new users to GLP-1.
So again, you're getting market expansion.
When you think about the orals as well, one of the other questions is capacity.
I know, Thibaut, you were talking about the supply chain.
There are similar questions for these oral medicines because not all of the oral medicines are the same.
Some are easier to manufacture than others.
And as a result, that's another variable to consider.
So some of these are what's called peptide-based orals, and some of these are non-peptide-based orals.
And the non-peptide-based orals are much easier to scale for a larger global market.
And so that's definitely another variable that we're monitoring and that I think investors need to consider.
And beyond the pill versions of these GLP-1s, we are seeing more innovation in the drug pipeline of the industry, which could be a key driver of differentiation against the competition from the generics.
So what are we seeing emerging today from diabetes and obesity pipelines which could be exciting for the future of the category?
So, as we see time and time again in pharmaceutical markets, the key players continue to innovate to try to improve profiles of the existing medication.
So there are kind of two areas.
One would be efficacy.
Another would be safety tolerability.
And so there are a number of players that are working first to develop longer-acting medication.
So, as I mentioned, the existing injectable drugs are are dosed once weekly, but there are a number of companies that are working to develop potentially monthly or less frequent injections.
So that's one area that we're monitoring closely.
And then the second and again this plays into what I discussed on Terzapatide is additional pathways that are involved here in diabetes and obesity.
And a number of players are working to target additional pathways beyond GLP-1 and GIP
And so some of the leading pathways that are being studied are something called amylin and glucagon.
And there are a number of medications that are in the late stage pipeline, that are coming along, which have some pretty interesting data.
And so that's another area that we're watching.
And again, the goal there would be to either improve efficacy and or improve tolerability versus the existing medications.
Great.
And maybe we can also take this opportunity to talk about some of the short-term drivers in the market that are not facing generic today like the US.
So what could be the key drivers for growth of GLP-1s and the overall obesity and diabetes category over the next five years?
Yeah, obviously the key one is seeing additional uptake of these medicines.
I think right now we estimate in obesity in particular, there's about low double-digit percent uptake.
And so obviously seeing increasing uptake of these medicines.
The orals, as I mentioned, are already driving market expansion.
And then the third is access.
So obviously in any market, that's very important.
In the US, I think about 50% of employers cover these medications right now.
We expect that to increase in the years ahead as the data continues to build.
But then this year, starting very shortly, The patients in the Medicare program in the US, so those people over the age of 65, will be able to access these medicines for 50 per month.
And so we think that is.
Another driver of growth is this will broaden access to about an additional 18 million people starting this summer.
So the next phase of the diabesity market comes down to execution lower costs and scaled supply in the mass market, and innovation and differentiation to compete in the premium segment.
Thibaut, thanks so much for taking the time to talk.
Great speaking with you, Terrence.
And thanks for listening.
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