Eli Lilly (LLY) has become one of the world’s most valuable companies, with a market cap of roughly $1.1 trillion.

And much of that success comes down to two drugs: Mounjaro and Zepbound.

Both belong to a class of medications known as GLP-1s, which help control blood sugar and suppress appetite.

These drugs have transformed the weight-loss market. According to Gallup, 11% of American adults now take GLP-1 medications for weight loss, up from just 3% in 2024.

And adoption continues to spread.

In fact, Walmart, America’s largest private employer, just announced an expansion of its prescription drug benefits for 2027, including new coverage provisions for GLP-1 medications.

For investors who got into Lilly early, the opportunity has already been enormous.

But the next phase of the GLP-1 boom could create a very different set of winners and losers.

Competition among drugmakers is intensifying. New treatments promise to make weight loss more convenient and potentially more affordable. And as millions of Americans change their eating habits, the effects are spreading far beyond healthcare.

The next phase of the GLP-1 drug race

To understand where the opportunity is heading, it helps to look at how quickly the competitive landscape has already changed.

Novo Nordisk (NVO) helped pioneer the modern GLP-1 weight-loss market with Ozempic and Wegovy. But despite its early lead, the company has struggled to keep pace with Lilly.

In fact, while Lilly has grown into a trillion-dollar giant, since the summer of 2024, Novo shares have fallen from a high above $140 to around $39.

That’s an important lesson for investors: Even in a booming industry, the best-executing companies can capture a disproportionate share of the opportunity.

And Lilly keeps raising the bar.

In late September, the company released trial results for a combination of its experimental drug eloralintide and Zepbound.

Patients with obesity or who are overweight with type 2 diabetes lost an average of up to 23.3% of their body weight over 48 weeks, compared with 14.8% for patients taking Zepbound alone.

This illustrates how difficult the competition is becoming.

Drugmakers increasingly have to offer something better than what’s already available, whether that means greater weight loss, fewer side effects, lower costs, or more convenient dosing.

And convenience could be an especially important battleground.

Consider Viking Therapeutics (VKTX), a smaller biotech company developing an experimental obesity treatment called VK2735.

One challenge with many current GLP-1 treatments is that patients need weekly injections, potentially for years, to maintain their results.

Viking is exploring whether patients could maintain their weight loss with injections as infrequently as once a month.

In a September study, patients who switched from weekly to monthly doses maintained up to 90% of the weight loss they had achieved during the initial treatment phase over the following 12 weeks.

That’s still early-stage data. Viking needs to demonstrate that the results hold up in larger, longer trials.

But the potential is clear: A treatment that delivers lasting results with fewer injections could appeal to patients who struggle to maintain a weekly regimen.

Investors should also watch larger biotech companies like Amgen (AMGN) and Regeneron (REGN) as they pursue opportunities in the broader metabolic-health market.

The important point is that GLP-1s are moving beyond a race to develop an effective weight-loss drug.

The next winners will have to prove they can offer meaningful advantages in an increasingly competitive market.

And the potential applications are expanding, too.

GLP-1-based medications have shown benefits beyond obesity, including diabetes, cardiovascular disease, and sleep apnea. Researchers are also studying additional possibilities, including addiction.

Each new medical use could expand the addressable market.

But the effects of these drugs are already reaching industries that have little to do with healthcare.

GLP-1s are changing how Americans spend money

GLP-1s suppress appetite, helping patients feel full sooner and eat less. And recent research suggests those changes are showing up in actual spending.

A Cornell University study analyzed purchasing behavior among U.S. households using GLP-1 medications. Within six months of starting treatment, households reduced grocery spending by an average of 5.3%. Among higher-income households, the decline exceeded 8%.

Meanwhile, spending at fast food restaurants, coffee shops, and other limited-service eateries also fell by about 8%. The reductions were especially pronounced in categories like savory snacks.

Consider that some of the heaviest consumers of these products buy significantly more than the average customer. If those customers cut back, the impact on sales can be disproportionately large.

And consumer stocks are feeling the pain. For instance, General Mills (GIS) has fallen over 60% from its mid-2023 levels, around the time GLP-1 adoption began accelerating.

Of course, food companies face plenty of other challenges, including inflation, changing consumer preferences, and competition from cheaper store brands. But GLP-1s add another potential headwind, particularly for companies that depend heavily on frequent snacking and high-volume consumption.

And this is increasingly looking like a lasting shift in consumer behavior.

The Cornell researchers found that reduced food spending persisted for at least a year among households that continued taking GLP-1 medications, although the effect moderated over time.

That creates a difficult situation for companies whose existing products depend on old eating habits.

The outcome won’t be the same for every business. Food companies can introduce smaller portions, higher-protein products, and healthier alternatives. Some are already adapting their offerings for GLP-1 users.

The lesson for investors is to look beyond a company’s recent stock performance and consider whether its business model can adapt to changing demand.

Businesses that adjust successfully could eventually turn disruption into opportunity. For those that struggle, the pressure could persist long after today’s enthusiasm for GLP-1s fades.

The overlooked companies helping build the next generation of treatments

Another part of this market looks particularly interesting.

As the competition among drugmakers intensifies, companies are spending heavily to develop new treatments, improve existing ones, and bring them to market faster.

That’s creating demand for technology that can make drug discovery and development more efficient.

Consider Absci (ABSI), a company we own in Curzio Alpha. Absci uses artificial intelligence to help design new biological drugs, including complex protein-based treatments.

Traditionally, developing a new drug takes years of lab work and testing thousands of potential molecules to find promising candidates. Absci’s technology aims to speed up that early process by using AI to design and evaluate drug candidates before advancing the most promising ones through laboratory testing.

The appeal for pharmaceutical companies is straightforward: Faster discovery could lower development costs and allow researchers to pursue more potential treatments. With growing competition across healthcare, including the race to develop better metabolic treatments, these capabilities could become increasingly valuable.

We’re up more than 130% on our Absci position, and there’s significantly more upside potential.

Another example is Telescope Innovations (TELIF), a company we’ve previously owned. Telescope combines AI and robotics to automate laboratory experiments, helping researchers run tests and analyze results more efficiently.

And this technology is already attracting interest from major pharmaceutical companies. In February, Telescope announced that it had installed a second automated laboratory system at Pfizer under the companies’ existing multiyear research agreement.

We previously took profits of 36%  on Telescope, but we may look to revisit it in the future.

Remember, these are small biotech companies working to commercialize emerging technologies, so they carry plenty of risk. But they illustrate an important part of the next phase of healthcare innovation: As the pressure to develop better treatments increases, the tools that help companies compete could become more valuable.

Another opportunity: Making treatment easier to access

Better medications are only part of the equation. Patients also need access, creating another potential market.

One company worth watching is Hims & Hers Health (HIMS), a digital healthcare platform that connects patients with medical providers and treatment options.

The company announced in April that its platform had expanded access to treatments from both Novo Nordisk and Eli Lilly.

Its potential advantage lies in its patient relationships. Someone seeking weight-loss treatment may also need ongoing medical consultations, nutritional guidance, and help managing the side effects or maintaining results over time. That creates an opportunity for platforms that can make treatment more convenient and provide ongoing care.

But it’s also a highly competitive and heavily regulated business. Hims & Hers has already faced scrutiny over compounded GLP-1 medications, and regulatory changes could affect its ability to offer certain treatments.

The opportunity depends on whether the company can build a lasting business around personalized healthcare as more patients seek treatment.

That brings us back to the larger theme: As GLP-1s become more widely available, investors need to think about the entire market surrounding these medications, from drug development to patient access.

What investors should watch next

The GLP-1 market still has plenty of room to grow. But continued adoption will depend on several factors.

Cost remains a major barrier for many patients, and insurance coverage varies. Side effects can make treatment difficult, and muscle loss is a concern facing patients and doctors.

And although newer drugs could make treatment more convenient, experimental therapies still face lengthy trials and regulatory review.

These factors will help determine which companies can build sustainable businesses as the market matures.

For investors, there are three developments worth following:

First, whether drugmakers can deliver better results, more convenient dosing, and lower prices without sacrificing profitability.

Second, how quickly GLP-1 adoption changes consumer spending, and which food and beverage companies can successfully adapt.

And third, whether smaller healthcare technology companies can turn growing demand for faster drug development and easier treatment access into meaningful revenue and profits.

Lilly has already shown just how valuable this market can become. But its success is also attracting more competition and changing industry economics far beyond pharmaceuticals.

The next big opportunities may come from companies solving the problems created by the GLP-1 boom, rather than simply selling the drugs themselves.

And that’s where we’re looking for the next wave of winners.

Want more of Frank’s favorite ways to play the GLP-1 craze, AI, and other market trends?

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