The Beginning of the End of the Obesity Epidemic

A visit to New Orleans... The longest ovation I've ever heard at a conference... The beginning of the end of the obesity epidemic... The best problem for a company to have... One way to spot a 'golden opportunity'...

New Orleans is known for sinfully rich fried foods...

So it's a bit ironic that the development we have to share today – a potentially huge breakthrough treatment in the Western world's obesity epidemic – was announced in Cajun country over the weekend...

Our Stansberry Venture Technology editor Dave Lashmet was on hand, attending the 82nd annual Scientific Sessions of the American Diabetes Association ("ADA"). And he was so fired up about what he heard, he penned a detailed report on his flight home last night.

Specifically, Dave wrote about thousands of doctors' obvious interest in a diabetes drug that could be used to treat obesity... If you'd seen their reactions like he did, you'd understand why he couldn't wait to share it.

This isn't our typical Digest fare – especially lately, as we've been writing heavily about market volatility, inflation, and other daily news. But I (Corey McLaughlin) want to pass along Dave's in-person observations for a few reasons...

First, as you'll see momentarily, what Dave learned is front-line, ahead-of-the-curve information you won't see anywhere else... Plus, it's a real-time look at the type of "boots on the ground" research by our editors that frequently informs our work.

For Dave, this is the roughly 40th major scientific conference he has attended over the past 20 years... And these travels were a continuation of a story he picked up on at another conference in 2019, when he first witnessed growing interest in "Gen 3" obesity drugs.

And secondly... The market for obesity cures is probably even greater than you might think... And that means huge potential profits for companies that develop them – as well as early, savvy investors.

Here's the important context...

As longtime readers and Dave's Venture Technology subscribers know, he has been tracking the obesity epidemic in the U.S. and around the world for years... and the epidemic has gotten dramatically worse in recent decades.

As you can see from this chart Dave shared in the Digest back in 2020 – which uses a Body Mass Index ("BMI") measure above 30 to classify someone as obese – the percentage of overweight Americans had tripled since the 1990s alone...

The statistics have gotten worse since we first shared this chart...

As Dave wrote in the March 2022 issue of Venture Technology (available to his paid-up subscribers), U.S. Centers for Disease Control and Prevention ("CDC") studies show that a third of U.S. adults are clinically obese... and another third are overweight.

Globally, 400 million people need to lose weight. That's a massive market.

Here's the thing, though... Even if you are in great physical shape and don't know anyone at all who's overweight – and you almost certainly do – this epidemic still impacts you...

As Dave described in a Q&A I did with him back in 2020 (in two parts, here and here), aside from the physical impacts of obesity (joint damage, diabetes, cardiovascular effects), the financial costs of the epidemic on everyone are extraordinary in ways most don't realize.

As he said then, it's particularly costly as more Americans reach retirement age because...

More than half of Americans hitting 65 are obese. Obesity among seniors is what everyone has to pay for [through Medicare and Medicaid]...

It's not just an individual burden. It's an individual burden until you're 64. As soon as you're 65, it's a national health crisis.

In other words, the obesity epidemic is a big problem... even if most people don't fully recognize it yet.

But as Dave explains today, doctors and drug companies sure understand the situation. That's why thousands of physicians just filled a conference room simply to hear the latest on a single drug... and gave a thundering ovation when they did.

The new drug is called Tirzepatide...

And on Saturday in New Orleans, Eli Lilly (LLY) first unveiled the final pivotal clinical data for Tirzepatide.

I (Dave Lashmet) will explain all about these results. I'll share what Eli Lilly will charge for its new drug. And I'll go into more detail about the incredible value of curing obesity. But first, let me tell you what I saw...

The reason I went to the conference was to watch the doctors. You see, doctors are unique in that they place orders for pharmaceutical products serving millions of patients... but the doctors never have to pay for these drugs.

This year's ADA conference took over the convention center alongside the mighty Mississippi River. At any one time, meetings took place in two dozen rooms. But on Saturday, everyone only needed one...

In Grand Salon A, where Eli Lilly's Tirzepatide data was unveiled, the 4,000 seats were full. I sat in one of them. Grand Salon B – right next door – was utterly empty. (All the other meeting rooms were empty, too.)

Put another way, these doctors voted with their feet to see Eli Lilly's data...

And after Eli Lilly's presenters were finished, these few thousand doctors gave them a long, loud, sustained applause – longer than I've ever seen at any other conference.

Here's why this matters...

Figure that each of these doctors sees three patients a day, 11 months a year. That's 1,000 patients per doctor. And at 4,000 doctors, that's potentially up to 4 million future prescriptions for a cure for obesity, from this group of doctors alone.

And since close to half of U.S. adults – and European adults – are obese, you probably know someone who could use this new drug. (Not that you'd feel comfortable telling anyone, though, because of all the stigma around weight.)

But the thing is, this drug really is a cure... and I think that stigma about drugs like these will change too as more people learn about them. What was once a forbidden topic – losing weight via drugs – won't be forbidden.

This is the revolution in medical treatment we just saw...

To test Tirzepatide, Eli Lilly enrolled 2,500 volunteers with an average weight of 232 pounds, virtually all with a BMI above 35. Researchers split them into four groups of 625 people each – three of which received the drug at different dosage levels, plus one control group that received a placebo.

(Although Eli Lilly shared these results at a diabetes conference, the folks in this study did not have Type 2 diabetes – though their weights increased their chances of developing it. The company structured the study to focus exclusively on how the drug treats obesity. Tirzepatide is also a proven, newly approved diabetes treatment.)

Eli Lilly's trial lasted for a year and a half, and the study was random, balanced, and double-blind. This means neither the doctors running the trial nor the patients who participated knew who got Tirzepatide or a placebo.

Eventually, though, the patients figured it out...

A lot more patients dropped out of the "control" part of the experiment because they were not losing weight... whereas people on the drug were shedding pounds.

At the lowest dose (5 milligrams, once per week), 625 folks lost an average of 34 pounds. That's revolutionary... And that's only the start.

Eli Lilly only tested the low-dose treatment to get better safety data for Tirzepatide, since the company skipped right over mid-stage clinical trials and went straight for approval trials.

So it's the mid-dose and high-dose results that matter to potential patients, doctors, Eli Lilly... and investors: more precisely, the 10-milligram and the 15-milligram levels.

The 625 obese patients who took the 10-milligram dose of Tirzepatide lost an average of 44 pounds – a life-changing difference. And the 625 obese people who took 15 milligrams of Tirzepatide lost an average of 47 pounds.

(Even the control group's participants lost an average of 3% of their body weight – about 7 pounds. That's the power of wishful thinking, which is why these folks volunteered for the trial in the first place. But that's a tiny amount compared with folks who took Tirzepatide.)

There were some side effects...

But these effects are largely mild. More to the point, they pass quickly and can be treated with existing over-the-counter medicines.

Specifically, the study found higher rates of nausea, diarrhea, and constipation in the clinical-trial volunteers who got Tirzepatide instead of a placebo.

But only about 3% of participants quit the trial for side effects. Most people who quit the study were in the placebo group, leaving because they sensed the "drug" wasn't working for them.

Again, 97% of participants stayed on Tirzepatide, even before they knew the clinical data we just showed to you. It was that obvious to them that this drug was working.

This isn't a case where the drug's safety is a question mark. This large study proved that it's both effective and safe.

The real problem will be keeping up with demand...

And overall, that's a good problem for Eli Lilly...

We learned at ADA that if current trends of the obesity epidemic continue, more than half of adult Americans will be overweight by 2030. More to the point, 25% of American adults will be morbidly obese by 2030.

Given a population of 260 million American adults, that's 65 million people who will need this drug domestically. Add another 100 million extremely overweight people in Europe, Australia, Canada, and Japan by 2030.

In other words, the biggest problem Eli Lilly will have with this drug is in supplying it. So, selling the 10-milligram dose instead of 15 milligrams gives Eli Lilly 50% more supply. And Eli Lilly mostly sets the price.

Practically, there's one competitor – a newly approved Gen 3 obesity drug called Wegovy. It's made by the drugmaker Novo Nordisk (NVO). But Novo Nordisk can't seem to make enough of it. And Wegovy's existing price will help set what Lilly can charge...

Based on Wegovy's example, investors should figure that Tirzepatide will sell for $20,000 per patient per year. In Lilly's case, again, given a 65-million-person domestic market, the hard part will be making enough of this drug. Eli Lilly just announced it's building two new factories at the cost of $2.1 billion. Even that's not enough... but it's a start!

Here's how it works...

If you don't exercise, Tirzepatide mostly acts as an appetite suppressor. It also strips sugar from your bloodstream. This means if you come off the drug, your appetite roars back.

Cynics might say this makes patients dependent on the drug. But practically, all you have to do is exercise as you start losing weight... and then when you hit your ideal body weight, you can stop taking the drug.

In other words, Tirzepatide can help get you to a healthy starting point. And it's a lot easier to exercise once you're already at a healthy weight. So it can break the vicious cycle between obesity and inactivity.

Now, let me be clear... The U.S. Food and Drug Administration ("FDA") has not yet approved Tirzepatide for obesity...

And although it is already approved to treat Type 2 diabetes, meaning it's possible to get prescriptions already, off-label, Tirzepatide only won its first approval for diabetes three weeks ago...

Even if you did get your hands on a prescription – and supply will be tight – it can't be filled until the second half of 2022.

For investors, ending obesity is a golden opportunity...

Eli Lilly has not booked a single dollar of sales on Tirzepatide for either diabetes or obesity. And this is literally a revolution in medicine... that could end obesity.

Eli Lilly can help tens of millions of obese Americans by selling them Tirzepatide. And this drug should sell for $20,000 per person, indefinitely. The FDA has not yet approved it. But I am confident it will.

Savvy investors can do this math...

We don't make formal stock recommendations in the Digest, but I wanted you to see what I saw over the weekend... to hear about the potential for this new drug... and my projections about it... because you can bet the news will start spreading.

It already is. Early this morning, I saw my first mainstream report about Tirzepatide trial results. From the Guardian...

A weekly dose of a diabetes drug appears to lead to significant weight loss in people with obesity, in a development experts have hailed as game changing.

Now you know the story behind it... the opportunity in the years ahead in companies developing drugs designed to fight the obesity epidemic... and one way I like to go about finding them: seeing doctors' interests – and reactions – firsthand.

It's not a secret when a big company like Eli Lilly introduces a new drug... even if investors are slow to figure out all its implications. But for the same reasons Dave is able to tell you about the promise of Eli Lilly's work, he is also first to hear about tiny companies that can explode hundreds of percent higher as they realize their drugs' potential or other technological innovations.

In Dave's Stansberry Venture Technology model portfolio, for example, he currently recommends shares of a smaller company that has its own promising drug for weight loss... and is also well-positioned to take advantage of the growing motivation to end the obesity epidemic. This company's share price remains under Dave's initial buy-up-to price, making it a great time to invest today to target big upside.

With all this in mind, we've arranged a special offer for Digest readers to get access to all of Dave's excellent work at a significant discount. Today, you can pay only $2,500 for one year of Stansberry Venture Technology (that's 55% off what others have gladly paid), and get all of Dave's latest recommendations, risk-free. To get started right now, click here.

Apple, Amazon, Microsoft... Buy or Sell?

Do you own Apple (AAPL), Amazon (AMZN), or Microsoft (MSFT)? Or are you considering buying any large-cap tech stock? Matt McCall analyzes some of those big-hitters and answers if you should be buying shares... or selling and running for the hills...

Click here to watch or listen to this episode right now. And to catch all of Matt's shows and more videos and podcasts from the Stansberry Research team, be sure to visit our Stansberry Investor platform anytime.

New 52-week highs (as of 6/3/22): Continental Resources (CLR), ProShares Ultra Oil & Gas Fund (DIG), Freehold Royalties (FRU.TO), Northrop Grumman (NOC), Texas Pacific Land (TPL), United States Commodity Index Fund (USCI), Viper Energy Partners (VNOM), Energy Select Sector SPDR Fund (XLE), and SPDR S&P Oil & Gas Exploration & Production Fund (XOP).

In today's mailbag, some more thoughts on understanding the economy... the Federal Reserve's plan to trim its balance sheet... and feedback on our colleague Dan Ferris' latest Friday Digest. Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"The point made [in the June 1 Digest and the June 2 mailbag] that one should make an effort to understand how we got to this point in the first place is spot on. Stansberry Research has helped me to accomplish this.

"People need to set aside their party affiliations or candidate loyalties just because they have a 'D' or an 'R' associated with it.

"If voters made a true effort to research and understand the parties platform and how it would align with their personal lives, agendas, and subsequent long term effects, then they may make different decisions.

"Voting for a candidate just because of their party affiliation has not and will not solve the issues or improve our economy or political environment.

"Voter expectations should be to make a true effort to get involved so one could understand the issues in order to make an educated decision rather than placing a courtesy vote because they always voted that way, personally dislike the other candidate or because of party loyalty." – Paid-up subscriber Larry H.

"Hooray!!! So, it will only take about 7-8 years @ $94 billion/month to reduce the Fed's balance sheet to zero. Have they run this one by Biden yet?" – Paid-up subscriber Robert M.

"Thank you Dan [for your Friday Digest]. You motivated me to go more conservative and sell some of my stocks. I allocated my portfolios to energy, oil, a little gold and the oil royalty company you recommended in Canada." – Paid-up subscriber Shari M.

"Dan, Some very good history to reflect on. But I think you didn't go back quite far enough. It is quite likely that, today, we are in the early stages of a period similar to what followed the market peak of 1966. At that time we were framed approximately between Dow 1,000 and 650 for almost 10 years, until we broke down to about 550 in 1975, after which we finally crawled out of the trench we were in and broke enough over 1,000 to say that we'd hit new highs. That was also a period of high inflation, when materials investing stood almost alone as a favorable profitable niche." – Paid-up subscriber Norm R.

All the best,

Dave Lashmet with Corey McLaughlin
New Orleans, Louisiana and Baltimore, Maryland
June 6, 2022