Why No Chinese Investors Dare to Bet on Semaglutide Despite Its Multi-Billion-Dollar Global Sales?

“I’ve lost my appetite.”

“After two months of medication, I lost over ten jin.”

"The weight loss is obvious, but I'm more worried about rebound."

Firsthand experiences and feedback on semaglutide have become one of the most enduring topics in 2023. Various real-world data on semaglutide are now readily accessible.

Interestingly, the semaglutide fever has even swept through China’s investment community. Healthcare investors, who are typically regarded as more restrained when it comes to embracing novelties, have been trying the drug themselves. Feedback from these investors suggests that semaglutide, hailed as a miracle weight-loss drug, does indeed deliver remarkable results, enabling easy weight loss without causing significant harm to the body.

What’s more intriguing is that, despite the surge in GLP-1 new drug projects fueled by semaglutide’s popularity, even investors who have personally participated in clinical trials have rarely invested their own capital. “Few investors specializing in pharmaceuticals are currently evaluating GLP-1 projects,” an investor told VCBeat.

As a new-generation GLP-1 drug, semaglutide has been on the market for many years. Before its obesity indication sparked global interest, the primary therapeutic focus of semaglutide and most other GLP-1 drugs was diabetes.

GLP-1 drugs, also known as glucagon-like peptide-1 receptor agonists (GLP-1RAs). Glucagon-like peptide-1 (GLP-1) is a naturally secreted "incretin" from the gastrointestinal mucosa in humans. Upon binding to the GLP-1 receptor (GLP-1R), it stimulates insulin secretion and suppresses glucagon, thereby promoting glucose metabolism and lowering blood glucose levels. In patients with type 2 diabetes, the significantly reduced secretion of GLP-1 is a major contributor to uncontrolled blood glucose levels.

As a highly promising therapeutic target for anti-diabetic drugs, the development of GLP-1 medications has long been a fiercely competitive arena dominated by industry giants. Pharmaceutical leaders such as Novo Nordisk, Eli Lilly and Company, and AstraZeneca have vied for prominence. For an extended period, the development of GLP-1 therapies was virtually monopolized by multinational pharmaceutical companies.

Under the dominance of multinational pharmaceutical companies, GLP-1 drugs have made the leap from long-acting to short-acting formulations. The process was brief but fraught with twists and turns.

In April 2005, exenatide received FDA approval for marketing as a twice-daily subcutaneous injection for the treatment of type 2 diabetes. It was the first GLP-1 drug approved globally and also the first GLP-1 agent introduced to the Chinese market. Initially co-developed by Amylin Pharmaceuticals and Eli Lilly and Company, exenatide achieved remarkable commercial success upon launch. Data show that in 2007, exenatide generated $663 million in revenue, accounting for 80% of Amylin’s total annual revenue.

However, exenatide soon stumbled due to side effects. In October 2007 and August 2008, the FDA issued two separate warnings that exenatide increased the risk of acute pancreatitis, which promptly halted its sales momentum. Subsequently, exenatide changed hands several times along with Amylin, ultimately becoming part of AstraZeneca’s diabetes business.

In 2009, the “most popular” GLP-1 drug was born. By modifying human GLP-1, Novo Nordisk launched liraglutide, the second GLP-1 receptor agonist (GLP-1RA) antidiabetic agent to be marketed globally and the first in this class approved for the treatment of obesity. As early as 2014, the U.S. Food and Drug Administration (FDA) approved liraglutide injection for the indication of obesity. Compared with exenatide, liraglutide has an extended plasma half-life, allowing for once-daily subcutaneous administration. Following its launch, liraglutide rapidly captured the GLP-1 drug market, becoming the best-selling diabetes medication for a period, with its popularity lasting until 2018.

In 2014,GLP-1 Drugs Witness a New Transformation,Long-acting versions emerged. Eli Lilly and Company launched dulaglutide, administered via once-weekly injection. In 2018, dulaglutide generated $3.199 billion in revenue, a 58% year-over-year increase, thereby surpassing liraglutide.

In 2017, building upon liraglutide,Nord NordSemaglutide was subsequently developed and improved. Later, it was renamed semaglutide (note: the Chinese text uses two different transliterations for the same drug, both referring to semaglutide). In head-to-head studies comparing glycemic control and weight loss efficacy, semaglutide significantly outperformed dulaglutide, earning it the title of “the best diabetes drug in history.” In the first half of 2019, semaglutide’s revenue reached $562 million. At that time, the international healthcare media outlet Evaluate Pharma had predicted that semaglutide’s global sales would reach $5.28 billion by 2024. However, semaglutide’s subsequent performance clearly far exceeded these expectations.

Since 2021, semaglutide has gained widespread prominence due to its indication for obesity. In 2022, sales of semaglutide reached $10.882 billion. By 2023, the momentum behind semaglutide had grown even stronger. In the first quarter alone, Novo Nordisk’s two semaglutide products generated combined sales of $4.135 billion. Notably, the weight-loss injection Wegovy and the oral tablet Rybelsus both recorded sales growth exceeding 100%.

In a sense, semaglutide is emerging as the newest “blockbuster” product, following in the footsteps of phenomenal successes such as the HPV vaccine and PD-1 inhibitors.

After two years of sustained popularity, semaglutide has failed to spark an investment boom in GLP-1 drugs. VCBeat’s review of public information reveals that since semaglutide was approved for obesity indications in June 2021, there have been no more than three financing events in China’s GLP-1 drug sector.

An investor analyzed for VCBeat that GLP-1 drugs have already demonstrated significant development potential and definite clinical medical value. First, whether used for diabetes or obesity, the efficacy and safety of GLP-1 drugs have been repeatedly verified; second, GLP-1 drugs have undergone multiple iterations, with several products launched on the market, and their manufacturing processes and supply ecosystems are becoming mature; third, beyond diabetes and obesity, GLP-1 drugs are continuously expanding their indications, showing clear clinical value in areas such as non-alcoholic fatty liver disease and cardiovascular diseases., a rare large category with a market size of tens of billions。

GLP-1 drug projects have cooled in the primary market, driven primarily by practical realities.

On one hand, there are actually few pharmaceutical companies with differentiated GLP-1 drug development pipelines and dedicated R&D teams. Historically, the indications for GLP-1 drugs were long confined to diabetes, a market where they had to compete for share against well-established antidiabetic agents such as insulin and metformin; consequently, GLP-1 therapies did not attract significant interest from pharmaceutical companies. It was not until the rise of semaglutide that GLP-1 drug development reached a turning point.

In China, more than 110 novel GLP-1 drugs have currently entered clinical development. However, between 2016 and 2020, only an average of 5–6 new drug applications for clinical trials were filed annually in this class. The past three years have witnessed a concentrated surge in clinical trial applications. Notably, in the first half of 2023 alone, 16 GLP-1 drug candidates were submitted for clinical trials, already matching the total number for the entire previous year.

“Judging solely by the total number, the domestic GLP-1 drug market is indeed becoming hyper-competitive,” said this investor. “However, among these projects advancing to clinical trials, most are developing biosimilars of semaglutide, with very few pipelines possessing genuine innovative attributes.” In his view, while it is predictable that injectable semaglutide biosimilars will face a brutal red-ocean price war in 3–5 years, similar to what occurred with PD-1 inhibitors, the future potential of GLP-1 drugs, as blockbuster products, will center on oral formulations.

At the current stage, oral GLP-1 drugs still face technical bottlenecks. Major pharmaceutical companies such as Novo Nordisk, Eli Lilly, and Pfizer have been making concerted efforts, but they have encountered frequent setbacks. Very few innovative biopharmaceutical companies have strategically positioned themselves in the oral GLP-1 space and possess the capability to break through these barriers. In this sense, the R&D competition for GLP-1 drugs has not yet become intensely saturated.

On the other hand, the contraction of the primary market and adjustments by investment institutions have led to a significant decrease in capital flowing into innovative drugs. This is likely the direct reason why the domestic GLP-1 drug sector has not truly gained rapid momentum. It is understood that some investment firms have disbanded their innovative drug investment teams, while many investors who previously focused on innovative drug projects have shifted their attention to other sub-sectors within the life sciences field under performance pressure.In other words, the pool of funders for GLP-1 drug projects has shrunk significantly.

“There is a curious phenomenon: many of the investors currently evaluating GLP-1 drug projects are those with a consumer-sector focus,” an investor who previously participated in a domestic GLP-1 drug project told VCBeat. He himself has historically concentrated on consumer healthcare projects and prefers to analyze semaglutide as a blockbuster consumer healthcare product. The investor stated that he remains bullish on the long-term potential of GLP-1 drugs, noting that while the short-term outlook aligns with consumer healthcare, the long-term trajectory will ultimately depend on innovative pharmaceuticals.

Setting aside the cooling reality in the primary market, new investment opportunities lie in innovation amid the vast market potential of GLP-1 drugs.

Relevant data show that the global market for antidiabetic drugs reached $59.6 billion in 2022. Notably, sales of GLP-1 medications surpassed those of insulin for the first time that year, indicating broad market prospects.

In China, GLP-1 drugs have also embarked on a trajectory of rapid growth. In 2018, the inclusion of liraglutide in the National Reimbursement Drug List sparked explosive growth in the domestic GLP-1 market. Novo Nordisk has maintained an absolute dominant position, capturing over 70% of the market share. In 2021, the size of China’s GLP-1 market surpassed RMB 2 billion for the first time, reaching RMB 2.46 billion—nearly a tenfold increase compared to five years earlier. That same year, the domestic insulin market was valued at RMB 25 billion, indicating that the GLP-1 market had reached one-tenth the size of the insulin market. In 2021, Novo Nordisk’s sales of GLP-1 products in China amounted to RMB 1.8 billion, representing a growth rate of 73%.

In the future, innovation in GLP-1 drugs will primarily focus on dosage forms and indications.

In terms of dosage forms, the development of oral GLP-1 drugs represents the mainstream trend for the future. Specifically, both peptide-based and small-molecule GLP-1 drugs are striving to overcome the challenges associated with oral formulations. Among these, although the oral formulations of peptide-based GLP-1 drugs are not yet ideal, several have already been approved and launched on the market, including oral versions of liraglutide and semaglutide. In contrast, the research and development of oral small-molecule GLP-1 drugs remains in the exploratory stage.

Currently, all marketed GLP-1 receptor (GLP-1R) agonists are large-molecule peptide analogs. The primary challenge in developing oral formulations of peptide-based GLP-1 drugs lies in the fact that peptides are readily degraded and inactivated by digestive enzymes and gastric acid, have short half-lives, exhibit poor penetration across the gastrointestinal mucosa due to their large molecular size, and consequently demonstrate low oral bioavailability. These same factors constitute the main reason why oral insulin has yet to be successfully developed. Therefore, achieving a breakthrough in patient adherence would represent a significant competitive advantage.

In this regard, small-molecule GLP-1R agonists offer distinct advantages, as they circumvent the technical bottlenecks associated with oral peptide delivery and enhance patient compliance. The industry is increasingly focusing on the development of non-peptide small-molecule GLP-1R agonists, aiming to address fundamental challenges such as limited absorption and bioavailability at the source.

Eli Lilly, a giant in the diabetes field, quickly identified the potentially lucrative market for oral small-molecule GLP-1R agonists. In 2018, Eli Lilly paid a $50 million upfront fee to acquire the global development and commercialization rights to LY3502970, which was in the preclinical stage at Chugai.

LY3502970 is a novel, potent, orally active non-peptide GLP-1R agonist. Preclinical studies have demonstrated that the glucose-lowering efficacy of LY3502970 is comparable to that of exenatide. Pharmacokinetic studies in cynomolgus monkeys revealed that LY3502970 has a half-life of 3.4–4.6 hours and a bioavailability of 21–28%.

Currently, Phase II studies of LY3502970 for type 2 diabetes and obesity have been completed. Phase III clinical trials comparing LY3502970 with insulin glargine (individualized dosing, once daily) in adult patients with type 2 diabetes at increased cardiovascular risk and in adults with obesity or overweight are also underway intensively.

Furthermore, Pfizer, which has yet to launch any new drugs in the GLP-1R field, has also joined the competition. Its R&D team screened and optimized compounds from a library of 2.8 million molecules using high-throughput assays, ultimately identifying a potential “best-in-class” small molecule. Among these, Danuglipron (PF-06882961) has advanced to Phase II clinical trials, while Lotiglipon (PF-07081532), identified by its partner Sosei Heptares, has entered Phase I clinical trials.

Of course, since GLP-1R belongs to the class B G protein-coupled receptors (GPCRs), its orthosteric site is highly conserved, making it difficult to achieve high selectivity. Moreover, the complex binding mode between the receptor and peptides, as well as the activation mechanism, pose significant challenges in screening suitable small-molecule ligands from a vast pool of compounds that can replace natural peptides. The development barriers are extremely high.

Not long ago, Pfizer decided to terminate the development of lotiglipon due to efficacy and safety data from clinical trials falling short of expectations. Pfizer stated that the discontinuation of lotiglipon’s clinical development was primarily driven by pharmacokinetic data from drug-drug interaction studies (C3991040–C3991047; NCT05671653 and NCT05788328) conducted during Phase I trials, as well as findings of elevated transaminase levels in patients enrolled in ongoing Phase I studies. On a positive note, none of the trial participants reported liver-related symptoms or adverse effects, there was no evidence of liver failure, and no individuals required treatment.

Furthermore, in clinical trials of Danuglipron, another Pfizer project, more than 1,400 participants did not exhibit such elevations in transaminases. However, an investor noted that since most companies developing small-molecule oral GLP-1 drugs in China have adopted molecular structures similar to that of Lotiglipron, Pfizer’s decision to discontinue its development undoubtedly represents a significant blow to innovative GLP-1 pharmaceutical companies in China.

In terms of new indications, GLP-1 drugs, as therapeutic agents for metabolic diseases, are expanding from areas such as glucose lowering and weight loss to high-prevalence conditions including cardiovascular disease, chronic kidney disease, non-alcoholic fatty liver disease, and Alzheimer’s disease.

Among these, non-alcoholic fatty liver disease (NAFLD) is one of the indications for GLP-1 drugs with relatively rapid progress in their next phase of development. For instance, Innovent Biologics’ dual-target GLP-1R/GCGR drug, IBI362 injection, was approved in March this year to initiate clinical trials for the treatment of non-alcoholic steatohepatitis (NASH), making it a leading GLP-1-based therapy for NASH in China. In prior preclinical studies on NASH, the IBI362 group demonstrated a significant reduction in NAFLD Activity Score (NAS), including improvements in steatosis, ballooning degeneration, and inflammatory markers.

According to statistics from Huachuang Pharma, more than ten GLP-1 drugs overseas, including MedImmune’s cotadutide, Hanmi Pharmaceutical’s efinopegdutide, and Altimmune’s pemvidutide, are being developed for non-alcoholic fatty liver disease (NAFLD), with some already advanced to Phase III clinical trials. In the field of Alzheimer’s disease, CSPC Pharmaceutical Group’s GX-G6 and Neuraly’s pegsebrenatide, among others, have also seen development efforts.

In addition, new indications for GLP-1 receptor agonists that have entered clinical trials include various disease conditions such as short bowel syndrome, Parkinson’s disease, glaucoma, and dermatomyositis.

In fact, regardless of whether it attracts a massive influx of capital, semaglutide has indeed spurred the development of GLP-1 drugs. We believe that with the development of oral formulations and the expansion into new indications, the GLP-1 drug sector will give rise to high-quality innovative companies worthy of long-term partnership.