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ETFs in Spotlight as FDA Vision Loss Warning Meets Lilly's Sleep Apnea Win
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Key Takeaways
LLY's Foundayo cut sleep apnea severity by 43.8%, while the FDA ordered NAION warnings on GLP-1 labels.
ETFs like IHE offer diversified healthcare exposure while maintaining significant Eli Lilly holdings.
Eli Lilly holds the top position in all four ETFs, with allocations ranging from 12.93% to 26.29%.
Two developments this week are forcing investors to reconsider how they gain exposure to the weight-loss drug boom. On one side, Eli Lilly’s (LLY) oral GLP-1 pill Foundayo delivered striking Phase 3 results, significantly reducing obstructive sleep apnea severity in patients with obesity.
On the other, the U.S. Food and Drug Administration (“FDA”) has ordered Novo Nordisk (NVO - Free Report) , Eli Lilly and other manufacturers to add warnings about a rare but potentially irreversible vision-loss condition, known as NAION, to the labels of popular GLP-1 medicines including Wegovy, Zepbound, Foundayo, Mounjaro and Ozempic.
The dichotomy is stark. Foundayo reduced apnea-hypopnea events by 43.8% among patients not using positive airway pressure (PAP) therapy, with nearly half achieving at least a 50% reduction in nightly breathing interruptions. Yet, the FDA’s NAION warning — based on data suggesting roughly 6.4 cases per 100,000 person-years among GLP-1 users — introduces a headline risk that could rattle investors holding the individual GLP-1 makers.
Given this push-pull situation, investors may find broader exposure through healthcare exchange-traded funds (ETFs) more appealing than concentrated investments in individual obesity-drug manufacturers, particularly as the healthcare sector's earnings growth outlook improves.
But before exploring those specific ETFs, it is crucial to assess whether this latest FDA warning could dent the revenue growth trajectory of these pharma giants individually — especially since the obesity drug market's rally over the past couple of years has been a key growth driver for the broader healthcare industry. Assessing the commercial viability of this new generation of drugs will be essential to better understand the evolving market dynamics.
The Obesity Pill Juggernaut
The obesity pill market is indeed colossal. As per the World Health Organization’s data, approximately 1.1 billion people worldwide were living with obesity in 2024, with the global prevalence of obesity more than doubling since 1990. This global rise in obesity is contributing to the increasing burden of type 2 diabetes, a health condition largely treated with Glucagon-like peptide-1 (GLP-1) medications.
With approximately 853 million people worldwide expected to live with diabetes by 2050, reflecting an increase of 46% from the 2024 levels, as predicted by the International Diabetes Federation, the growth prospects of GLP-1 drugs remain enormous.
To this end, it is imperative to note that Eli Lilly commands more than 50% of global GLP-1 prescription volume, while Foundayo provides an additional growth avenue through its oral formulation, which eliminates the need for injections. Potential approval for obstructive sleep apnea could further expand its market opportunity, given that an estimated 936 million adults worldwide live with the condition.
The NAION warning, while serious, involves a lesser risk relative to the cardiovascular and metabolic benefits these drugs confer, considering the probability of vision loss among GLP-1 users is estimated to be quite low, less than 1%. More importantly, consistent demand for diabetes and endocrine treatments, which has long supported these companies, is expected to persist or even strengthen, providing greater visibility into future revenue growth from GLP-1 therapies.
The ETF View
Keeping in mind the aforementioned discussion, it would be misleading to view pharma giants like LLY as purely obesity plays.
Eli Lilly's immunology, oncology, and neuroscience franchises have gained increased traction lately, with Jaypirca being the fastest-growing BTK inhibitor in America, while aKisunla leads amyloid-targeting Alzheimer's therapies.
For long-term investors, the commercial outlook for GLP-1 therapies remains promising. However, broader healthcare exposure may offer a more balanced investment opportunity by capturing growth in obesity treatments alongside more stable healthcare businesses.
Healthcare ETFs in Spotlight
Considering the aforementioned discussion, investors seeking to participate in the metabolic care super-cycle while mitigating company-specific regulatory risks may find the following diversified healthcare and pharmaceutical ETFs attractive investment alternatives. These funds offer meaningful exposure to Eli Lilly while providing diversification across oncology, immunology and cardiovascular franchises.
This fund, with net assets worth $1.71 billion, includes 52 drug manufacturers and vaccine producers. LLY enjoys the first spot in this fund, holding 26.29% of its assets.
IHE has surged 30.2% year to date and charges 37 basis points (bps) in fees. It traded at a volume of 0.18 million shares in the last trading session.
This fund, with net assets worth $1.09 billion, includes 26 companies involved in pharmaceuticals, including pharmaceutical research and development as well as production, marketing and sales of pharmaceuticals. LLY enjoys the first spot in this fund, holding 22.79% of its assets.
PPH has rallied 17.8% year to date and charges 36 bps in fees. It traded at a volume of 0.18 million shares in the last trading session.
State Street Health Care Select Sector SPDR ETF (XLV - Free Report)
This fund, with assets under management (AUM) worth $50.54 billion, includes 61 companies in the pharmaceuticals; health care equipment and supplies; health care providers and services; biotechnology; life sciences tools and services; and health care technology industries. LLY enjoys the first spot in this fund, holding 16.54% of its assets.
XLV has risen 22% year to date and charges 8 bps in fees. It traded at a volume of 0.19 million shares in the last trading session.
This fund, with net assets worth $20.8 billion, offers exposure to 412 companies that manufacture health care equipment and supplies or that provide health care-related services, and companies that are primarily involved in the research, development, production, and marketing of pharmaceuticals and biotechnology products. LLY enjoys the first spot in this fund, holding 12.93% of its assets.
VHT has gained 21.2% year to date and charges 9 bps in fees. It traded at a volume of 0.19 million shares in the last trading session.
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ETFs in Spotlight as FDA Vision Loss Warning Meets Lilly's Sleep Apnea Win
Key Takeaways
Two developments this week are forcing investors to reconsider how they gain exposure to the weight-loss drug boom. On one side, Eli Lilly’s (LLY) oral GLP-1 pill Foundayo delivered striking Phase 3 results, significantly reducing obstructive sleep apnea severity in patients with obesity.
On the other, the U.S. Food and Drug Administration (“FDA”) has ordered Novo Nordisk (NVO - Free Report) , Eli Lilly and other manufacturers to add warnings about a rare but potentially irreversible vision-loss condition, known as NAION, to the labels of popular GLP-1 medicines including Wegovy, Zepbound, Foundayo, Mounjaro and Ozempic.
The dichotomy is stark. Foundayo reduced apnea-hypopnea events by 43.8% among patients not using positive airway pressure (PAP) therapy, with nearly half achieving at least a 50% reduction in nightly breathing interruptions. Yet, the FDA’s NAION warning — based on data suggesting roughly 6.4 cases per 100,000 person-years among GLP-1 users — introduces a headline risk that could rattle investors holding the individual GLP-1 makers.
Given this push-pull situation, investors may find broader exposure through healthcare exchange-traded funds (ETFs) more appealing than concentrated investments in individual obesity-drug manufacturers, particularly as the healthcare sector's earnings growth outlook improves.
But before exploring those specific ETFs, it is crucial to assess whether this latest FDA warning could dent the revenue growth trajectory of these pharma giants individually — especially since the obesity drug market's rally over the past couple of years has been a key growth driver for the broader healthcare industry. Assessing the commercial viability of this new generation of drugs will be essential to better understand the evolving market dynamics.
The Obesity Pill Juggernaut
The obesity pill market is indeed colossal. As per the World Health Organization’s data, approximately 1.1 billion people worldwide were living with obesity in 2024, with the global prevalence of obesity more than doubling since 1990. This global rise in obesity is contributing to the increasing burden of type 2 diabetes, a health condition largely treated with Glucagon-like peptide-1 (GLP-1) medications.
With approximately 853 million people worldwide expected to live with diabetes by 2050, reflecting an increase of 46% from the 2024 levels, as predicted by the International Diabetes Federation, the growth prospects of GLP-1 drugs remain enormous.
To this end, it is imperative to note that Eli Lilly commands more than 50% of global GLP-1 prescription volume, while Foundayo provides an additional growth avenue through its oral formulation, which eliminates the need for injections. Potential approval for obstructive sleep apnea could further expand its market opportunity, given that an estimated 936 million adults worldwide live with the condition.
The NAION warning, while serious, involves a lesser risk relative to the cardiovascular and metabolic benefits these drugs confer, considering the probability of vision loss among GLP-1 users is estimated to be quite low, less than 1%. More importantly, consistent demand for diabetes and endocrine treatments, which has long supported these companies, is expected to persist or even strengthen, providing greater visibility into future revenue growth from GLP-1 therapies.
The ETF View
Keeping in mind the aforementioned discussion, it would be misleading to view pharma giants like LLY as purely obesity plays.
Eli Lilly's immunology, oncology, and neuroscience franchises have gained increased traction lately, with Jaypirca being the fastest-growing BTK inhibitor in America, while aKisunla leads amyloid-targeting Alzheimer's therapies.
For long-term investors, the commercial outlook for GLP-1 therapies remains promising. However, broader healthcare exposure may offer a more balanced investment opportunity by capturing growth in obesity treatments alongside more stable healthcare businesses.
Healthcare ETFs in Spotlight
Considering the aforementioned discussion, investors seeking to participate in the metabolic care super-cycle while mitigating company-specific regulatory risks may find the following diversified healthcare and pharmaceutical ETFs attractive investment alternatives. These funds offer meaningful exposure to Eli Lilly while providing diversification across oncology, immunology and cardiovascular franchises.
iShares U.S. Pharmaceuticals ETF (IHE - Free Report)
This fund, with net assets worth $1.71 billion, includes 52 drug manufacturers and vaccine producers. LLY enjoys the first spot in this fund, holding 26.29% of its assets.
IHE has surged 30.2% year to date and charges 37 basis points (bps) in fees. It traded at a volume of 0.18 million shares in the last trading session.
VanEck Pharmaceutical ETF (PPH - Free Report)
This fund, with net assets worth $1.09 billion, includes 26 companies involved in pharmaceuticals, including pharmaceutical research and development as well as production, marketing and sales of pharmaceuticals. LLY enjoys the first spot in this fund, holding 22.79% of its assets.
PPH has rallied 17.8% year to date and charges 36 bps in fees. It traded at a volume of 0.18 million shares in the last trading session.
State Street Health Care Select Sector SPDR ETF (XLV - Free Report)
This fund, with assets under management (AUM) worth $50.54 billion, includes 61 companies in the pharmaceuticals; health care equipment and supplies; health care providers and services; biotechnology; life sciences tools and services; and health care technology industries. LLY enjoys the first spot in this fund, holding 16.54% of its assets.
XLV has risen 22% year to date and charges 8 bps in fees. It traded at a volume of 0.19 million shares in the last trading session.
Vanguard Health Care ETF (VHT - Free Report)
This fund, with net assets worth $20.8 billion, offers exposure to 412 companies that manufacture health care equipment and supplies or that provide health care-related services, and companies that are primarily involved in the research, development, production, and marketing of pharmaceuticals and biotechnology products. LLY enjoys the first spot in this fund, holding 12.93% of its assets.
VHT has gained 21.2% year to date and charges 9 bps in fees. It traded at a volume of 0.19 million shares in the last trading session.