A recent study by Deloitte indicates that the pharmaceutical industry is facing risks from a "bubble effect" due to soaring profitability driven by surging demand for weight-loss and diabetes medications. Demand for drugs such as Wegovy and Zepbound has pushed research and development returns to their highest levels in years, but a report released by Deloitte on Monday noted that this effectively masks pressures faced by other areas of the industry.

The R&D return rate for the world's top 20 pharmaceutical companies has increased for the third consecutive year to 7%, almost entirely due to a small number of high-value assets, such as glucagon-like peptide-1 receptor agonists (GLP-1 drugs).

The report found that, for the first time in 16 years, weight-loss therapies have surpassed oncology as the largest contributor to the value of late-stage R&D pipelines. Deloitte believes this increases companies' exposure to shocks in specific therapeutic areas.

Hanno Ronte, a partner in Deloitte's Life Sciences and Healthcare practice, told media, "This is a bubble because too many resources are concentrated in a single area." It is estimated that drugs targeting obesity and diabetes currently account for 38% of the total projected commercial revenue from late-stage R&D pipelines expected by 2025.

The impact is so significant that it obscures a weaker environment in other parts of the industry. If GLP-1/GIP assets are excluded from the analysis, the industry's return rate would drop to just 2.9%, lower than the 3.8% recorded in 2024.

Obesity assets now represent approximately 25% of the total projected sales from late-stage R&D pipelines, while oncology's share has fallen to 20%. This marks a staggering increase for the obesity sector, which contributed only 1% of projected value as recently as 2022.

Although this boom has driven overall growth, it has also led to a significant concentration of risk. Deloitte found that just 54 blockbuster-level indications—representing only 9% of the late-stage pipeline—are expected to generate roughly 70% of risk-adjusted peak sales.

Overreliance on blockbuster drugs is not new, but Deloitte stated that the current level of concentration is unprecedented. The Big Four accounting firm said this creates a high-risk environment—where a small number of assets can boost overall returns but also bring intensified competition and sensitivity to shocks in specific therapeutic areas.

Ronte commented, "From a patient perspective, the bubble won't burst, and these drugs won't disappear. But GLP-1 drugs have reached a critical point where vanity and health intersect, truly creating a transformative market for patients, healthcare systems, and everyone."

Scientists are still exploring the full benefits of GLP-1 drugs. Novo Nordisk's GLP-1 drugs have been approved for reducing cardiovascular risk and treating patients with liver and kidney diseases, while Eli Lilly's GLP-1/GIP combination drug has been approved for treating sleep apnea in obese patients.

However, many unknowns remain, particularly regarding the drugs' potential effects on brain health and inflammation. Last year, Novo Nordisk released results from a multi-year clinical trial studying the effect of semaglutide—the active ingredient in its blockbuster diabetes and weight-loss drugs Ozempic and Wegovy—on slowing the progression of Alzheimer's disease. The trial did not show a significant delay in disease progression but did reveal effects on Alzheimer's-related proteins and systemic inflammation biomarkers in patients. GLP-1 drugs have also been shown to help treat addiction.

Ronte said, "That is really where the hope lies. We are still riding this wave, which is why people are investing. Of course, when you're surfing, if you have to share with many others... you won't have much room to maneuver. The question is: Do you double down on this—that's the bubble—or do you say, 'We're going to work hard to find the next scientific wave'?"