President & CIO explains that a Canadian patent expiry pales next to the scale of the US market
2026 began with the end of Novo Nordisk’s patent monopoly for semaglutide, the active ingredient in Ozempic and Wegovy, in Canada. Health Canada can now approve a generic version of those weight loss drugs, which have proven highly effective and popular as the “regulatory exclusivity” for semaglutide expired on January 4th. Nine drug manufacturers have applied to Health Canada for approval.
Semaglutide is a GLP-1 drug, a category that took the world and healthcare industry by storm for its remarkable capacity to help patients lose weight. GLP-1 drugs have been proven to help with diabetes, obesity, and many weight-related health issues like sleep apnoea and cardiovascular disease. This success has also been a huge investment driver for the manufacturers of GLP-1 drugs, with many of the pharmaceutical names behind these treatments enjoying significant share price appreciation in recent years. The question, then, is whether a generic semaglutide in Canada would derail that gold rush?
Paul MacDonald doesn’t think so. The President & Co-CIO of Harvest ETFs explains that Canada still has a long way to go between patent expiry and a widely available generic. More importantly, the patents for semaglutide and other GLP-1 drugs remain in place in the far larger and more lucrative US market. With innovations in oral GLP-1 drugs and the likelihood that these treatments may soon be covered under Medicare and Medicaid for certain patients, the earnings opportunity for investors remains firmly in place.
“This is going to be, and is in the process of becoming, the largest drug class,” MacDonald says. “If you were on a desert island and just read that ‘generic semaglutide is available, you’d think that was very bad news for Novo Nordisk. But the fine print is that the patent has only expired in Canada, it has yet to be approved, and there aren’t the manufacturing facilities to make it yet. At the same time in the US, we’ve seen them announce a framework to include GLP-1 drugs in Medicare. We don’t know the exact dates yet, but we have the cost structure of $245 covered and $50 out of pocket, and that would include the oral GLP-1 drugs that have just been approved.”
MacDonald, who managers the Harvest Healthcare Leaders Income ETF, explained that the patents for these drugs in the US are only set to start expiring between 2030 and 2034. The potential that they could be accessed via plans like Medicare and Medicaid, to treat both diabetes and obesity in the US, could be hugely significant for the pharmaceutical sector. Moreover, MacDonald believes that the approval of oral GLP-1 drugs in the US might further improve access and uptake, opening the door to other markets where the refrigerated supply chains required for injectable GLP-1s are not as robust.
For all the ways MacDonald believes this category can keep growing, he notes that these drugs are not miracles, and they’ve been proven not to work for some patients. Nevertheless, he sees continued upside on the basic premise that the drug companies will keep innovating and that there is a deep need to correct for the ways in which the modern world creates obesity. He says he was convinced of the investment case for these drugs by clinical results that showed considerable drops in heart disease risks, even among high risk cohorts. Declines in sleep apnoea events, too, make a compelling case for widespread usage. While there are risks of abuse and questions of what happens when patients go off these drugs, MacDonald sees continued use of these drugs.
The potentially game-changing use of these drugs for so many other comorbidities, however, may raise questions about other investable sectors of the healthcare industry. MacDonald notes that we could see long-term declines in certain medical devices associated with obesity, such as CPAP machines and pacemakers. He notes, though, that many of those likelihoods have been priced into medical device names already. Moreover, he believes some of the more outlandish claims, like buying mall REITs because everyone’s about to drop a clothes size, aren’t worth real consideration.
For Canadian advisors whose clients might be hearing about the new generics, MacDonald stresses the idea that Canada is both a ways away from generic rollout and represents a small segment of an evolving market where companies are going to continue to innovate under new patents. He argues that the investment outlook for this segment of the healthcare sector, and the sector as a whole, appears strong.
“We’re seeing ongoing trials, where they’re trying multiple mechanisms of action, and multiple combinations with different types of muscle atrophy drugs to make these even more effective at reducing fat,” MacDonald says. “But there are a lot of really bright people that are looking at this space and money that is going into it. Because if you can do that, it is financially beneficial and it will be systemically beneficial if we can find some of these results. I think innovation is going to actually drive volumes.”
