Capturing Growth Opportunities in the Obesity Drug Market: Three ETF Strategies

The prescription weight loss drug sector has emerged as one of the most compelling investment themes in healthcare. With obesity treatment gaining mainstream attention and pharmaceutical innovation accelerating, investors are turning to exchange-traded funds as a vehicle to capture this expanding market. Here’s how three distinct ETF strategies can position your portfolio to benefit from this rapidly evolving landscape.

PPH: Pharmaceutical Innovation at the Forefront

VanEck Pharmaceutical ETF (NASDAQ: PPH) stands as the primary beneficiary of the obesity treatment revolution. Trading near $85.44 with a 7% annual increase, PPH maintains an exceptionally lean expense ratio of 0.36%, reflecting efficient fund management.

The fund’s strength lies in its concentrated exposure to companies developing breakthrough obesity medications. Eli Lilly (NYSE: LLY) has become a heavyweight player through Tirzepatide (Mounjaro), which can deliver weight reductions exceeding 20% in non-diabetic patients. The mechanism works by blocking GLP-1 and GIP receptors, simultaneously regulating hunger and insulin secretion.

Meanwhile, Novo Nordisk continues its dominance with semaglutide formulations—Wegovy for weight management and Ozempic for diabetes treatment. Clinical data shows semaglutide can help patients achieve approximately 15% weight loss as part of a comprehensive management program. With net assets reaching $543.2 million as of March 31, PPH offers substantial liquidity for investors seeking direct pharmaceutical exposure.

SLIM: Broad-Based Obesity Ecosystem Play

The Obesity ETF (NASDAQ: SLIM) takes a different approach by tracking the Solactive Obesity Index, capturing the entire weight loss drug ecosystem rather than just pharmaceuticals. The fund allocates at least 80% of assets across healthcare providers, biotechnology firms, medical device manufacturers, and nutrition companies.

Novo Nordisk commands 20% of SLIM’s portfolio, while DexCom (NASDAQ: DXCM) holds 13%. This dual weighting reflects the interconnected nature of obesity treatment—continuous glucose monitoring devices enhance medication efficacy. Herbalife (NYSE: HLF) rounds out the portfolio with nutritional interventions, from protein formulations to dietary aids.

Additional holdings including Tandem Diabetes Care (NASDAQ: TNDM) and Insulet Corporation (NASDAQ: PODD) benefit from the metabolic health improvements these weight loss medications provide. However, investors should note SLIM’s recent underperformance, with a year-to-date decline of 11.27%, reflecting healthcare sector volatility. The fund currently yields 0.57% and maintains modest net assets of $11.63 million.

IHF: Healthcare Infrastructure and Accessibility

iShares US Healthcare Providers ETF (NYSEARCA: IHF) offers a more conservative weight loss drug ETF option through diversified healthcare infrastructure exposure. The fund tracks the Dow Jones U.S. Select Health Care Providers Index, posting an 11% annual return with a competitive 0.40% expense ratio and 0.78% dividend yield.

IHF’s portfolio construction emphasizes established healthcare systems that operationalize weight loss programs. UnitedHealth Group (NYSE: UNH) represents the largest holding at 22%, with its Optum division providing comprehensive weight management services. Cigna (NYSE: CI) contributes nutritional counseling capabilities, while CVS Health (NYSE: CVS) leverages its MinuteClinic network for accessible weight loss supplements and consultations. Humana (NYSE: HUM) rounds out the top four holdings at 4% each, offering structured diet plans.

This fund demonstrates lower market correlation with a beta of 0.72 and moderate volatility (17.20% standard deviation over three years), making it suitable for conservative investors seeking obesity drug ETF exposure. A five-to-one stock split executed at year-end improved share accessibility for retail investors.

Investment Thesis and Risk Considerations

The convergence of pharmaceutical innovation, healthcare infrastructure, and consumer awareness creates a multi-year tailwind for weight loss drug investments. Each ETF approach addresses different investor objectives—PPH for pure pharmaceutical upside, SLIM for ecosystem diversification, and IHF for infrastructure stability.

However, the healthcare sector remains subject to regulatory uncertainties, side effect concerns, and competitive pressures from emerging treatments. Weight loss drug ETF investments require understanding that medication efficacy, market adoption rates, and pricing dynamics will ultimately determine returns. Investors should carefully evaluate their risk tolerance and investment timeline when considering exposure to this dynamic sector.