How to invest in US weight loss drug stocks on the ASX

Over the past couple of years, you’ve likely heard of the popular weight loss drugs such as Ozempic that are coming out of the United States.

Drugs like Ozempic have taken the world by storm and resulted in massive profits for drug stock makers like Novo Nordisk. As such, it’s only natural for ASX investors to want a slice of the action.

And some significant action there is. According to exchange-traded fund (ETF) provider BetaShares, investment bank Morgan Stanley estimates that the global market for obesity drugs like Ozempic could reach US$77 billion by 2030.

However, the ASX is not exactly known for its pharmaceutical stocks. Sure, we have a few respectable names on our ASX boards. But the real global titans in this space – think the likes of Novo Nordisk, Eli Lilley, Pfizer and Johnson & Johnson – are all international stocks with either primary or secondary listings on the US markets.

Australian investors can always buy these shares directly from the US markets if they want exposure to these companies. But many ASX investors aren’t comfortable with this option.

Luckily, there’s an easy, ASX-based alternative – investing in ASX ETFs.

The ASX is home to hundreds of different exchange-traded funds. A few of these specialise in global healthcare and pharmaceutical companies and would make for an easy way for ASX investors to get a slice of the action.

How to use ASX ETFs to buy US weight loss drug stocks

One such fund is from BetaShares itself – the BetaShares Global Healthcare ETF (ASX: DRUG). This ETF invests in a portfolio of the world’s leading healthcare companies, hedged into Australian dollars to take out the impacts of foreign exchange movements.

DRUG holds around 60 different pharmaceutical and healthcare stocks, mostly listed on the US markets. If you buy DRUG units, you’re top two holdings in the underlying portfolio will be none other than Eli Lilley and Novo Nordisk. Eli Lilley currently makes up 8.5% of DRUG’s weighted portfolio, with Novo Nordisk coming in at 7.1%.

As such, this is a very simple choice for any ASX investors seeking access to these stocks.

But DRUG isn’t the only choice for ASX investors looking for weight loss drug exposure. There’s also the iShares Global Healthcare ETF (ASX: IXJ).

This ETF operates similarly to DRUG in offering a portfolio of the largest global healthcare and pharmaceutical stocks to ASX investors.

IXJ also currently has Eli Lilley and Novo Nordisk as its largest holdings, with portfolio weightings of 9.31% and 5.95%, respectively.

VanEck Global Healthcare Leaders ETF (ASX: HLTH) is another option to consider. It has a slightly different composition, with stocks like Tenet Healthcare and United Therapeutics Corp occupying the top spots. However, Eli Lilley and Novo Nordisk are still there, with portfolio weighting of 2.51% and 2.46%, respectively.

Being sector-specific ETFs, these funds aren’t the cheapest on the ASX. DRUG charges an annual management fee of 0.57%, for example. IXJ asks 0.41% per annum, while HLTH will set you back 0.45% per annum.

But that’s the price you’ll have to pay if you want easy ASX access to US weight loss drugs and their manufacturers on the Australian stock market.

The post How to invest in US weight loss drug stocks on the ASX appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has positions in Johnson & Johnson. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Pfizer. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Johnson & Johnson and Novo Nordisk. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.