When Novo Nordisk (NVO) dropped nearly 11% in pre-market trading Monday, then slid another 9% at the open after disappointing Alzheimer's trial results, it wasn't just a pipeline setback. It was a stress test for an entire category of healthcare ETFs that have quietly transformed into GLP-1 momentum plays over the past two years.
The obesity drug boom powered by Novo's Ozempic and Wegovy, alongside Eli Lilly's (LLY) Mounjaro and Zepbound, has delivered spectacular returns. But it's also created a concentration problem that's easy to miss until something breaks. Many healthcare ETFs now rise and fall with the fortunes of just two companies, and Monday's selloff made that painfully clear.
The Funds Taking the Biggest Hit
The Roundhill GLP-1 & Weight Loss ETF (OZEM) sits at ground zero. With Eli Lilly at 18.72% and Novo Nordisk at 13.23%, more than one-third of the fund is directly tied to the GLP-1 duopoly. OZEM has been a rocket ship during the obesity drug rally, but the concentration works both ways. When one of your top two holdings drops 9% in a morning, you feel it immediately.
That said, OZEM's heavy tilt toward Lilly might actually cushion the blow compared to other funds. Lilly's broader revenue engine means the company isn't living or dying by GLP-1 alone, even though that franchise is massive.
The VanEck Pharmaceutical ETF (PPH) has become an accidental GLP-1 bet. The fund's exposure to both Eli Lilly and Novo Nordisk means it's tightly coupled to the duopoly's performance. GLP-1 names have been key return drivers, and Monday's selloff highlighted just how much of PPH's fate is tied to these two stocks.
Then there's the iShares U.S. Pharmaceuticals ETF (IHE), where Lilly accounts for a whopping 27% of the portfolio. That's not diversification—that's a concentrated bet with a pharma wrapper. When Lilly stumbles, IHE holders feel it immediately. While Novo doesn't carry the same weight here, the fund illustrates the broader concentration risk lurking in pharma ETFs.
Even broad sector funds aren't immune. The Health Care Select Sector SPDR Fund (XLV), a market-cap-weighted behemoth, has watched Lilly's influence grow as the company rocketed to a trillion-dollar valuation. When one stock gets that big, market-cap weighting becomes a concentration mechanism, not a diversification tool.
Why Lilly-Heavy Funds Might Actually Be Fine
Here's where the story gets interesting: ETFs loaded up on Eli Lilly might be in better shape than they appear.
Lilly generated $25 billion from Mounjaro and Zepbound in just the first nine months of 2025, becoming the first healthcare company ever to hit a $1 trillion valuation. But unlike Novo, Lilly isn't a one-trick pony betting everything on GLP-1.
The company's broader portfolio is thriving. Verzenio in oncology and Taltz in immunology continue posting solid growth. Newer launches like Omvoh, Ebglyss, Jaypirca, and Kisunla are adding meaningful revenue. Lilly's been on an M&A spree, expanding into ophthalmology, oncology, gene therapy, and cardiovascular disease to diversify the pipeline.
And they're not resting on their GLP-1 laurels either. The late-stage pipeline includes orforglipron, an oral GLP-1 candidate, and retatrutide, a tri-agonist that could represent the next generation of obesity treatments. Lilly is extending its lead, not just defending it.
For funds like OZEM, PPH, IHE, and XLV, this multi-engine growth story means Lilly-heavy exposure remains relatively secure, even if the GLP-1 trade hits turbulence.
Novo, meanwhile, faces a tougher narrative. The company is dealing with narrowed GLP-1 growth expectations, trial failures outside its core obesity franchise, and political pressure from Trump's push to lower obesity drug prices. The FDA recently rejected its multi-dose Wegovy device, and competition is intensifying from Lilly, Viking Therapeutics, and Pfizer's $10 billion Metsera acquisition.
Novo is working on oral Wegovy and next-generation combinations like CagriSema and amycretin, but revenue growth expectations have moderated considerably. The company is still a powerhouse, but the path forward looks bumpier than Lilly's.
What This Means for Your ETF
The GLP-1 boom has reshaped healthcare ETFs in ways that aren't always obvious from the fund names or marketing materials. Returns have been supercharged, but so has risk. Novo's stumble doesn't derail the obesity blockbuster story, but it's a sharp reminder that concentration cuts both ways.
If you own pharma or healthcare ETFs, it's worth understanding whether you're carrying more Novo risk or Lilly resilience. The difference might matter a lot more now than it did six months ago, when everything GLP-1-related seemed to go up in a straight line. Monday's selloff was a preview of what happens when one pillar wobbles—and not all pillars are built the same.
