Novo Nordisk has been one of the chief beneficiaries of the boom in GLP-1 drugs, which have shown great promise in fighting obesity. Competition in the space is fierce, but shares got a much-needed boost on Friday after the Danish pharmaceutical giant released promising trial results for a next-generation drug that the company hopes will build on the success of flagship weight-loss treatments Wegovy and Ozempic.
Like those injections, the new drug targets gut hormone GLP-1 but additionally mimics amylin, a hormone released by the pancreas that suppresses hunger. Novo’s U.S.-listed shares jumped over 10% in premarket trading Friday and remained up over 7% midmorning after the company said people who received the new treatment reduced their weight, on average, by 22%, over 36 weeks, compared with a weight gain of 2% for those who received a placebo. The most common side effects were gastrointestinal, the company added, with the vast majority being mild to moderate in severity.
Both Wegovy, Novo’s main obesity offering, and diabetes treatment Ozempic have soared in popularity and been touted as “miracle drugs” for their startling efficacy in helping patients lose weight, along with other potential health benefits. That drove Novo’s U.S.-listed shares to a record high of $148.15 this past June, up more than double from where they sat at the beginning of 2023.
The stock has declined roughly 40% since, however, and currently trades just short of the $90 mark. One reason is pressure from American drugmaker Eli Lilly, which makes competing products Zepbound and Mounjaro (alternatives to Wegovy and Ozempic, respectively).
Novo’s stock fell slightly in early December after a trial sponsored by Lilly found that patients who took Zepbound lost 20.2% of their body weight, on average, compared with just a 13.7% reduction for those taking Wegovy.
An analyst at a Danish bank said that Novo’s Friday trial results for the amylin treatment, however, could help restore investor faith in the company’s drug pipeline.
“It’s still early and not many patients, but it can give some hope that you have a product that can take over from Wegovy and that can compete to a great extent,” Jyske Bank’s Henrik Hallengreen Laustsen told Reuters.
That does not mean investors should necessarily anticipate blockbuster returns in the year ahead. CFRA Research analyst Wan Nurhayati recently reduced his price target on the stock from $122 to $90 after the U.S. government said Ozempic and Wegovy would be among the 15 drugs targeted for a second round of Medicare price negotiations in 2027.
“A steep price cut might limit future sales growth (the first round of price negotiation last year saw a 38% to 79% price reduction across the selected drugs), though we still expect [Novo] to remain one of the market leaders in the obesity market,” Nurhayati wrote in a note Monday. “Nevertheless, this news, coupled with another disappointing trial result (from a study of a higher dose of Wegovy), has added to the series of challenges for [Novo], which we think could continue to affect sentiment in the near term.”
Friday’s results, however, gave shareholders a reason for cautious optimism.
