Novo Nordisk, a leader in the rapidly expanding GLP-1 drug market, received a significant boost on Friday after revealing promising trial results for a next-generation treatment aimed at tackling obesity. This news comes as the company seeks to build on the success of its flagship drugs, Wegovy and Ozempic, which have become staples in the weight-loss treatment space.
The new drug, similar to its predecessors, targets the GLP-1 gut hormone but also mimics amylin, a hormone released by the pancreas that helps suppress hunger. After the announcement of the positive trial results, Novo’s U.S.-listed shares surged over 10% in premarket trading, holding steady with a gain of more than 7% by midmorning. The trial showed that participants who received the new treatment experienced an average weight loss of 22% over 36 weeks, compared to a 2% weight gain for those who were given a placebo. The side effects reported were primarily gastrointestinal, with most being mild to moderate in severity.
Both Wegovy and Ozempic have been hailed as “miracle drugs” for their remarkable effectiveness in aiding weight loss and offering potential health benefits. The success of these treatments drove Novo’s U.S. stock to a record high of $148.15 in June 2023, more than doubling from its starting position at the beginning of the year. However, the stock has since dropped around 40%, now hovering near the $90 mark. This decline has been partly due to increasing competition from U.S. drugmaker Eli Lilly, which offers alternatives like Zepbound and Mounjaro to Wegovy and Ozempic.
In early December, Novo’s stock took a hit after a trial sponsored by Eli Lilly showed that Zepbound led to a 20.2% average weight loss, outperforming Wegovy, which saw a 13.7% reduction. Despite these challenges, Novo’s new amylin-targeting drug has raised investor hopes. According to Henrik Hallengreen Laustsen, an analyst at Danish bank Jyske Bank, the recent trial results could help rekindle confidence in the company’s pipeline of treatments. “It’s still early, and not many patients have been tested, but it can give some hope that you have a product that could take over from Wegovy and be competitive,” Laustsen told Reuters.
However, analysts caution that the road ahead may not be smooth for Novo. CFRA Research analyst Wan Nurhayati recently lowered the stock’s price target from $122 to $90 following news that Ozempic and Wegovy are among 15 drugs that will be subject to second-round Medicare price negotiations in 2027. This could result in steep price cuts, potentially limiting sales growth, as seen in previous rounds where price reductions ranged from 38% to 79%. Despite this, Nurhayati maintains that Novo will continue to be a leader in the obesity treatment market, though the company faces numerous challenges that may weigh on sentiment in the short term.
As Novo Nordisk navigates these hurdles, its next-generation drug could play a pivotal role in maintaining its position in the highly competitive obesity treatment market.
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