Novo Nordisk's stock plunges as its obesity trial fails
Novo Nordisk's (NVO) stock crashed on Monday after the Danish drugmaker revealed that the clinical trial for its next-generation weight-loss pill CagriSema failed in its head-to-head comparison with Eli Lilly and Company's (LLY) Zepbound pill.
According to the clinical trial's results, 20.2% of the people treated with a standard dose of CagiSema achieved weight loss after 84 weeks, compared to 23.6% with Zepbound.
Shares of Novo plunged more 16%. Meanwhile, Lilly's stock gained 4.8%.
Novo's stock has fallen nearly 55% over the past year as it has struggled to keep pace with Lilly.
CagriSema, which is not on the market yet, is supposed to be Novo's next-gen weight loss pill that follows its Wegovy obesity drug. Wegovy was one of the first weight loss pills on the market, but has struggled to compete with Zepbound, failing in a head-to-head clinical trial with Lilly's drug last year.
But CagriSema has not shown early promise against Zepbound, as it underperformed in a diabetes trail as well.
The latest failure now has investors calling on Novo to rethink its operations, with some seeing its strategy of focusing on obesity and diabetes as no longer working.
BMO Capital Markets analyst Evan David Seigerman told Bloomberg that “a complete strategy overhaul is in order,” noting how “it is striking to hear management concede that their competitor’s product outperformed in a trial they sponsored and designed.”
A survey of analysts conducted by Bloomberg in 2024 pinned the expected sales for CagriSema at $18.4 billion. However, a follow-up survey conducted earlier this month now places the revenue estimate at $6.9 billion.
Martin Holst Lange, executive vice president, R&D and chief scientific officer at Novo, said in a statement that the company was "pleased with the weight loss of 23% for CagriSema in this open-label trial," while adding that it plans to initiate a higher-dose trial of the drug.
Karen Andersen, a director at Morningstar said in a note on Monday that its latest setback and the fact that Novo continues to lose market share to Lilly in the weight-loss drug sector, shows that the company "needs its pipeline to produce differentiated therapies that can help extend its position in the market."
But with CagriSema failing to show a marked improvement over Wegovy in its head-to-head matchup with Zepbound, analysts are now casting doubts about Novo's ability to compete against Lilly in the market for obesity and diabetes drugs.
“In an instant, we’ve gone from the company being described as having the best pipeline in the world to the whole story falling apart,” Lars Hytting, head of trading at ArthaScope, told Bloomberg. ArthaScope is an investor in Novo.
“It’s not just that they’re being outclassed on their existing products — suddenly that fantastic pipeline turns out to be far less impressive than it was made out to be,” Hytting added.
Novo's patent for Wegovy will expire at the end of 2032, at which point analysts expect it to face even greater competition from generic and lower-cost versions of the drug.
Novo filed a lawsuit earlier this month against Hims & Hers Health, Inc. (HIMS) for patent infringement after its rival released a copycat version last week of Wegovy.
Hims was offering a compounded semaglutide pill with a starting price that was $100 cheaper than Wegovy. However, the company has since pulled the drug from the market.