(Bloomberg) — The weight loss-fueled gains of Danish drugmaker Novo Nordisk A/S are officially a thing of the past.
The stock this week wiped out the last of the yearslong surge that followed the 2021 US approval of its Wegovy obesity drug, after a next-generation shot delivered less weight loss than that of its main rival.
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Down 21%, the shares are on track for their steepest weekly slump since August, surpassing one of 20% earlier this month that followed a dire sales forecast.
The setback caps a tumultuous five years for Novo, a period that saw the stock ride a wave of optimism driven by its leadership in the booming obesity-drug market. Less than two years have been enough to unravel those roughly fivefold gains, and Chief Executive Officer Mike Doustdar now faces mounting calls to diversify beyond diabetes and obesity — franchises that have defined the company for three decades.
Following this week’s update, the whole thesis for Novo now relies on Wegovy pills, according to Intron Health analyst Naresh Chouhan. Last month’s launch was one of the most successful pharmaceutical debuts ever with more than 240,000 Americans taking the pill already, Doustdar said.
“If there is any sign of a material slowdown from what has clearly been an excellent launch, we expect the shares to further de-rate,” Chouhan said.
For some bullish analysts, this week’s disappointing data for Novo’s next-generation obesity shot CagriSema was the last straw, with five downgrading the stock. Deutsche Bank AG’s Emmanuel Papadakis cut his rating to hold, saying the results blow a sizable hole in the investment case for the drug.
JPMorgan Chase & Co.’s Richard Vosser also downgraded the shares to neutral, saying the latest developments are likely to curb the drug’s commercial potential.
To be sure, Novo’s obesity shot still delivered 20.2% weight loss, not far from the 23.6% achieved by Eli Lilly & Co.’s next-generation candidate tirzepatide. Novo’s Doustdar highlighted the result on an investor call this week after an analyst said CagriSema “looks somewhat obsolete.”
Yet the trial has intensified doubts about whether the Danish company can maintain its edge in the obesity race.
With rivals advancing less-frequent dosing drugs and higher-efficacy treatments, Novo’s ability to manage its obesity franchise beyond the 2032 patent cliffs may come under scrutiny, according to HSBC Holdings Plc analyst Rajesh Kumar. The issue “could become another point of debate,” he said.