Pharmaceutical company Novo Nordiskin the share plunged more than 20 percent on the Copenhagen stock exchange on Friday. The terrible decline was due to the test results of the company’s new slimming drug, which fell short of expectations.
On Monday, the stock was up 8.8 percent, but Friday’s news was still on investors’ minds.
Novo Nordisk’s CagriSema drug helped the test group lose 22.7 percent of their body weight over 68 weeks, when the company had stated a public goal of 25 percent. Investors had expected up to 27 percent.
The difference doesn’t sound like much, and a 20 percent drop in the stock price seems counterintuitive. However, the market basically only seeks the best, so the price reaction is drastic if a competitor’s product turns out to be better.
Novo Nordisk’s American competitor Eli Lilly’s products seem to be able to do exactly the same as Novo at the moment. Eli Lilly’s share price went up quite a bit on Friday.
Analysts who follow Novo Nordisk have different ideas about the significance of the test results.
“Only as good as a competitor”
Interviewed by Reuters portfolio manager Markus Mann’s commented on the news at the end of the week as a “worst case scenario” for Novo Nordisk.
“Their product turned out to be just as good as the competitor’s, but it’s more difficult to manufacture.”
Other analysts and portfolio managers interviewed in the story also commented on the research results in a negative tone.
Bloomberg analyst John Murphy sees storm clouds on Novo’s horizon. Its new product is at the same level as the competitor, but the competitors’ future products may be even more powerful. Novo also has other challenges.
“Eli Lilly also has retatrutide coming out, which may offer even greater potency. With Wegovy’s patent expiring in the early 2030s and possible IRA challenges, the lackluster results are likely to add pressure to the consensus, which sees this asset generating nearly 20 percent of Novo’s sales in 2030. Now Novo will have to invest more in amycretin, although it’s currently only in Phase 1 trials .”, Murphy commented in the Bloomberg story.
Novo is also defended
Nordic analyst Michael Novodin according to the exchange rate reaction was overshooting.
“Even though the product’s effectiveness did not match the predictions, we think the price reaction was unreasonable. CagriSema’s result is still the best seen in phase 3 trials, and its tolerability profile was consistent with a single GLP-1, and slightly better than (competitor) Wegovy.”
In the tests conducted by Novo, only 57 percent of the test group used the maximum dose of the drug. Some analysts consider this a sign that the drug has tolerability problems, but Nordea’s position is different.
“If one speculates, the result could also be due to the fact that the patients simply stopped (using the drug) when they achieved the desired weight loss. With this in mind, we are confident that Novo can achieve greater weight loss with the same CagriSema product in such a trial.”
Interviewed by Bloomberg Barclaysin director of medical research Emily Field also describes the market reaction as an overreaction.
“I still understand why investors are not satisfied with the research data. The company has been repeating the 25 percent goal for years, and now the result was 23 percent. We do not have comprehensive information and context about what has led to these results. It’s a certain kind of credibility problem,” Field states in the video.
According to him, it is essential to follow Novo’s information on the subject in order to find out why the results were less than expected.
“People have now chosen a negative perspective without hard data. The situation can still change. It should also be remembered that this result will not affect the business result of 2025 in any way. The share is traded at 21 times the amount compared to next year’s result, which is a significantly lower ratio than in recent years.”
At its worst, Novo’s stock was down 27 percent. The drop was one of the biggest, or even the biggest ever seen in the stock market. Even the most cynical analysts couldn’t expect that.
For example In Berenberg’s analysis the price reaction was expected to be -20 percent at worst and 5 percent at best. Investors should follow Novo’s news coverage in the coming weeks, as there may be many things in the background of the research results that can turn the share price upwards.
On Monday, the company’s share price was up 8.6 percent.
Source: www.arvopaperi.fi
