Drastic drop in Novo Nordisk shares! Weak results of new drug shocked

Shares in Danish pharmaceutical company Novo Nordisk A/S have seen their biggest drop since December. The reason is the poor results of a clinical trial of their new injection CagriSema, which was supposed to be the next step in the treatment of diabetes and obesity. Although patients with diabetes lost an average of 15.7% of their weight, investors' expectations were higher.

Novo Nordisk $NVO reported Monday that patients who followed CagriSema treatment lost an average of 15.7% of their body weight over 68 weeks. By comparison, patients taking a placebo lost only 3.1% of their weight. However, taking all study participants into account, the weight loss was only 13.7%, which is less than investors had hoped for.

Analysts had expected figures closer to 20%, said David Evans of Kepler Cheuvreux. This is the second disappointment linked to the drug - a study last December targeting patients with obesity but no diabetes also failed to deliver the expected results. This raises doubts about the future success of CagriSema, especially in competition with Eli Lilly & Co's Zepbound.

Novo Nordisk shares fell as much as 8.8% in Copenhagen in response to the news, the steepest decline since the first CagriSema study was published on 20 December. Overall, the company's shares have lost about 38% over the past 12 months, reflecting investor concerns about Novo Nordisk's long-term competitiveness in the weight-loss drug market.

The dosing problem

GLP-1 hormone-based drugs, such as Novo Nordisk's Wegovy, generally have less effect on weight loss in patients with diabetes. The difference tends to be around 30-35%, Jefferies analysts said. Investors had hoped that CagriSema would overcome this tendency with the addition of an active ingredient, but the results don't suggest that.

Patients in the study were able to choose their dosage, with less than two-thirds reaching the highest dose. A similar trend was seen in a previous study targeting obese patients, where many chose lower dosages, which may have affected the overall results.

According to Bloomberg analyst Michael Shah, CagriSema's results are similar to rival drug Zepbound, raising concerns about whether Novo Nordisk can differentiate itself significantly in the market. However, the study's design, which allowed patients to choose their doses, may have partially misrepresented the drug's true potential.

Novo Nordisk plans to apply for initial regulatory approval

The drug could be on the market by early 2027 and peak annual sales could reach $10 billion. That's significantly less than expected for existing blockbusters like Ozempic or Wegova.

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Source: Yahoo Finance