Disappointing Data Spurs $125 Billion Market Value Drop
Novo Nordisk’s (NVO) ambitions in the competitive obesity drug market took a hit on Friday as the company announced weaker-than-expected results from a late-stage trial of its next-generation obesity drug, CagriSema. The announcement triggered a dramatic 27% drop in Novo’s share price, wiping off as much as $125 billion from the company’s market value—one of the largest one-day losses ever recorded for a European company.
The trial revealed that CagriSema, a combination of semaglutide (the active ingredient in Novo’s blockbuster drug Wegovy) and cagrilintide, led to an average weight loss of 22.7% after 68 weeks. While impressive, the result fell short of Novo’s 25% target and matched the efficacy of Eli Lilly’s (LLY) competing obesity drug, Zepbound, which has already set a high bar with a weight loss efficacy of nearly 23%.
A Blow to Market Leadership
The results represent a setback for Novo Nordisk, which has dominated the obesity treatment market with Wegovy. Investors had pinned hopes on CagriSema as a potential breakthrough, enabling Novo to outpace competitors like Eli Lilly (LLY) in an increasingly crowded field. The company’s failure to exceed expectations raised concerns about its ability to sustain its market leadership.
Markus Manns, portfolio manager at Union Investment, described the results as a “worst-case scenario.” He noted that CagriSema’s comparable efficacy to Zepbound, coupled with its more complex manufacturing process, could diminish its competitive edge.
Adding to Novo’s challenges, only 57% of trial participants reached the highest dose of CagriSema, which may have limited the overall weight-loss results. The company has yet to clarify why more patients did not complete the highest-dose regimen.
Market Reaction and Strategic Adjustments
Novo Nordisk’s stock tumbled to its lowest level since August 2023, closing the day 18.8% down by midday trading. Meanwhile, shares of U.S. rival Eli Lilly surged over 7% in pre-market trade, reflecting investor confidence in Lilly’s position as a leader in the obesity drug market.
In response, Novo Nordisk announced plans to launch a new trial in early 2025 to explore CagriSema’s additional weight-loss potential. Despite the setback, Martin Holst Lange, Novo’s executive vice president for development, expressed optimism, stating the company is “encouraged” by the data and remains committed to refining the drug’s efficacy. Novo aims to submit CagriSema for regulatory approval by late 2025.
CagriSema’s Promise and Challenges
CagriSema represents an innovative approach to obesity treatment by combining two hormones that suppress hunger and regulate blood glucose levels. While its efficacy aligns with existing GLP-1 receptor agonist drugs like Wegovy, its inclusion of the amylin-mimicking molecule cagrilintide offers a new dimension to weight management.
The trial, which involved 3,400 participants with a body mass index (BMI) of 30 or higher or BMI of 27 with weight-related comorbidities, highlighted similar side effects to other GLP-1 drugs. Most adverse events were gastrointestinal in nature, mild to moderate, and diminished over time.
Future Outlook
Novo Nordisk’s rapid ascent to become Europe’s most valuable company, fueled by Wegovy’s success, underscores the high stakes in the obesity drug race. However, the company’s share performance has lagged behind rival Eli Lilly in 2024, partly due to concerns over losing its first-mover advantage.
With the global obesity drug market expected to grow significantly, Novo remains focused on innovation and expansion. While the CagriSema trial results are a setback, the company’s commitment to further trials and regulatory submissions indicates a long-term strategy to remain a key player in the field.
As Novo Nordisk refines its pipeline, the market will closely watch how it addresses these challenges and capitalizes on the growing demand for effective obesity treatments. For now, the disappointing results have underscored the fierce competition in the sector and the high stakes of maintaining leadership.
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