Novo Nordisk stock crashed Friday after the pharmaceutical giant's next-generation weight-loss drug missed expectations in a highly anticipated study. Shares of rivals Eli Lilly and Viking Therapeutics jumped.
The Danish drugmaker tested its new drug, CagriSema, in patients with obesity but not type 2 diabetes. Patients lost 22.7% of their body weight over 68 weeks. That topped the 16.1% loss for patients who took semaglutide, the active ingredient behind Novo's weight-loss blockbuster Wegovy and diabetes drug Ozempic.
But it missed Novo Nordisk's guidance for 25% weight loss. And safety remained relatively unclear.
Novo Nordisk Stock Slumps
The bad news sent Novo Nordisk stock down 17.8% to 85. Shares have been falling since midyear. Eli Lilly stock rose 1.4% to 767.76, while Viking Therapeutics shares ran up 1.8% to 42.25.
Shares of companies that develop diabetes-treating devices, including Dexcom, Insulet and Tandem Diabetes, rose 5.6%, 3.9% and 7.9%, respectively. There's long been a perception that weight-loss drugs will undo the market for devices that help manage diabetes.
"While we still expect Novo Nordisk to remain one of the market leaders in the obesity market, we believe the disappointing results could continue to affect sentiment in the near-term," CFRA analyst Wan Nurhayati said in a report.
The news highlights the key differences between combinations in obesity treatment.
Novo Nordisk's CagriSema combines semaglutide and an amylin-focused molecule. Semaglutide works by mimicking the GLP-1 hormone to control hunger and improve blood sugar levels. Amylin is another hormone with ties to food intake and glucose. Novo had lofty expectations for at least 25% weight loss from the combination approach.
"It has the potential to become the drug that gives unprecedented weight loss, unprecedented plasma control," Martin Holst Lange said on the company's recent third-quarter earnings conference call. Lange is the company's executive vice president of development. "We'll also get the (cardiovascular) benefits and potentially also other benefits. First and best in class potential."
In comparison, Lilly sells tirzepatide as a weight-loss drug called Zepbound and in diabetes treatment as Mounjaro. It mimics the GLP-1 hormone and loops in another called GIPR. Viking's shot, VK2735, uses the same method. In final-phase testing, the highest dose of Zepbound helped patients lose up to 25% of their body weight, compared to 1.5% for the placebo.
CagriSema Outperforms Wegovy
Novo is trying to improve on Wegovy with CagriSema.
In a recent head-to-head study, Zepbound topped Wegovy in terms of weight loss. Zepbound patients lost 20.2% of their body weight over the course of 72 weeks, compared to 13.7% for Wegovy patients.
"It is now questionable whether CagriSema will be able to demonstrate weight loss superiority over Zepbound in NVO's head-to-head Ph3 trial," Leerink Partners analyst David Risinger said in a report.
He has an outperform rating on Lilly shares, but doesn't rate Novo Nordisk stock.
William Blair analyst Andy Hsieh noted the weight lost is fairly comparable between Zepbound and CagriSema — 25% vs. 22.7%, respectively. But the safety question weighed on shares. Drugs in the GLP-1 drug class often cause gastrointestinal side effects, including nausea, vomiting and diarrhea.
In Novo's study, just 57% of patients were able to reach the highest dose of CagriSema. That compares to 83% for another experimental Novo drug, cagrilintide, and 70% for Wegovy. Novo said CagriSema appeared "to have a safe and well-tolerated profile" with the most common side effects lining up with the GLP-1 drug class.
"We argue that the tolerability component is the major driver for investors' bearish take on (the study called) REDEFINE1 since the most significant unmet medical need in the obesity space is the ability to maintain patient adherence to GLP-1-based therapies," Hsieh said in a report.
Amgen Jumps On Novo's News
Amgen stock also 0.8% on Novo Nordisk's setback. The company is working on what could be a monthly shot for weight loss called MariTide. MariTide relies on another mechanism, mimicking GLP-1 and blocking GIPR.
Over 52 weeks, patients taking MariTide lost about 20% of their body weight, RBC Capital Markets analyst Gregory Renza said in a client note. He sees CagriSema as "not superior" to MariTide.
"We also note that MariTide's weight loss has yet to plateau, which per our (key opinion leader), suggests a possibility of further weight loss beyond Week 52," he said.
Renza has an outperform rating on Amgen stock.
"Collectively, this data readout of CagriSema provides a clearing event for AMGN, removing the potential for added competitive threat from next-gen obesity drugs, in the near-term," he said.
Leerink Partners analyst Thomas Smith said the same for Viking Therapeutics.
"We see topline CagriSema results as removing a competitive overhang for VKTX, which should incrementally boost '2735's competitive positioning among the broader obesity landscape," he said in a client note.
He rates Viking shares an outperform, but doesn't rate Novo Nordisk stock.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
