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Why Novo Nordisk surged 14% on new weight-loss drug results

Shares of Danish pharmaceutical giant Novo Nordisk surged close to 14% on Friday after the company announced positive results from early-stage trials for its once-weekly obesity treatment, amycretin.

The drug showed an average weight reduction of 22% in overweight and obese patients after 36 weeks, a stark contrast to the 2% weight gain observed in the placebo group.

The promising results pushed Novo Nordisk stock to its biggest one-day gain since August 2023, also pushing shares of rival Zealand Pharma by more than 6.5%.

However, the news weighed on Eli Lilly, whose shares dipped 0.86% in premarket trading, as investors speculated on the potential challenge to its obesity drug, Zepbound (Mounjaro).

Positive trial results highlight amycretin’s weight-loss potential

Amycretin, administered via injection, is designed to target two key hormones: GLP-1, mimicked by Novo Nordisk’s flagship obesity drug Wegovy, and amylin, which regulates hunger.

The recent trial, involving 125 participants, revealed significant weight-loss results, with most side effects reported as mild to moderate gastrointestinal issues.

Martin Lange, Novo Nordisk’s executive vice president for development, expressed optimism about the findings.

“We are very encouraged by the subcutaneous phase 1b/2a results for amycretin in people living with overweight or obesity,” Lange said, adding,

The results seen in the trial support the weight lowering potential of this novel unimolecular GLP-1 and amylin receptor agonist, amycretin, that we have previously seen with the oral formulation.

The company is also exploring an oral version of amycretin.

In early-stage trials last September, the pill demonstrated a 13.1% weight reduction after just 12 weeks, further bolstering Novo Nordisk’s expanding obesity treatment portfolio.

Novo Nordisk’s breakthrough heats up rivalry with Eli Lilly

Novo Nordisk’s latest breakthrough has reignited competition in the lucrative weight-loss drug market, where Eli Lilly’s Zepbound has enjoyed significant success.

However, Zepbound’s market dominance could face pressure, especially after Novo’s amycretin outperformed investor expectations, following the earlier disappointment of its obesity drug CagriSema.

The rivalry between the two pharmaceutical giants highlights the growing demand for innovative weight-loss treatments.

Eli Lilly faces additional challenges, including competition from emerging oral obesity drugs like orforglipron, which is undergoing Phase III trials and could rival Novo Nordisk’s high-dose Rybelsus.

Investors in Eli Lilly will be closely monitoring the progress of Novo Nordisk’s amycretin, as it represents a significant advancement in the competitive field of obesity treatment and could potentially impact Eli Lilly’s market share in this segment.

Where do analysts stand on Novo Nordisk stock?

Despite potential challenges, Novo Nordisk continues to command confidence from analysts.

Earlier this week, BofA Securities reiterated its “Buy” rating for Novo Nordisk, maintaining a price target of DKK 1,075.

The firm noted the company’s robust market position, with a market capitalization exceeding $650 billion and 27% revenue growth over the past year.

BofA Securities forecasts that Novo Nordisk’s fiscal year 2024 sales might hit the lower end of its guidance, falling short of consensus expectations.

However, the firm expects strong fiscal year 2025 guidance. They highlighted the critical role of first-quarter total prescription (TRx) trends in alleviating concerns over product demand.

BofA Securities outlined two key factors for investors to watch.

First, the clarification of the CagriSema profile from the REDEFINE-2 study could impact Novo Nordisk’s stock by 5-10%, depending on insights into why only 57% of patients in the initial study received the highest dose.

Second, the competitive threat from orforglipron, currently in multiple Phase III trials, presents a potential risk.

If the drug delivers in-line results, it could lead to a 5% drop in Novo Nordisk’s share price due to increased competition and the lack of a scalable oral obesity treatment strategy.

BofA analysts acknowledged short-term risks, including competition from orforglipron and questions surrounding CagriSema’s performance.

However, they emphasized that Novo Nordisk’s strategic focus on innovation and scalability remains a key driver of its market success.

The post Why Novo Nordisk surged 14% on new weight-loss drug results appeared first on Invezz

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