Novo Nordisk shares fall after Wegovy’s successor disappoints in study

Novo Nordisk on Friday revealed disappointing results in a late-stage trial for its experimental next-generation obesity drug CagriSema, wiping up to $125 billion from its market value.

The drug candidate’s lower-than-expected weight loss deals a blow to the Danish company’s ambitions for a successor to its weight-loss drug Wegovy that is more potent than Eli Lilly’s rival Zepbound, also known as Mounjaro.

Investors and analysts had eagerly awaited the data as proof of Novo’s case that it has a strong pipeline of drugs to follow Wegovy in the fiercely competitive anti-obesity market.

CagriSema’s trial showed that the drug helped patients reduce their weight by 22.7%, below the 25% that Novo Nordisk had expected.

Shares in Novo fell as much as 27% after the results were announced, hitting their lowest level since August 2023 in one of the biggest one-day wipeouts on record for a European company.

They fell by 20%.

Shares in US rival Lilly rose more than 5% in early trade.

‘Worst case scenario’

Novo said that if all people adhered to CagriSema treatment, patients overall achieved weight loss of 22.7% after 68 weeks, with 40.4% losing 25% or more.

CagriSema is a weekly injection that combines semaglutide, which is the active ingredient in Wegovy and mimics the gut hormone GLP-1, and a special molecule called cagrilintide that mimics the pancreatic hormone amylin.

Both hormones combined suppress hunger and help control patients’ blood glucose.

The results are a “worst-case scenario” for Novo, said Markus Manns, portfolio manager at mutual fund firm Union Investment, a Novo and Lilly shareholder.

“CagrisSema is as good as Zepbound, but more complex to manufacture,” he said.

Lilly’s obesity injection — sold as Zepbound in the United States — led to an average weight loss of nearly 23% in clinical trials.

Data from the Novo CagriSema Phase III trial were based on about 3,400 people with a body mass index (BMI) of 30 or more or people with a BMI of 27 and at least one weight-related comorbidity, such as hypertension or cardiovascular diseases.

Investor Manns said Novo’s management should have set more conservative targets, such as aiming for greater weight loss than Wegovy or the same as Zepbound.

“Predicting Phase 3 outcomes is more art than science. However, I think it was a strategic mistake to set such high expectations,” he said.

New trial

Martin Holst Lange, Novo Nordisk’s executive vice president for development, said Novo was “encouraged” by the data.

He said only 57% of patients in the trial reached the highest dose.

Alexander Jenke, a portfolio manager at Medical Strategy in Munich and a Novo shareholder, said this would indicate there were problems with tolerance among some patients.

He said there may have been higher rates of gastrointestinal adverse events such as nausea, vomiting and diarrhea.

Nordea analyst Michael Novod said patients may have discontinued the injections after achieving a satisfactory weight loss.

While the judgment missed expectations, the stock price reaction is overblown, Novod said.

“Despite the disappointing results, CagriSema is still the best weight loss reported in a Phase 3 trial,” he said.

The investors noted that the other two groups of patients in the trial, given either cagrilintide or semaglutide alone, had much higher percentages of patients reach the higher dose: 83% for the cagrilintide arm and 70% for semaglutide.

The company did not immediately respond to a request for comment on why more patients did not reach the higher dose.

Novo said in its statement that the drug had similar side effects compared to its GLP-1 drugs already on the market.

The most common adverse events with CagriSema were gastrointestinal, and the vast majority were mild to moderate and decreased over time, consistent with the class of GLP-1 receptor agonists, he said.

Novo Nordisk plans to start a new trial in the first half of next year to further explore CagriSema’s additional potential for weight loss, a Novo Nordisk spokesman said.

It expects to submit the drug for regulatory approval by the end of 2025.

Before the test results, analysts estimated that sales for CagriSema could top $20 billion.

The most advanced

Novo’s trial is the most advanced for an amylin drug candidate currently being tested on the market.

Shares in Danish drugmaker Zealand Pharma, which is testing a weight-loss drug candidate that also mimics the pancreatic hormone amylin, fell after the data.

Wegovy’s success helped Novo become Europe’s largest company by market capitalization, worth more than $460 billion.

Some analysts predict that the obesity drug market could be worth around $150 billion globally annually by the early 2030s.

Concerns that Novo could lose its first-mover advantage in the obesity drug race have sent its shares crashing this year.

Pressure to find a more potent successor to Wegovy grew after Lilly released data in early December from a late-stage trial that pitted Zepbound against Wegovy and showed that Zepbound was more effective.