Novo Nordisk NVO disclosed top-line data from the phase 3 Redefine 1 study showing 20.4% placebo-adjusted weight loss for obesity drug candidate CagriSema after 68 weeks of treatment among patients who adhered to treatment.
Why it matters: Shares plunged roughly 20% on Dec. 20 as investors digested the news, which is a disappointment relative to Novo Nordisk’s expectation of 25% average weight loss.
- Novo is fighting to maintain share against competitor Eli Lilly’s LLY Zepbound, which yielded a similar 20.1% placebo-adjusted weight loss at 72 weeks in the Surmount-1 study and showed superiority to Novo’s approved obesity drug Wegovy in the Surmount-5 study.
- Novo’s patent protection on Wegovy (semaglutide) extends to 2032, but Medicare negotiation could begin as soon as 2027, and Novo needs innovative next-generation obesity drugs to extend its long-term growth.
The bottom line: We’re maintaining our fair value estimate of $86 per share for Novo, and we continue to think the firm’s history of reliable innovation and solid pipeline in cardiometabolic diseases support a wide moat. Following today’s decline, we think the shares look fairly valued.
- The unique design of the Redefine 1 study allowed patients to lower their doses if they encountered tolerability issues, which likely drove CagriSema’s top-line efficacy numbers below Novo’s expectations.
Coming up: The balance of power between Novo and Lilly in obesity will likely continue to bounce back and forth, based on significant pipeline data from both firms expected in 2025.
- For Novo, we expect phase 3 CagriSema data in patients with both obesity and Type 2 diabetes, as well as a head-to-head study against Zepbound, could help support future uptake. The promising combination drug amycretin will also have subcutaneous data and could move to pivotal studies.
- For Lilly, phase 3 data for oral GLP-1 orforglipron could extend momentum, and Zepbound’s pending approval in sleep apnea could extend reach to Medicare.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
