A new drug from the creator of Ozempic has helped people lose weight. Is it time to buy stocks?
Novo Nordisk reported that its new experimental drug helped people lose weight and improve blood sugar levels in trials. The positive news contributed to the growth of the company's quotations by almost 5%. However, the shares of the Ozempic manufacturer have fallen in price by about 50% this year. Is it worth buying them in hopes of a reversal?
Details
A next-generation diabetes drug developed by Novo Nordisk helped lower blood sugar levels and reduce patients' weight in trials, the company said.
Patients who received injections of a drug called amicretin weekly lost up to 14.5% of their weight over 36 weeks. Those who received the drug orally once a day lost up to 10.1% of their weight, Novo reported. The company plans to begin late-stage trials of amicretin in patients with type 2 diabetes next year.
On this news, the company's shares rose by 4.8% at trading in Copenhagen. At the same time, since the beginning of the year Novo's capitalization has decreased by more than half due to investors' concerns about its ability to compete with other companies in the market of obesity drugs, Bloomberg notes.
Why it's important.
The maker of Ozempic has ceded leadership in the fast-growing obesity market to US-based Eli Lilly and now needs a new generation of drugs to improve its competitive position. Amicretin is a key element of this strategy: it combines two weight-loss mechanisms in a single molecule, Bloomberg writes. The fresh study results could be a positive signal for the company's future portfolio after the failure of the tablet version of Ozempic against Alzheimer's disease crashed Novo's stock the day before, Nov. 24, Bloomberg notes.
Novo's development compares favorably with Lilly's competitors - Zepbound injections and the next-generation drug orforglypron in tablet form - but it is difficult to compare them directly because of differences in clinical trial design, Bloomberg Intelligence analyst Michael Shah said. Patients in the Novo study were initially overweight and may have initially had an easier time losing weight, the agency explained.
Amicretin had less effect on blood sugar levels than Lilly's drugs in their large late-stage trials, Shah said. However, detailed trial data, including a description of side effects, will be crucial, Bloomberg notes.
What are the analysts saying?
After disappointing results of Ozempic's study against Alzheimer's disease, Intron Health analysts lowered their target price on Novo Nordisk shares from 270 to 230 Danish kroner, maintaining a "sell" recommendation. The new target implies a 20% drop in the stock relative to the last closing price.
HSBC downgraded its recommendation on Novo Nordisk shares from "buy" to "hold" and lowered its target price from DKK 445 to DKK 300. The bank's assessment implies a 4.5% growth in the company's shares.
AlphaValue/Baader Europe also noted that there is now "extremely unfavorable" investor sentiment surrounding Novo Nordisk, which has been exacerbated by the failure of trials for the Alzheimer's disease drug. However, the analysts emphasized that only Novo and Eli Lilly continue to dominate the rapidly growing market for obesity drugs. They also noted that Novo has a very strong product portfolio in the field of obesity therapy, which will allow the company to retain a solid market share even as competition intensifies.
Analysts at AlphaValue/Baader Europe maintained their recommendation to buy Novo shares, but lowered their target price from DKK 590 to DKK 561. Their estimate implies a 95.5% growth in the stock.
Most analysts, in general, recommend Novo securities to buy - it has 12 such ratings out of 21. Seven advise to keep the securities in the portfolio and two advise to sell them.
This article was AI-translated and verified by a human editor
