Novo shares rise: cheap copy of its drug fails to survive criticism from US regulator

Shares of Novo Nordisk - the Danish maker of weight loss drugs Wegovy and Ozempic - were up more than 8% at a moment's notice in Europe in trading on February 9. This came after the U.S. Food and Drug Administration (FDA) threatened restrictions on telemedicine Hims & Hers, which first launched a copy of Novo's drug on the market and then - after the FDA statement - withdrew its pill from the market, writes CNBC.

Hims & Hers announced Feb. 7 that it will stop selling a copy of Novo's weight-loss drug. Hims & Hers had planned to sell this compounded tablet version of the popular weight-loss product - a drug that pharmacies make themselves based on the active ingredient, bypassing patent protection for the original product at a time of shortages - at a price starting at $49, about $100 cheaper than the brand-name drug that Novo sells directly to consumers through the NovoCare platform.

The company's announcement follows Novo Nordisk and the FDA threatening Hims & Hers with litigation. On Friday, February 6, the FDA said it intends to take "decisive steps" to curb unlicensed drug duplication practices by compounding pharmacy companies, including Hims & Hers. "These measures are intended to protect consumers from drugs whose quality, safety, and efficacy FDA cannot confirm," the regulator said in a statement. Violations could lead to legal action, the regulator added, emphasizing that "companies may not claim in promotional materials that unapproved FDA compounded products are generics or equivalent to FDA-approved drugs."

Novo Nordisk's American depositary receipts in the U.S. added a little more than 5% at the premarket on February 9 amid the news. They have lost more than 6% since the beginning of the year. News of a $49 copy of Wegovy last week brought down shares of both Novo Nordisk and its key rival Eli Lilly. In contrast, Hims' stock rose sharply on those reports last week, but then squandered some of the gains after Novo threatened the company with legal action and the FDA with proceedings. Hims & Hers stock lost more than 20% on the premarket on February 9, while shares of Novo's U.S. rival Eli Lilly rose 2%.

Novo's best-selling drug based on semaglutide, the active ingredient in Wegovy and Ozempic, has previously faced supply disruptions in both the US and Europe. Early in the boom of GLP-1 class drugs (diabetes and obesity drugs) in 2022, demand far outstripped supply. Since then, Novo has ramped up production capacity, including by buying contract pharma maker Catalent in 2024 for $16.5 billion, and eliminated supply constraints. No shortages have been reported for the tablet form of the drug, launched in January this year.

In addition, Novo Nordisk previously warned that its revenue could decline by 5-13% in 2026 due to increased competition for Ozempic and Wegovy, as well as pricing pressure in the US.

"Hims & Hers has made a provocation [in the market], and we believe it could lead to increased scrutiny of the company's entire GLP-1 drug compounding business, not just one pill," the Wall Street Journal quoted SEB analysts as saying. SEB estimates that other GLP-1 compounding players could also come under greater regulatory scrutiny.

"Overall, we view what is happening as a positive for Novo," the analysts conclude.

February 9, Barclays maintained neutral recommendation on Novo Nordisk shares and left unchanged the target price of 360 Danish kroner. Its assessment implies the potential growth of the securities by 21.6% relative to the closing price on February 6. The majority of analysts following Novo securities - 12 out of 23 - recommend to buy securities of the Danish pharmaceutical producer, nine advise to keep them in the portfolio and only two - to sell.

Most analysts have a neutral stance on Hims & Hers shares, with 12 of the 19 analysts covering the company advising to hold the stock. Five recommend buying and two recommend selling.

This article was AI-translated and verified by a human editor