Novo Nordisk A/S (NYSE:NVO) revised its full-year profit outlook downward following weaker-than-expected quarterly sales of its popular weight-loss drug Wegovy. The disappointing results have raised concerns about increasing competition from Eli Lilly and Co. (NYSE:LLY).
The company’s shares, which have surged approximately 230% since Wegovy’s launch in June 2021, fell by up to 7.7% in early trading and were down 5.8% at 1410 GMT. This decline marks one of the most significant single-day drops for Novo Nordisk in two years and positions it among the largest decliners on the broader STOXX 600 index.
Chief Financial Officer Karsten Munk Knudsen acknowledged the market’s reaction as expected due to the high stakes surrounding Wegovy. The company’s second-quarter profits also fell short of expectations, contrasting sharply with the strong sales and earnings performances reported last year, according to Markus Manns, a portfolio manager at Union Investment in Germany, a Novo shareholder.
Novo Nordisk, like its U.S. rival Eli Lilly, is expanding its production capacity to keep up with high demand in the rapidly growing obesity drug market, which some estimates suggest could reach $150 billion by the early 2030s. Despite this, U.S. patients are averaging just six months on Wegovy, with low availability of the drug contributing to this short duration.
The company’s updated sales forecast for the year, now between 22% and 28% in local currencies, improved from a previous range of 19% to 27%. This adjustment was seen as a positive sign indicating that Wegovy supply issues are being addressed. However, Novo Nordisk continues to restrict the supply of the lowest or starter dose of Wegovy in the U.S., where it remains in shortage according to the U.S. Food and Drug Administration (FDA) website.
Novo’s CEO, Lars Fruergaard Jorgensen, downplayed concerns over Lilly’s competition, stating that current market dynamics are unlikely to significantly impact sales in the near term, despite ongoing high demand. CFO Knudsen noted that Wegovy’s U.S. prices were lower this year due to various anticipated factors, including price concessions to secure insurance access.
Wegovy, Novo Nordisk’s leading weight-loss drug, saw sales rise by 53% to 11.66 billion Danish crowns ($1.7 billion), but this fell short of the 13.54 billion Danish crowns expected by analysts. Sales of Ozempic, another drug with the same active ingredient, also missed expectations. The second-quarter results were further impacted by higher-than-expected rebates to U.S. pharmacy benefit managers, which Knudsen described as a “quarterly blip.”
Novo Nordisk reduced its operating profit growth forecast for the year to between 20% and 28% in local currencies, down from 22% to 30%. Additionally, the company recorded a 5.7 billion Danish crown impairment loss from ending an advanced kidney disease trial in June.
The company is investing heavily to boost Wegovy production and compete with Eli Lilly, which introduced its rival obesity treatment, Zepbound, in the U.S. last December. Both companies are now competing in various markets, with the U.S. being the most lucrative due to high obesity rates. Novo Nordisk also announced the withdrawal of its submission to U.S. and European regulators for Wegovy’s approval for treating heart failure and kidney disease, with plans to resubmit more data at the start of 2025.
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