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Novo Nordisk passes $500 billion value on Wegovy frenzy

Danish drug maker has struggled to keep pace with demand for Wegovy and Ozempic products

The Novo facility where the weight-loss medication Wegovy is produced. Photograph: The New York Times

Wed Jan 31 2024 - 10:44

Novo crossed the milestone on Wednesday as its shares gained as much as 4.1 per cent, reaching a level only attained by Dior owner LVMH.

The Danish pharma company has roared past the luxury-goods giant, vaulting into the limelight as Wegovy for obesity and a sister medicine for diabetes, Ozempic, proved they could help people shed unwanted weight by curbing their appetite.

The company’s earnings sparked fresh optimism as the drug maker said revenue could grow by as much as 26 per cent this year and operating profit by up to 29 per cent at constant exchange rates. The guidance looks conservative, according to Bloomberg Intelligence analyst Michael Shah.

The drug maker has struggled to keep up with demand for both Wegovy and Ozempic, which share the same active ingredient. On Wednesday, it said it has more than doubled the number of Wegovy starter doses it is shipping to the US, enabling more people to get on the treatment.

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The company announced $8.7 billion (€8 billion) in investments last year to beef up its manufacturing capacity.

Whether that translates to long-term sales will depend on two factors: competition from Eli Lilly’s Zepbound, introduced late last year, and how long people are willing to keep taking the medicine.

Novo shares have gained 60 per cent in the past year, fuelled by the obesity frenzy. They rose as much as 4.1 per cent in Copenhagen trading on Wednesday. The returns contrast with those of Swiss drug maker Novartis, whose stock fell amid concern about its growth prospects.

Some analysts are sceptical that Novo’s performance can last. The shares are expected to decline around 3 per cent over the next 12 months, according to data compiled by Bloomberg.

“Novo remains our least preferred based on valuation and long-term trends,” Jefferies analyst Peter Welford wrote in a note Wednesday. According to UBS’s Jo Walton, “great expectations” for the drug maker are already reflected in its valuation.

With Lilly’s arrival into the market Novo pioneered, the Danish company warned of “intensifying competition.” It also said it expects pressure on the price of its drugs for obesity and diabetes.

US insurers are pushing back against rising costs for weight-loss treatment. North Carolina is cutting off coverage of drugs like Wegovy for state employees after its state health plan spent $100 million (€92 million) on the medicines last year, potentially a harbinger of what is to come as payers seek to negotiate over prices.

[ Ozempic and Wegovy maker Novo Nordisk set to build large manufacturing facility in Dublin ]

Key to winning broader coverage are the results of a large study, released last year, that showed Wegovy could help reduce the risk of strokes and heart attacks in overweight people with existing heart disease.

The drugmaker has sought regulatory approval for a label change that would allow Wegovy to be prescribed to patients like these. The US Food and Drug Administration granted priority review for the request.

The medicine also succeeded in helping relieve obese patients’ pain from knee arthritis in a clinical trial, the company said Wednesday.

Profit last quarter surged 62 per cent to 22 billion kroner (€2.9 billion) at Novo, in line with analysts’ estimates. Sales of Wegovy, at 9.6 billion kroner (€1.3 billion), were below expectations amid supply constraints. – Bloomberg

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