Novo Nordisk (NVO), known for its successful weight-loss medications, faced harsh scrutiny following the release of underwhelming results from its trial of CagriSema, its next-generation obesity drug. Investors were shaken, with the company's stock plummeting 17.8% to $85 on December 20, 2023, reflecting the market's disappointment and driving down Novo's valuation by as much as $125 billion.
The Phase 3 trial aimed to demonstrate superior weight loss compared to existing treatments. It reported an average weight loss of 22.7% over 68 weeks. While this figure is noteworthy, it fell short of Novo's previous projection of 25% weight reduction, and it paled compared to the results from Eli Lilly’s (LLY) tirzepatide, marketed as Zepbound, which has been gaining traction due to its efficacy.
According to UBS analyst Trung Huynh, the data is seen as validating tirzepatide's position as best-in-class for obesity treatment. "CagriSema's results show it is mostly on par with MariTide from Amgen as both appear to have similar efficacy, which diminishes CagriSema's attractiveness," Huynh stated.
CagriSema combines semaglutide—the active ingredient behind Novo's Wegovy—with another molecule known as cagrilintide. While semaglutide works by mimicking the GLP-1 hormone to reduce hunger and improve blood sugar, cagrilintide targets amylin, another hormone linked to food intake. Prior expectations for CagriSema were high, with executives like Martin Holst Lange expressing hopes it would provide "unprecedented weight loss."
After analyzing the recent results, market analysts expressed concerns, particularly about the medication's tolerability. Only 57% of patients reached the highest dose of CagriSema by the trial's end, compared to 83% for cagrilintide and 70% for semaglutide treatments. Both analysts and investors pondered the underlying reasons for such figures. Some speculated it might indicate significant gastrointestinal side effects—including nausea, vomiting, and diarrhea—that deterred patients from increasing their dosage.
The trial’s limitations reveal potential hurdles for CagriSema’s acceptance and consumer compliance. Notably, 40.4% of participants still managed to lose at least 25% of their body weight during the trial period, yet for many, reaching this threshold was not enough. Despite evidence of effectiveness, safety concerns have clouded investor sentiment, as marked by analyst comments about the key necessity of maintaining adherence to GLP-1 therapies.
CFRA analyst Wan Nurhayati outlined the sentiment shift, saying, "While we still expect Novo Nordisk to remain one of the market leaders, these disappointing results could negatively impact investor outlooks for some time." With the competition heating up, not only from Lilly but also Viking Therapeutics (VKTX), Novo’s market position appears precarious. Both Lilly and Viking stocks rose post-announcement, signaling the market’s shifting confidence.
Analysts also highlighted the comparative performance data of CagriSema against its competitor Zepbound. On average, Zepbound facilitated up to 25% weight loss for its users, leaving CagriSema’s unmet projections coming under scrutiny. Leerink Partners analyst David Risinger noted the uncertainty surrounding the potential for CagriSema to demonstrate superiority as it heads to head with Zepbound. "We are left questioning whether CagriSema will be competitive against these newer entrants," Risinger added.
The scandalous news for Novo continues as it was also revealed the company is set to commence another trial for CagriSema by the first half of 2025. How it will shape treatments for obesity remains uncertain. Investors are eager to learn what the next stages of research will look like, particularly as the company has not clearly outlined how it will address the issues observed during the last study.
Market analysts have emerged with different theories concerning participant responses. Some have suggested the lowered adherence was beyond intolerable side effects; patients could have deemed their weight loss sufficient and opted not to proceed to higher doses. Others speculate the side effects played a definitive role. According to Emily Field, managing director at Barclays, "Did Novo not meet the 25% weight-loss bar because of the 'good guy' patients satisfied with their weight loss or the 'bad guy' patients who faced intolerable side effects?"
With the upcoming trial likely becoming key for CagriSema’s potential acceptance in the rapidly advancing obesity drug market, all eyes will be on Novo’s plans for releasing comprehensive data and addressing the issues raised during its last trial. The current industry sentiment emphasizes caution, and it remains to be seen how Novo can regain investor trust and rectify its path moving forward.
