Topline
Shares of pharma giant Novo Nordisk fell Wednesday after the Danish firm reported lower-than-expected profits for the second quarter and a slimmed-down profit outlook for the year, as it faces growing competition in the market for weight loss drugs and is under pressure to ease supply constraints.
Novo reported worse-than-expected earnings on Wednesday.
Key Facts
Novo Nordisk reported net profit of 20.05 billion Danish kroner ($1.86 billion) in the second quarter of 2024, below consensus analyst estimates but an increase of 3% from the same time last year.
The firm reported 68.06 billion Danish kroner ($9.97 billion) in sales and 4.5 Danish kroner ($0.66) earnings per share for the period, missing consensus analyst estimates of around $10.1 billion and $0.71, according to FactSet.
Sales are up 25% from the same time period last year, when Novo pulled in $7.9 billion in sales.
Novo’s performance was buoyed by booming demand for diabetes and weight loss drugs like Ozempic and Wegovy, the company’s branded injections containing the GLP-1 drug semaglutide, with Wegovy alone bringing in around $1.7 billion, up 55% from the same time last year.
Overall, Novo said the GLP-1 class made up nearly half (45%) of sales in the first quarter, around $5.4 billion, up 33% from the same time last year, and the company raised sales expectations for the full year from 19% to 27%.
However, Novo cut its operating profit outlook for the full year, expecting growth between 20% to 28% compared to earlier forecasts of 22% to 30%, and shares tumbled by nearly 7% during trading hours in Copenhagen, though they regained some ground and were down 4% around 4:30 a.m. EST.
Key Background
Booming demand for the latest generation of hormone-mimicking weight loss and diabetes drugs has elevated Novo Nordisk and its American rival Eli Lilly into the ranks of the world’s most valuable companies. Alongside Lilly, which sells the drug tirzepatide as branded diabetes and weight loss medications Mounjaro and Zepbound, Novo enjoys a practical duopoly over a class of drugs called GLP-1 agonists that help regulate blood sugar and appetite. The drugs can be used to help manage diabetes and have been shown to induce a degree of weight loss previously unattainable without surgery. A host of other benefits are also emerging, notably improving heart health, for which Novo has already secured a label expansion for, and there are signs GLP-1s may also be used to help treat or prevent conditions including sleep apnea, some cancers, addiction, Parkinson’s, dementia and kidney disease. But Novo and Lilly’s explosive growth has slowed dramatically in recent weeks as drug shortages in the U.S. and efforts to move into new markets weigh on sales forecasts.
Tangent
Three of five available Wegovy injection doses are still listed as being in short supply in the U.S., according to the Food and Drug Administration’s website. The drug has been on the FDA’s drug shortage list for more than two years and neither Novo nor the FDA give an indication as to when the issue will be resolved. The limited availability mostly affected the three smallest doses of Wegovy, which are typically used to start treatment. The FDA cites “demand increase for drug” as the reason for the shortage. All three doses for Ozempic are listed as “available” on the FDA site.
What To Watch For
Novo and Lilly are also facing stiff competition from rivals hoping to crack the GLP-1 drug market, which analysts estimate could be worth as much as $130 billion by 2030. In a bid to stay ahead of Lilly and other upstarts, Novo has been pumping record amounts into research and development. An oral version of semaglutide is already on the market for diabetes, called Rybelsus, and Novo is working on bringing a version for weight loss to market, though Novo’s opportunities in the field are limited as oral formulations require more of the active ingredient that is already struggling to produce enough of. Lilly, Roche and Pfizer are all among companies trying to bring GLP-1 pills—as well as other formulations—to market and promising clinical trial results have boosted share prices in recent weeks and months. Novo is also working on developing the next generation of GLP-1 drugs and its candidate to succeed Wegovy, CagriSema, has shown promise in clinical trials. Readout of a late-stage trial for the therapy is expected later this year.
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