Novo Nordisk’s Stock (NVO) Making Jekyl and Hyde Moves – What is the Latest?

Novo Nordisk's (NYSE: NVO) stock price is up more than 4.5% in early trading today, after falling more than 17.5% in Friday's session. This type of Jekyll and Hyde behaviour can be expected at times in pharma stocks, but not as often in those that hold hundreds of billions of dollars in market cap. What is the latest from the DKK 2 trillion ($287 billion) valued firm?

As is often the case in pharma moves, trial results have caused the swing when weight-loss drug CagriSema, underperformed expectations in its Phase 3 trials, falling short of the company's target. The drug was aimed at achieving at least 25% weight loss among participants, but only reached an average of 22.7% weight loss.

The results were particularly disappointing when compared to Eli Lilly's (NYSE: LLY) Zepbound, which demonstrated a weight loss of at least 24% in similar trials.

CagriSema represents a new approach for Novo Nordisk, combining semaglutide, the active ingredient in Wegovy, with cagrilintide to enhance weight loss efficacy. Despite this innovative combination, the results still lagged behind Zepbound, which received FDA approval on November 8, 2023. Zepbound, a drug by Eli Lilly, targets both GLP-1 and GIP receptors, offering greater efficacy in weight reduction compared to the GLP-1 agonist approach employed by Wegovy.

Wegovy, released in 2021, achieved a 16.1% average weight loss in trials, indicating that CagriSema's performance, while improved, still did not meet the company's ambitious objectives. The underperformance of CagriSema could pose a threat to Novo Nordisk's competitiveness in the weight-loss drug market, where Eli Lilly's Zepbound is expected to disrupt Wegovy's sales considerably upon its release.

With Novo Nordisk's stock price trading at DKK 639 ($85), there remains significant perceived upside according to some of the latest analyst price targets on the street. Handelsbanken recently upgraded their price target to DKK 1,000, along with an upgrade in rating to Outperform (from Market Perform). Barclays lowered their target to DKK 900 (from 1050), whilst BMO lowered to $105.

This latest development highlights the competitive landscape of the weight-loss pharmaceutical market and the challenges that drug companies face when setting high targets for new medications. The outcome of CagriSema’s trials indicates that while progress has been made in weight-loss drug efficacy, meeting or exceeding new market expectations remains a difficult task.