Pfizer Inc. (NYSE: PFE) announced on 26 June 2023 that it is discontinuing further development of the weight loss drug lotiglipron, which could be a serious competitor to Wegovy from Novo Nordisk A/S (NYSE: NVO). This presents a great opportunity for the Danish pharmaceutical company to strengthen its position in the weight loss market.
Today we will talk about Novo Nordisk A/S, as well as Wegovy and the reasons behind its popularity. We will analyse the performance of the corporation’s stock and examine its prospects.

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Novo Nordisk in brief

Established in Denmark in 1923, Novo Nordisk A/S develops medications for the treatment of diabetes mellitus, haemophilia, growth disorders, obesity, and other diseases. The corporation has subsidiaries in over 80 countries and sells its products in more than 170 countries.

Rising obesity rates in the US

The World Health Organisation defines obesity as a body mass index equal to or greater than 30. According to the Trust for America's Health (TFAH) annual report on the obesity crisis, published in September 2022, 41.9% of American adults are obese, and this rate continues to rise across the US. It is projected that by 2023, nearly half of the population of the US (48.9%) will be overweight, with 24.2% suffering from severe obesity. This situation is driving demand for drugs to combat obesity and related diseases.

Who is Novo Nordisk’s primary competitor in this segment?

As mentioned above, Pfizer Inc. discontinued the development of lotiglipron due to repeated cases of elevated liver enzymes in patients. Investors reacted negatively to this news with Pfizer Inc. stock losing 3.7% on 26 June 2023. By 11 September, the time of writing, the stock value had decreased by 10.5%.

Pfizer Inc. stock chart
Pfizer Inc. stock chart*

Today, Eli Lilly and Company (NYSE: LLY) is Novo Nordisk A/S’s main competitor in the weight loss medication market. The shares of both representatives of the pharmaceutical sector are trading at historic highs.

What has fueled the demand for Novo Nordisk’s Wegovy?

Wegovy, a weight loss drug taken once a week as an injection, gained approval from the Food and Drug Administration (FDA) in June 2021.

It contains semaglutide, which suppresses appetite and boosts metabolism. Clinical trials have demonstrated its high efficacy, resulting in a 15% weight reduction when combined with a diet and physical exercise.

The effectiveness of Wegovy has boosted the demand for the drug in the US and other countries. Additionally, enthusiastic reviews on social media contributed to increasing its popularity.

On 8 August 2023, Novo Nordisk A/S announced positive results from a large-scale clinical trial named SELECT, which investigated the effects of Wegovy on cardiovascular health in obese people. The trial enrolled 17,604 overweight or obese adult patients with established cardiovascular disease.

The research showed that Wegovy reduced the risk of heart attacks, strokes or death from cardiovascular problems by 20% compared to a placebo. This was the first research to prove that a weight loss drug can prevent serious health complications in obese people.

On the day the official press release was published, Novo Nordisk A/S stock added 17.2%, rising to 189.17 USD per unit. It is worth noting that the use of Wegovy not only to combat overweight but also to treat obesity-related diseases could significantly increase order volumes.

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Novo Nordisk ramps up Wegovy production in response to soaring demand

Novo Nordisk A/S CEO Lars Fruergaard Jorgensen said that in terms of Wegovy orders, the company is dealing with almost a billion potential customers worldwide, referring to people with existing or potential overweight problems.

On 12 June, the company published a press release, announcing that Novo Nordisk A/S is investing 15.9 billion DKK in expanding its manufacturing facilities. The company is concerned that even with this step, it may not be enough to meet the rising demand for Wegovy in the near future.

To solve the problem of Wegovy shortage in the UK, it was decided to make it available through a controlled and limited launch programme. In the US, Novo Nordisk A/S had previously implemented restrictions on the supply of Wegovy initial doses to ensure the continuity of the treatment cycle for existing patients.

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Novo Nordisk strengthens its position in the weight loss market

On 10 August 2023, it was announced that Novo Nordisk A/S is acquiring Inversago Pharma, which is developing the INV-202 drug that suppresses appetite in patients with metabolic syndrome. It has successfully passed the first phase of clinical trials and is currently in phase 2. The deal’s value could reach up to 1.08 billion USD and will depend on whether specific development and launch milestones are achieved.

This deal could be advantageous for both companies: Novo Nordisk A/S gains access to the potentially first-in-class obesity treatment, while Inversago Pharma receives financial support and the expertise of the leading player in the diabetes and obesity drug market.

Novo Nordisk live stock price chart

Novo Nordisk

Novo Nordisk stock analysis

Novo Nordisk A/S stock chart shows an impressive movement and remarkable ability not to respond to the stock market turmoil. Since the beginning of 2017, the stock prices have surged by over 550%, while the global crisis caused by the COVID-19 passed without negative consequences for the company’s stock. Perhaps this can be explained by the fact that Novo Nordisk A/S represents the pharmaceutical sector, which saw robust demand for drugs at that time.
From January to October 2022, the S&P 500 (US500) stock index plunged 27%, Dow Jones (US30) dropped 22%, and Nasdaq 100 (NAS100) tumbled 37%. This is how market participants reacted to the tightening of monetary policy by the Federal Reserve System and the launch of a quantitative tightening (QT) programme. Over this period, Novo Nordisk A/S shares lost less than 5%, following which their value continued to rise.

Novo Nordisk A/S stock chart
Novo Nordisk A/S stock chart*

In September 2023, Novo Nordisk A/S stock is trading within an ascending channel. On 5 September, the price once again broke through the resistance level, hitting a new all-time high of 197.54 USD and heading towards the upper line of the channel at 200 USD.

Novo Nordisk A/S stock chart
Novo Nordisk A/S stock chart*

The fact that the stock value is moving closer to the upper line of the channel signals a potential correction, implying a price decline. This scenario is also supported by the divergence on the MACD indicator. If the quotes fall, the stock could reach the trend line. On its way down, the price will have support levels at 190 USD and 170 USD.

Novo Nordisk A/S stock chart
Novo Nordisk A/S stock chart*

A breakout of the upper channel line will drive the quotes further up. This scenario is supported by Novo Nordisk A/S stock split with a 2-for-1 ratio, which is scheduled for 20 September. Following the split, the number of corporation shares will double while the price will halve. This is likely to broaden the circle of investors who can purchase Novo Nordisk A/S shares and contribute to further price growth.

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Thanks to the high demand for weight loss drugs, Novo Nordisk A/S revenue in the first six months of 2023 increased by 29% from the corresponding period of 2022. Operating profit and net profit increased by 30% and 43%, respectively. Considering the ongoing shortage of Wegovy, the company’s management has revised their sales growth outlook for 2023 from 24-30% to 27-33%.

The popularity of products, potential revenue growth, user reviews, frequent mentions in the media, and the stock split – all these factors can attract more investors to the Danish company, which, in turn, creates conditions for possible rises in its stock value.

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* – Past performance is not a reliable indicator of future results or future performance.

The material presented and the information contained herein is for information purposes only and in no way should be considered as the provision of investment advice for the purposes of Investment Firms Law 87(I)/2017 of the Republic of Cyprus or any other form of personal advice or recommendation, which relates to certain types of transactions with certain types of financial instruments.