No silver bullet for Novo

Novo Nordisk has been under the weather for the past year, but the company’s prognosis just got even worse.

Today, shares of Novo Nordisk fell 5.58%, plummeting to a four-year low after the company said that a long-shot clinical trial for a highly anticipated Alzheimer's drug had failed to reach a key milestone, and that development of the treatment would be discontinued.

Novo was hoping that the key ingredient of its cash cow weight-loss drug—semaglutide—could be a two-hit wonder, helping cure Alzheimer’s as well as helping patients drop pounds.

But according to Novo’s trial, semaglutide didn’t make enough of a difference in patients to show it was working. Novo previously called the trials for the drug, a pill called Rybelsus, a “lottery ticket” in an effort to try to prepare investors for the unlikely possibility that the ingredient would help slow cognitive decline. But still, the trial was closely watched by analysts, given that if the drug had worked, it would open up an entirely new market for semaglutide usage.

Novo’s ailing year

While Novo was the first pharma giant to start distributing its ultra-popular GLP-1 drug Ozempic, it massively fumbled its first-mover advantage after a slew of supply chain problems. That allowed rival Eli Lilly to come out with its own similarly massively successful GLP-1 weight-loss drug, Zepbound, and steal Novo’s shine.

Since then, Novo hasn’t been able to get its mojo back: Novo’s share price has dropped 47.52% this year, it replaced its CEO, and it conducted mass layoffs as the company struggles to regain its footing. Meanwhile, arch rival Eli Lilly reached a record $1 trillion valuation on Friday after surging 38.28% year to date.

But some analysts argue that today’s selloff was melodramatic, given Novo had told everyone the trials were a long shot. In fact, most analysts covering the stock still gave Novo Nordisk an “overweight” rating. There’s also still hope that GLP-1 drugs could be used to prevent other kinds of medical conditions like heart attacks and strokes.

But it's too early to call a comeback quite yet.—LB