The largest speaking level within the pharmaceutical business in the intervening time revolves round remedies often known as glucagon-like peptide-1 (GLP-1) agonists. GLP-1 agonists are used to deal with diabetes and persistent weight administration, though analysis suggests these medicines might produce other purposes in areas akin to sleep apnea, kidney illness, and cardiovascular issues.
In the mean time, the most well liked GLP-1 remedy is Ozempic. Danish pharmaceutical chief Novo Nordisk (NYSE: NVO) is the brains behind Ozempic, in addition to sibling GLP-1 medicines together with Wegovy, Rybelsus, and Saxenda. You’d assume with such a strong lineup of choices surrounding one in every of healthcare’s largest alternatives, shares of Novo Nordisk could be hovering.
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Nevertheless, that is removed from the case. I’ll break down why a current piece of stories from Novo Nordisk brought on the inventory to tank. Furthermore, I am going to discover if now is a chance to buy the dip, or run for the hills.
What occurred with Novo Nordisk inventory?
On Dec. 20, Novo introduced outcomes from a section 3 scientific trial surrounding one of its new GLP-1 candidates, called CagriSema. The title CagriSema is solely an amalgamation of the 2 main elements within the drug: cagrilintide and semaglutide. Of observe, semaglutide is the main ingredient in Ozempic, Wegovy, and Rybelsus. Per the outcomes of the examine, sufferers who took CagriSema reached an averaged weight discount of as much as 22.7%.
As of Dec. 30, shares of Novo has declined by nearly 17% following the announcement of the CagriSema examine. Clearly, traders weren’t happy with the result of this trial.
Why is that this improvement vital?
You are most likely questioning why traders reacted the way in which they did following Novo’s newest scientific replace. In my eyes, there are two principal causes:
- Novo’s administration had set a benchmark of 25% common weight discount for the CagriSema examine. As talked about, all the inhabitants of sufferers taking CagriSema solely skilled a couple of 23% discount in weight. It is very important observe, nevertheless, that roughly 40% of sufferers “reached a weight lack of 25% or extra.”
- The second motive I believe traders had been spooked by the CagriSema outcomes is expounded to a current examine revealed by Novo’s high rival within the weight reduction area, Eli Lilly. Lilly is the maker of GLP-1 remedies Mounjaro and Zepbound. For comparability’s sake, Mounjaro is basically Lilly’s reply to Ozempic, whereas Zepbound is the corporate’s response to Wegovy. In a examine revealed on Dec. 4, Lilly discovered that sufferers taking Zepbound skilled a mean weight discount of 20% versus those that took Wegovy reached a mean weight lack of roughly 14%. When taking these figures into consideration, there’s an argument to be made that CagriSema is not superior to Zepbound, main some traders to query the power of Novo’s scientific pipeline.
Picture supply: Getty Photos.
Is Novo Nordisk inventory a purchase proper now?
On the floor, the outcomes from the CagriSema trial seem underwhelming. However as I usually encourage traders to do, it is vital to zoom out and contemplate the larger image.
In a examine from 2021, sufferers taking semaglutide skilled a mean weight discount of 14.9% over the course of a 68-week trial interval. So though CagriSema fell wanting its objective within the section 3 trial, there’s an argument to be made that it’s nonetheless a stronger remedy when benchmarked towards semaglutide (i.e., Wegovy and Ozempic).
To me, I see the precipitous sell-off in Novo inventory as emotional, panic-driven conduct. On the finish of the day, I believe CagriSema will turn into a blockbuster drug for Novo in the long term. For now, the corporate merely wants to return to the drafting board and tweak a few of its analysis and improvement (R&D) protocols so as to enhance CagriSema’s efficacy earlier than it reaches approval from the Meals and Drug Administration (FDA).
Proper now, Novo inventory is buying and selling at a forward price-to-earnings (P/E) a number of of twenty-two.5 — its lowest stage in properly over a yr. I believe now could be a terrific alternative to scoop up shares of Novo on the dip and decrease your price foundation if you happen to’re an present investor, or provoke a place if you happen to’ve been following the corporate for some time.
All informed, Novo’s long-term thesis nonetheless holds up, and I believe the corporate will stay a frontrunner within the GLP-1 area for years to return.
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Adam Spatacco has positions in Eli Lilly and Novo Nordisk. The Motley Idiot recommends Novo Nordisk. The Motley Idiot has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the creator and don’t essentially replicate these of Nasdaq, Inc.
