Wegovy's "Greatest Showman" Tune Used to Have Wall Street Humming Along... Not Anymore (-8%)

Novo Nordisk, the Danish pharma giant that once had investors humming along to their Greatest Showman-esque commercial, is now having to face the music. Turns out they’re up against fierce competition that’s causing their profits to go down the drain.

So what do the numbers tell us? Novo Nordisk reported net profits of $1.86 billion for the second quarter of 2024. While that might sound like a lot of cheddar for a pharmaceutical company, it’s only a 3% increase from last year and still short of the $2 billion analysts had predicted. Sales were just shy of $10 billion, missing the $10.1 billion target. 

The real catalyst here is the increasing competition in the weight loss drug market. Hollywood stars and their obsession with shedding pounds at any cost have propelled weight loss drugs like Wegovy and Ozempic center stage. These GLP-1 drugs, which help control blood sugar and appetite, have been Novo’s bread and butter. But now, the secret is out and other players are muscling in.

Companies like Hims & Hers and Viking Therapeutics are stepping into the ring with their own heavyweight contenders. Over at Pfizer, scientists are licking their lips as they work on their own oral GLP-1 drug—a potential cannon ball splash if it hits the market. Naturally, this is causing analysts to rethink their stock estimates, wondering if Novo can keep its king of the hill status with the tough new competition.

To make matters worse, Novo Nordisk has been grappling with supply constraints. Three out of five available Wegovy injection doses are still listed as being in short supply in the U.S. It’s like hitting 300 yard bombs with your drive into the middle of the fairway only to chunk your wedges short of the green – pretty frustrating for everyone involved. The FDA blames this on the crazy demand for the drug, a nice problem to have until you start losing sales because you can’t keep up.

Analysts were banking on Wegovy sales hitting the $2 billion mark, but Novo fell short with just $1.7 billion. Ozempic, their diabetes wonder drug, didn't fare much better, barely missing the $4.4 billion target. As a result, Novo had to dial back its profit expectations for the year, now eyeing growth between 20% to 28%, down from the rosier forecast of 22% to 30%. 

(Source: NY1)

Novo Nordisk's path to profits isn’t getting any smoother. Despite being a heavyweight in the weight loss and diabetes drug markets, challenges are piling up. They've been throwing money at research and development to stay ahead, working on an oral version of semaglutide for weight loss. But producing it is tougher than explaining cryptocurrency to your grandma, and Novo is already struggling to keep up with demand.

In true Michael Scott style, CEO Lars Fruergaard Jorgensen is putting on a brave face, downplaying competition from Eli Lilly like it's no big deal. But let’s be real, U.S. patients are only sticking with Wegovy for about six months, mainly because of limited availability. It's like trying to keep diners loyal to a restaurant that constantly runs out of its famous banana pudding – eventually, they’ll just go somewhere else.

And Wall Street? Well they’re not taking too kindly to the news considering the stock is down 8% today.

Stock.News does not have positions in companies mentioned.