Novo Nordisk shares slide after rare miss on obesity drug Wegovy sales

LONDON, Aug 7 (Reuters): Novo Nordisk on Wednesday trimmed its full-year profit outlook after reporting weaker-than-expected quarterly sales of its popular weight-loss drug Wegovy, stirring worries among investors about stiffening competition from Eli Lilly.
The results end a prolonged streak of positive earnings news from the first mover in the obesity drug race which has seen its value surge to more than $500 billion, making it Europe's most valuable listed company.
Novo shares, which have soared some 230 per cent since June 2021, fell as much as 7.7 per cent in early trading and were down 3.1 per cent by 0916 GMT, the fourth biggest faller on the broader STOXX 600 and within sight of their February lows.
Chief Financial Officer Karsten Munk Knudsen in an interview called the market reaction unsurprising, given the market's sensitivity to Novo's mega-blockbuster drug Wegovy.
Second-quarter profit also missed expectations, potentially deepening investor worries that Novo's dominance in the fast-growing obesity drug market - which some forecast could be worth about $150 billion by the early 2030s - is at risk as it races to expand capacity to meet runaway demand.
The soft second-quarter results are "in sharp contrast to the massive sales and earnings beats we have seen last year", said Markus Manns, a portfolio manager at Novo shareholder Union Investment in Germany.
CEO Lars Fruergaard Jorgensen downplayed concerns over competition from US rival Lilly in a call with journalists, saying that he did not see those dynamics having a big impact on sales in the foreseeable future.
But CFO Knudsen said Lilly's recent entrance to the obesity market had forced Novo to cut prices of Wegovy, though he said this was expected.
Novo will continue restricting supplies of the lowest or starter dose of Wegovy to the US market to ensure patients who start treatment can continue, Jorgensen added.
The Danish company cut its operating profit growth forecast this year to between 20 per cent and 28 per cent in local currencies from 22 per cent to 30 per cent previously.
Operating profit in the quarter rose 8 per cent at constant exchange rates to 25.9 billion Danish crowns ($3.8 billion) compared with the 27.3 billion crowns forecast by analysts in a LSEG poll.
Sales of Wegovy, Novo's first-to-market weight-loss drug, rose 53 per cent to 11.66 billion crowns, well below the 13.54 billion crowns expected by analysts, while sales of Ozempic, a diabetes drug with the same active ingredient, also just missed expectations.
An adjustment of rebates related to estimates the company made on last year's sales hit net sales of Wegovy in the second quarter, CFO Knudsen said, calling it a "quarterly blip".
Novo ended an advanced kidney disease trial in June, resulting in a 5.7 billion Danish crown impairment loss which it said impacted operating profit.
Nevertheless, Novo raised its sales growth outlook for this year to between 22 per cent and 28 per cent in local currencies from 19 per cent to 27 per cent previously.
Jorgensen said on the media call that the upgrade showed Novo is comfortable in its ability to further ramp up supply, without giving details.
Analysts from Barclays and Citi both said that although the second-quarter numbers were weaker than expected, Novo's statements on boosting Wegovy production were reassuring.
Novo is spending billions of dollars to lift Wegovy production to meet runaway demand and fend off Lilly, which launched its rival therapy Zepbound in the US last December.
Though Novo and Lilly are now going head-to-head with obesity treatments in a number of markets including Britain and Germany, the most lucrative one by far is the US, where more than 70 per cent of adults are obese or overweight.
The lowest of five dose strengths of Wegovy is still in shortage, according to the US Food and Drug Administration website, which was updated late on Tuesday to show two more dose strengths were now available.
On Friday, the FDA updated its website to say Lilly's Zepbound was available, but it did not remove the drug from its shortage list. It said in a statement it was working with Lilly to confirm supplies were stable.
Lilly will release quarterly numbers on Thursday.
Novo said it had withdrawn its submission to US and European regulators for approval of Wegovy to treat heart failure and kidney disease, and plans to resubmit with more data at the start of 2025.