Novo Nordisk beyond weight loss has investors wary, scientists hopeful

Novo Nordisk has had a tough year: Its stock price plummeted as investors turned their backs on the Danish drugmaker and its weight-loss business, leading to the biggest leadership change in the company’s 100-year history.

As the lucrative market attracts new players, investors appear to have largely given up on Novo’s ability to turn its breakthroughs in pioneering GLP-1 drugs into financial gains. But scientists say the drug still has potential.

What began with a focus on the drug’s ability to manage weight and blood sugar and combat related conditions such as heart disease is now expanding further with growing interest in how it might affect the brain.

Semaglutide, or better known as Ozempic and Wegovy, is a GLP-1 receptor agonist originally developed for diabetic patients to manage their blood sugar levels. However, as its appetite suppressant and weight loss properties became known, it began to be prescribed off-label en masse by doctors. Today, it is approved for anti-obesity purposes and generates billions of dollars a year for its manufacturer, Novo Nordisk.

Now the medical community is discovering a growing list of additional benefits of these drugs.

US Food and Drug Administration says “Wegovy promotes weight loss and potentially other mechanisms that are not fully understood” wrote In an August statement, it approved the drug to treat liver disease. Semaglutide has also been approved by regulators to reduce the risk of heart attack and stroke in overweight people with cardiovascular disease, as well as to treat chronic kidney disease in people with diabetes.

Meanwhile, a rival drug from a US competitor Eli LillyTirzepatide (known as Mountjaro and Zepbound), which targets the hormone GLP-1 as well as another gut hormone called GIP, is approved for the treatment of moderate to severe obstructive sleep apnea in adults with obesity.

But the benefits may not end there. Amid increasing competition, new formats such as pills as well as additional indications have become a new frontier for drug developers.

GLP-1s and the brain

Observational studies have shown that GLP-1s suppress not only cravings for food but also cravings for alcohol, tobacco, and recreational drugs because they affect the brain’s reward pathway. These drugs, which apparently alter dopamine signals in the brain, can reduce appetite and enable the individual to be more rational when faced with tempting options.

“There is interest in understanding the potential of semaglutide on a variety of brain functions,” Laura Nisenbaum, executive director of the Alzheimer’s Drug Discovery Foundation (ADDF), told CNBC.

“Understanding that inflammation and energy use in the brain will be very important for our normal cognitive function,” Nisenbaum said. He added, acknowledging that this connection would be useful in many different neurological and neuropsychiatric indications where changes or damage to the brain affect mood, behavior or cognition.

Emerging data suggest that semaglutide and the competing drug tirzepatide, manufactured by Eli Lilly, may be the first effective “anti-consumption” agents with the potential to treat binge eating, obesity, alcohol consumption, nicotine addiction, recreational drug use, and even uncontrollable shopping behaviors. to work It was found by researchers at Saint Luke’s Mid-America Heart Institute and the University of Missouri.

Another small scale randomized clinical trial found that low-dose semaglutide reduced alcohol consumption and significantly reduced appetite compared with placebo in patients with alcohol use disorder over nine weeks of treatment. The results justify larger clinical trials of incretin treatments for alcohol use disorder, the researchers said.

It wasn’t Alzheimer’s disappointment

Another potential additional benefit of this class of drugs may be how it interacts with the dementia process.

In November, Novo disappointed investors when it released data from a two-year clinical trial testing whether semaglutide slowed cognitive decline in Alzheimer’s patients.

Hopes were high that the drug could help people suffering from the most common form of dementia, as it had been observed in real-world studies that diabetic patients taking semaglutide developed Alzheimer’s at a lower rate than those who did not take it.

However, the late-stage trial failed to achieve its main aim and showed that semaglutide did not significantly affect cognition in Alzheimer’s patients. Novo said it would end the trial’s one-year extension due to the results.

But some scientists told CNBC that this shouldn’t be seen as a failure. Even if the results are disappointing, they say this is a well-conducted experiment from which the scientific community can learn.

“In the case of medication, it showed a negative outcome in this particular population,” said Ivan Koychev, an associate professor of neuropsychiatry at Imperial College London.

Semaglutide affects Alzheimer’s disease proteins in the right direction as seen in biomarker measurements, Koychev said. “They affect Alzheimer’s disease-associated proteins, reducing their amounts in the cerebrospinal fluid, suggesting that it directly interacts with alternative pathology.”

There was also an observed reduction in systemic inflammation biomarkers, according to Novo. “The idea is that this anti-inflammatory effect, if applied early enough in the disease process, you can significantly change the risk of dementia,” Koychev said. he said.

“The signal was always in the realm of prevention rather than treatment,” he added.

Similarly, Nisenbaum said the next useful step would be to test semaglutide and other GLP-1s early in the course of the disease as a preventive treatment.

Novo Nordisk said that all data from the trial had been reviewed, but that it was too early to speculate further about the effect of semaglutide on patients with dementia.

Science vs. Street

Although the innovations Novo is developing have the potential to significantly impact public health, many investors have turned their backs on the company over the past 18 months as its growth prospects have faced challenges.

Novo shares are having their worst year since listing on Nasdaq Copenhagen three decades ago. At its peak in mid-2024, the stock traded above 1,000 Danish kroner. Today it is trading around 320 kroner.

The stock’s 50% year-to-date decline is due to increased competition from US rival Eli Lilly and so-called pharmacies making knock-off versions of semaglutide cheaper. Amidst a flurry of hopeful new entrants, failure to convince investors that the pipeline will deliver significant financial gains is also adding to the pressure.

Even though analysts always said it was a long shot and Novo management called it a “lottery ticket,” the reading of Alzheimer’s trial data in November sent shares falling 5.8% on the day; which underlined its highly uncertain outcome.

Two Alzheimer’s drugs currently on the market, Eli Lilly’s Kisunla and Biogen/Eisai’s Leqembi, have been shown to slow the progression of Alzheimer’s disease by up to a third but carry the risk of serious side effects.

ADDF’s Nisenbaum said these drugs were studied 15 years ago and many negative studies were found during that period. “Each of them, we learned something in clinical trials that allowed us to understand our patients and then understand how to measure what was going on in them.”

“This is definitely a long-term play,” he added, hoping that semaglutide or other new drugs targeting risk factors could be used in combination with Kisunla and Leqembi.

But the market doesn’t see it that way, and there are many reasons for this.

First of all, investors’ time horizons are much shorter than the decades-long process typically required to bring a drug to market; This means that pharmaceutical development often conflicts with the faster pace of public markets. Adding new indications to a drug also takes time because they often need to be supported by lengthy clinical studies.

Second, semaglutide’s key patent expirations are in 2031 and 2032, which will give the green light to others to make generic versions of semaglutide.

“We don’t see a good argument for the valuation base,” Jefferies analysts said in late November, noting that Novo now enters the 5-year patent expiration window with no real moat.

“Lower U.S. prices may spur demand for additional volume and increase patient retention, but we do not view generics and compounding as being uncompetitive at these prices,” they added, rating the shares at Underperform.

The Trump administration’s pressure to lower drug prices for Americans and the threat of higher import taxes created additional problems for Novo, as well as many of its pharmaceutical industry peers, last year.

Goldman Sachs analysts led by James Quigley are slightly more optimistic. “We maintain a Buy rating on Novo Nordisk, continuing to believe there may be some volume opportunity for Novo as the obesity market evolves, with expectations resetting sharply downwards in near/mid-term forecasts,” they wrote in a note in late November.

“While Novo is unlikely to take a leading share, we still see opportunities for Wegovy, CallSema and Oral Wegovy to create value beyond what the market currently believes, although we recognize this will likely take time and evidence of an upside in scrips before investors lend money,” they added.