Today’s sell-off in Novo Nordisk often is the shopping for alternative you’ve got been ready for.
Bad information for Novo Nordisk (NVO -17.83%) Friday was excellent news for Eli Lilly (LLY 1.35%) and Viking Therapeutics (VKTX 1.83%), its two important rivals within the area of weight reduction medicine. This morning, Novo reported headline outcomes from its section 3 trial of a brand new weight reduction drug, CagriSema, and whereas objectively not unhealthy, the outcomes had been much less nice than Novo was taking pictures for.
As of 11:05 a.m. ET, Novo Nordisk inventory is down a disheartening 20.8%, whereas each Lilly and Viking shares are up 4.4% apiece.
Novo Nordisk’s no good, very unhealthy day
Originally designed to deal with sufferers with diabetes, GLP-1 medicine like Novo’s Ozempic and Lilly’s Zepbound have taken on a brand new position in society because the go-to therapy for weight problems, and for simple weight reduction, usually. Novo hoped to broaden its lead on this market with its new providing, CagriSema, which fortifies the semaglutide ingredient in Ozempic with an amylin-focused drug that additionally goals to lower meals cravings.
The objective: to beat Ozempic’s file for 16.1% weight reduction amongst sufferers taking the drug over 68 weeks, by hitting a brand new goal of 25% weight reduction over the identical interval.
I will not maintain you in suspense. Novo missed that concentrate on. The firm’s Redefine 1 section 3 trial of CagriSema, containing each cagrilintide and semaglutide “achieved its major endpoint by demonstrating a statistically vital and superior weight reduction” relative to a placebo. However, common weight reduction over the course of the 68-week trial was solely 22.7% — not the focused 25%.
So that is the unhealthy information. The excellent news is that CagriSema does seem to have resulted in larger weight reduction than Novo’s authentic recipe Ozempic and higher weight reduction than Lilly’s Zepbound. (Viking’s personal weight reduction drug, VK2735, continues to be in trials.)
How unhealthy is that this information for Novo Nordisk inventory?
Investors in Novo Nordisk appear very sad with these outcomes whereas buyers in Lilly and Viking appear a lot happier, however ought to they be?
While you’d anticipate Novo to attempt to put a contented face on these outcomes, administration truthfully does not appear too upset.
“We are inspired by the load loss profile of CagriSema demonstrating superiority over each semaglutide and cagrilintide in monotherapy within the REDEFINE 1 trial,” mentioned Novo’s Executive Vice President for Development Martin Lange, noting that the corporate plans to “additional discover the extra weight reduction potential of CagriSema.” And when you think about that 40.4% of the sufferers taking part within the REDEFINE 1 research really did obtain 25% or larger weight reduction after 68 weeks (it is solely the common that fell wanting the mark), it might appear at the very least attainable that additional tweaking of the drug mixture may finally yield the outcomes Novo is in search of.
Image supply: Getty Images.
Is Novo Nordisk inventory a promote?
Meanwhile, immediately’s huge sell-off in Novo Nordisk inventory could also be giving buyers an sudden second chunk on the GLP-1 apple — an opportunity to purchase Novo inventory at a price-to-earnings ratio of barely 29. On a inventory anticipated to develop earnings at higher than 21% yearly over the following 5 years, and paying a modest 1.3% dividend yield in addition, that is not too way more than what I’d name a good valuation for Novo Nordisk shares.
When you take into account additional that Lilly shares are promoting for nearer to 82 occasions earnings (i.e., twice as costly), whereas Viking Therapeutics inventory has no earnings in any respect, and subsequently no P/E ratio on which to worth it, this all form of makes Novo Nordisk appear like the worth investor’s selection for investing in weight reduction medicine.
Crazy as it could sound to say it, immediately simply is perhaps good day to purchase Novo Nordisk inventory.
Rich Smith has no place in any of the shares talked about. The Motley Fool recommends Novo Nordisk and Viking Therapeutics. The Motley Fool has a disclosure coverage.
