Novo Nordisk's (NVO) Stock Plunge: Medicare Negotiations and CagriSema Trial Results

Novo Nordisk's (NVO) stock price took a significant hit on Friday, November 22, 2024, following two major announcements that impacted investor sentiment. The company's shares fell by more than 15%, marking the worst one-day drop in over 20 years and pushing the stock deeper into a bear market (Source: Seeking Alpha, "Novo Nordisk stock drops more than 15% after update on obesity drug"). The decline was driven by two key events: the U.S. Department of Health and Human Services' (HHS) announcement of Medicare price negotiations for Ozempic and Wegovy, and the disappointing results of the CagriSema phase 3 trial.



Medicare Price Negotiations
On Friday, the HHS announced that Ozempic and Wegovy are among 15 medications selected for Medicare price negotiations under the Inflation Reduction Act. This news marked the second cycle of negotiations aimed at lowering costs for some of the most expensive prescription drugs. The negotiations will take place this year, with the new prices set to take effect in 2027. The 15 drugs accounted for approximately $41 billion in total gross covered prescription drug costs under Medicare Part D between November 2023 and October 2024. This announcement pressured future revenues for Novo Nordisk, as it could lead to lower prices for these drugs in the future.

CagriSema Trial Results
Novo Nordisk also announced the results of its phase 3 trial for CagriSema, a combination of semaglutide and cagrilintide, on Friday. While the trial achieved its primary endpoint by demonstrating a statistically significant and superior weight loss compared to a placebo, the average weight loss of 22.7% after 68 weeks did not meet the company's target of 25% effectiveness set prior to the trials. This news was seen as disappointing by investors, as it fell short of expectations and raised questions about the drug's potential market impact.

The market reacted negatively to these announcements, with investors expressing concern about the potential impact on future revenues and the drug's market potential. Eli Lilly's stock, on the other hand, traded higher on the same day, as investors saw the results as a positive for their competing weight loss drug, Zepbound (Source: Seeking Alpha, "Novo Nordisk stock drops more than 15% after update on obesity drug"). The negative sentiment was also reflected in the significant sell-off of Novo Nordisk shares, with the stock falling by 20.8% at one point (Source: Seeking Alpha, "Bad news for Novo Nordisk Friday was good news for Eli Lilly and Viking Therapeutics").

In conclusion, the decline in Novo Nordisk's stock price following the announcement of the Medicare price negotiations and the disappointing results of the CagriSema trial could have long-term implications for the company's stock price and business. The potential long-term impact on the stock price includes changes in analyst ratings, price targets, and investor sentiment. The potential long-term impact on the business includes revenue and earnings growth, innovation and R&D, market position, and regulatory risks. As Novo Nordisk navigates these challenges, it will be crucial for the company to adapt its strategies and strengthen its position in the market.