Novo Nordisk's Weight Loss Drug Wegovy Faces Sales Slump, Sparking Investor Concerns

Danish pharmaceutical giant Novo Nordisk's star weight loss drug, Wegovy, saw its quarterly sales fall short of expectations, triggering investor concerns that the company's first-mover advantage in the weight loss drug market is at risk and will face fiercer competition.

Novo Nordisk announced its second-quarter results on Wednesday, with both operating profit and net profit falling below expectations. The company also revised its full-year operating profit forecast.

In the three months ending June, operating profit rose by 8% to 25.9 billion Danish kroner ($3.8 billion), missing analysts' forecast of 27.3 billion Danish kroner; net profit was 20.05 billion Danish kroner ($2.93 billion), while the median analyst forecast was 20.9 billion Danish kroner.

Wegovy, Novo Nordisk's weight loss drug, saw a 53% increase in sales in the second quarter, reaching 11.66 billion kroner, well below the consensus expectation of 13.54 billion kroner compiled by analysts, but still higher than the first quarter's 9.4 billion kroner.

Adjusting the Full-year Forecast

Compared to the first quarter of this year, when Novo Nordisk's net profit grew by 28% year-on-year to 25.4 billion Danish kroner and the company slightly raised its sales and operating profit growth forecasts, the latest results show a decline.

On Wednesday, Novo Nordisk once again raised its full-year sales growth forecast, with the current 2024 full-year sales growth forecast at 22% to 28%, compared to the previous forecast of 19% to 27%.

However, the company has revised its 2024 operating profit forecast, now expecting a growth rate of 20% to 28%, rather than the previous forecast range of 22% to 30%.

Novo Nordisk pointed out that the company is undertaking a manufacturing capacity expansion, and the associated costs have weighed on the profit for the quarter. The company is investing heavily in increasing the production of Wegovy to meet the growing demand and compete with Eli Lilly, which launched Zepbound, a competitor to Wegovy, in December last year in the United States.

Greater Competitive Pressure

Since Novo Nordisk first launched Wegovy in the United States in June 2021, the company's stock price has risen by about 230%, but it has fallen by 21% since reaching a high in June this year.

Currently, Novo Nordisk is facing increasingly fierce competition in the weight loss drug field, from both small companies and giants like Eli Lilly and Roche. Novo Nordisk's first-mover advantage in the rapidly growing obesity drug market is at risk.

Last month, Roche announced early trial data for its weight loss drug candidate, CT-996. The trial data showed that obese patients lost an average of 6.1% of their body weight after taking CT-996 tablets for 4 weeks. Based on the new data, the market is optimistic about Roche's prospects, which is a warning signal for Novo Nordisk.

Fortunately, in recent months, Novo Nordisk's weight loss drug Wegovy has also received encouraging news. The drug was approved in China in the second quarter of this year, opening the door to sales in the world's second-largest economy; medical regulatory agencies in the UK and the EU have also expressed their support for Wegovy, believing it can reduce the risk of serious heart disease in overweight and obese adults.