NVO and LLY Stocks Drop: What's Behind the Slump?

Novo Nordisk (NVO) and Eli Lilly (LLY) stocks took a tumble today, with both companies reporting disappointing news that sent investors fleeing. Let's dive into the reasons behind the drop and what it means for these pharmaceutical giants.



Novo Nordisk (NVO) -19.76%

Novo Nordisk's stock price plummeted by nearly 20% today, following the announcement of results from the REDEFINE 1 trial for its new weight loss treatment, CagriSema. The trial demonstrated promising results, with CagriSema showing superior weight loss benefits over individual treatments like semaglutide and cagrilintide. However, the market reacted negatively due to concerns about the long-term efficacy and safety profile of the new drug.

The REDEFINE 1 trial showed that CagriSema led to a 22.7% weight loss after 68 weeks of treatment, compared to 11.8% with cagrilintide and 16.1% with semaglutide alone. Additionally, 40.4% of CagriSema patients achieved a weight loss of 25% or more. Despite these encouraging results, only 57% of patients managed to reach the highest dose of CagriSema by the end of the trial, which could limit its overall effectiveness.

Novo Nordisk's year-to-date (YTD) performance has been poor, with a 19.00% decline, contrasting with the OMX Copenhagen 25 Index's 5.02% YTD decline. The company's poor performance this year, coupled with the concerns raised by the REDEFINE 1 trial, has led to a significant sell-off in its stock.

Eli Lilly (LLY) -6.3%

Eli Lilly's stock fell over 6% today after it posted downbeat results for Q3 2024. The company's revenue of $11.4 billion in Q3 was up 20% y-o-y, driven by a 2x rise in Mounjaro sales to $3.1 billion and rising demand for its obesity drug – Zepbound – which garnered $1.3 billion. However, both drugs fell short of estimates.

Eli Lilly reported a 50 bps y-o-y rise in gross margin to 82.2% in Q3, leading to a stellar 12x y-o-y rise in the bottom line to $1.18 on an adjusted basis. Despite the strong financial performance, the company lowered its sales outlook to $45.7 billion and adjusted earnings of $13.27, at the mid-point of the provided range, due to supply issues impacting sales and IPR&D charges weighing on overall earnings growth this year.



Eli Lilly's stock has outperformed the broader indices, with 46% gains in 2024, versus a 22% rise for the S&P 500 index. The company has generated better returns than the broader market in each of the last three years. Despite the downbeat result and cut in full-year guidance, Eli Lilly's long-term growth prospects remain robust, driven by its strong pipeline and historical outperformance.

In conclusion, both Novo Nordisk and Eli Lilly stocks dropped today due to concerns about the long-term efficacy and safety of their respective weight loss drugs, as well as supply issues and IPR&D charges impacting Eli Lilly's sales outlook. Despite the short-term setbacks, both companies have strong pipelines and long-term growth prospects that investors should consider when evaluating their portfolios.