We know that the weight loss drug market has been downright explosive lately, but for drugmaker Novo Nordisk (NVO), it is starting to show signs of decline. The tests from its CagriSema drug proved a bit of a disappointment, but Novo Nordisk stood by its candidate anyway. That dedication cut little ice with shareholders, who sent shares slipping fractionally in Friday afternoon’s trading.
Despite CagriSema not living up to even Novo’s own expectations, and in two different late-stage trials, no less, Novo remains “encouraged” by the overall weight-loss profile seen. But despite this, Lars Fruergaard Jorgenson, Novo Nordisk’s CEO, still had positive things to say about the drug at the Annual General Meeting in Copenhagen.
CagriSema—named for a portmanteau of components cagrilintide and semaglutide—produced a 15.7% loss of body weight in patients with type 2 diabetes, against a loss of just 3.1% on a placebo. Given that Novo was looking for loss percentages in the high teens, this was something of a disappointment. An earlier trial proved equally disappointing for non-diabetics, who lost 22.7% of their body weight in 68 weeks, when it was hoped they would lose 25%
Plan B?
There are always other routes to try, in the end, and Novo Nordisk is clearly looking to tackle these. It recently arranged a deal with Lexicon Pharmaceuticals over LX9851, which offers up a “…non-incretin development candidate in obesity and associated metabolic disorders.” As a result of the licensing, Novo Nordisk has an “…exclusive, worldwide license…” to make and sell LX9851.
Meanwhile, Lexicon will be working on Investigational New Drug (IND) applications for LX9851, which Novo Nordisk will file upon completion. The move cost Novo Nordisk, reportedly, $75 million up front, with near-term milestone payments included. If all the milestones are reached, meanwhile, that number could reach as much as $1 billion.
Is Novo a Strong Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on NOVO stock based on five Buys and five Holds assigned in the past three months, as indicated by the graphic below. After a 45.12% loss in its share price over the past year, the average NOVO price target of $110.36 per share implies 58.7% upside potential.
