What are the limits in the fight against obesity? Ozempic owner disappoints the market

Sustaining long-term results is often the most difficult goal for those trying to lose weight. And the same challenge is faced by Novo Nordisk, the Danish laboratory that, back in 2018, introduced Ozempic: the injectable drug that revolutionized the fight against obesity. Seven years later — with a market capitalization of $382 billion, making it the largest firm in Europe — this pharmaceutical company is now struggling to stay in shape. Even though it once led the market, there are now many new competitors.

The pressure on Novo Nordisk redoubled in December 2024. The results of a phase III clinical trial — an advanced stage of research — for its experimental drug CagriSema set off alarm bells: patients experienced an average reduction of 22.7% of their body weight after 68 weeks of treatment. The market interpreted this data as a failure for the company, which was betting that this new composition, which adds cagrilintide, a hormone that regulates food intake and bolsters the feeling of satiety, would be the latest evolution of its great successes (Wegovy and Ozempic) and that it would be ready to reach the market by 2026.

“CagriSema has a fundamental role in the future growth engine of the company. Expectations have been high, with the price of its shares more than doubling between 2023 and the first half of 2024,” says Jakob Westh Christensen, a market analyst at the investment platform eToro. The bet on this new drug is key in the Danish group’s strategy to distance itself from the competition again. The American firm Eli Lilly & Co., with its alternatives Zepbound (for weight loss) and Mounjaro (for diabetes), is also seeking to lead the new generation of drugs against obesity. So far, Retatrutide, developed by Eli Lilly, has achieved an efficacy rate of 24%, ahead of CagriSema.

Previously, the biggest challenge facing Novo Nordisk and Eli Lilly — beyond their rivalry — was to supply the huge demand for miracle weight-loss drugs. But today, this duopoly is facing down 40 other manufacturers that are also working on alternatives against obesity, such as Pfizer, AstraZeneca, and Roche, among others. As more alternatives appear, the current leaders will be under more pressure to make their products more effective or easier to tolerate than those sold by the competition… something that’s becoming increasingly difficult.

When CagriSema’s results were presented, the stock fell 29% in a single session. Panic was especially rife among retail investors, who saw Novo Nordisk as a safe bet in a growing market. However, there’s still confidence in the effort being made. For this reason, most stock brokerage firms continue to recommend that clients buy shares in the company.

Side effects

“It’s true that the weight loss was below the 25% expected by the market, practically in line with the Eli Lilly product,” says Ana Gómez Fernández, a financial analyst at Spanish investment bank Renta 4. “However, we believe that having 2-3% more or less weight loss isn’t going to be so decisive in clinical practice… it’s still a very incipient niche, with a large, unmet demand,” she adds. Still, she points out something else: the fact that the company hasn’t reported specific figures regarding the side effects of its new drug.

The analysts at Deutsche Bank agree, emphasizing that, as with any diet, the secret to success may be in the details. “The company used a flexible dosage design, which left the maintenance dose — as well as any decision to reduce the dosage during the trial — at the discretion of the patients,” the German bank points out. Only 57% of patients reached the highest dose, which analysts believe created a “disconnect” between laboratory efficiency expectations and what actually happens in practice. This difference, JPMorgan points out, may take more than two years to be resolved… the time it takes for new studies to be conducted.

Miriam Fernández, head of Thematic Investment at Ibercaja Gestión, points out that, although Novo Nordisk “will have a hard time getting back on track to resume a virtuous cycle of clinical study results,” we mustn’t forget the nature of the market segment in which it operates. “The idiosyncratic risk of pharmaceutical companies — [which is] linked to the success or failure of their clinical trials — always adds volatility, as has been the recent case with CagriSema.”

The main analysts point out that — at the moment — we’re only seeing the tip of the iceberg when it comes to the weight loss business. “We’re talking about a niche that could exceed $100 billion in 2030… [it’s] likely to be the largest within the therapeutic areas of pharmaceutical companies,” says Gómez Fernández. Other analysts are even more optimistic and see a potential of up to $200 billion, as in the case of the firm Morningstar.

This potential growth is added to two particularities of the Danish pharmaceutical company: its diversification and its ownership. “The treatment of obesity still represents little more than 20% of the company’s total sales, with the majority of revenues coming from the treatment of diabetes,” Christensen highlights. On the other hand, experts also note that the Novo Nordisk Foundation, which controls 77% of the firm’s shares and 28% of its capital, provides stability and leaves the company less exposed to short-term rushes. At the end of the year, Eli Lilly shares were valued at 34.3 times expected earnings, while Novo’s were valued at 21.5 times, making the Danish drugmaker considerably cheaper to buy into than its American rival.

However, this doesn’t mean that there aren’t any threats. “Since we launched Ozempic [in the United States] in 2018, our [stock] price has decreased by 40%,” acknowledged Lars Fruergaard Jørgensen, CEO of the pharmaceutical company, in an appearance before the U.S. Senate, under pressure from the Democratic administration due to the high price of medicines. However, the change of occupant in the White House doesn’t mean the absence of problems, either. “The effects of the confirmation of the nominee Robert F. Kennedy Jr. as Secretary of Health and Human Services in the U.S. are still unknown,” Fernández acknowledges.

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