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That the obesity market will be massive is a given, with sales projected to rise to $150bn by 2030. But it will be crowded, too. The premium valuations enjoyed by the current duopoly — Denmark’s Novo Nordisk and the US’s Eli Lilly on 32.5 and 57.6 times 2024 earnings respectively — are predicated on the fact that their heft will allow them to keep on top of the competition. Novo Nordisk’s stumble on Friday puts that in doubt.
The Danish pharma group says participants in a late-stage trial for its next generation weight-loss compound CagriSema, a combination of semaglutide and cagrilintide, lost “only” 22.7 per cent of their body weight on average. That is a wonderful result by any measure — except one. Novo Nordisk had targeted weight loss of 25 per cent. Its stock was down a fifth in the early afternoon, wiping €85bn off its market capitalisation.
On the face of it, that looks like a big reaction to a small miss. It is equivalent to more than the whole of the net present value of CagriSema’s future sales, which Berenberg analysts put at DKr130 per share, or around €75bn.
Exactly why the drug underperformed expectations is not entirely clear. It may have to do with dosing, since only 57 per cent of patients in the trial received the highest amount of the drug. Meanwhile, even at 22.7 per cent weight loss, CagriSema is marginally ahead of Eli Lilly’s Zepbound, which in a recent trial reduced body weight by 22.5 per cent.
Yet there is some logic to the market’s reaction to Novo Nordisk’s miss. Had CagriSema managed to shave a quarter off patients’ body weight, that would have given it a clear lead in the next generation of drugs. As things stand, it has failed to close the field to upcoming compounds, including Eli Lilly’s Retatrutide, for which trial results are expected in 2026. The US pharma group’s stock was up in pre-market trading.
More broadly, there are 120 weight-loss agents being trialled by 60 companies according to IQVIA analytics, making for a crowded pipeline. This will never be a winner-takes-all market given different patients will have different requirements and different reactions to available drugs. But a big chunk of Novo Nordisk’s valuation relies on hopes that its size, expertise and cash flows will give it a head start. This is not a race in which incumbents can afford to lose their footing.