Novo Nordisk, beyond weight loss, worries investors and scientists hope

Novo Nordisk had a difficult year: a fall in the share price which led to the biggest leadership shakeup over the company’s 100-year history, as investors turned their backs on the Danish drugmaker and its weight-loss businesses.

It appeared that investors had largely given up on Novo’s ability to translate its progress in GLP-1 drug development into financial gains, as the lucrative market attracts new players. However, scientists say the drug still has potential.

What began with a focus on the drug’s ability to manage weight and blood sugar levels, as well as combat associated illnesses such as heart disease, is now expanding further with growing interest in how it might also impact the brain.

Semaglutide, or as it is better known, Ozempic and Wegovy, is a GLP-1 receptor agonist that was initially developed for diabetic patients to manage their blood sugar levels. However, it was soon prescribed en masse by doctors off-label, as its appetite-suppressing and weight-loss properties became known. Today, it is approved for anti-obesity purposes and brings in billions each year for its manufacturer, Novo Nordisk.

Today, the medical community is discovering a growing list of additional benefits associated with these medications.

“Wegovy promotes weight loss and potentially other mechanisms that are not fully understood,” according to the U.S. Food and Drug Administration. wrote in a statement released in August when it approved the drug to treat liver disease. Semaglutide is also approved by regulators to reduce the risk of heart attacks and strokes in overweight people with cardiovascular disease, as well as to treat chronic kidney disease in diabetic patients.

Meanwhile, a rival drug from a U.S. competitor Elie Lillytirzepatide (known as Mounjaro and Zepbound), which also targets the hormone GLP-1 as well as another gut hormone called GIP, is approved for the treatment of moderate to severe obstructive sleep apnea in obese adults.

But the benefits may not stop there. Amid increased competition, additional indications have become a new frontier for drug developers. new formats like pills.

GLP-1 and the brain

Observational studies have shown that GLP-1s appear to quell cravings not only for food, but also for alcohol, tobacco, and recreational drugs because they affect the brain’s reward pathway. By apparently altering dopamine signals in the brain, these drugs could reduce cravings and allow the individual to be more rational when faced with tempting options.

“There is interest in understanding the potential of semaglutide on various brain functions,” Laura Nisenbaum, executive director of the Alzheimer’s Drug Discovery Foundation (ADDF), told CNBC.

“Understanding that inflammation and energy consumption in the brain is going to be very important for our normal cognitive function,” Nisenbaum said. Recognizing this link will be useful in many neurological and neuropsychiatric indications where changes or damage to the brain impact mood, behavior or cognition, she added.

Continuing evidence suggests that semaglutide and tirzepatide, a rival drug made by Eli Lilly, may be the first effective “anti-consumption” agents with the potential to treat binge cravings, obesity, alcohol use, nicotine addiction, recreational drug use and even out-of-control buying behavior. study by researchers at Saint Luke’s Mid America Heart Institute and the University of Missouri.

Another small scale randomized clinical trial found that a low dose of semaglutide reduced alcohol consumption and significantly reduced cravings compared to placebo in patients with alcohol use disorder during nine weeks of treatment. The findings warrant larger clinical trials of incretin-based therapies for alcohol use disorders, the researchers concluded.

The disappointment of Alzheimer’s that wasn’t

Another potential additional benefit of this class of drugs could be how it interacts with the dementia process.

In November, Novo disappointed investors by published data as part of a two-year clinical trial to determine whether semaglutide could slow cognitive decline in patients with Alzheimer’s disease.

Hopes were high that the drug could help people suffering from the most common type of dementia, as it was observed in real-world studies that diabetic patients taking semaglutide developed Alzheimer’s disease at a lower rate than others.

But the late-stage trial failed to achieve its main goal of showing that semaglutide did not have a significant impact on the cognition of Alzheimer’s patients. Novo said it would pause the one-year extension of the trial because of the results.

However, some scientists told CNBC that this shouldn’t be seen as a failure. They say that although the results were disappointing, it was a well-conducted trial that the scientific community could learn from.

“It just gave a negative result in terms of the drug in this particular population,” said Ivan Koychev, associate professor of neuropsychiatry at Imperial College London.

Semaglutide, however, affects Alzheimer’s proteins in the right direction, as shown by biomarker measurements, Koychev said. “They impact proteins linked to Alzheimer’s disease, they reduce their quantity in the cerebrospinal fluid, which suggests that it interacts directly with the alternative pathology.”

According to Novo, a reduction in systemic biomarkers of inflammation was also observed. “The idea is that maybe it’s this anti-inflammatory effect that, if implemented early enough in the disease process, can significantly change the risk of dementia,” Koychev said.

“The signal was always in the area of ​​prevention rather than treatment,” he added.

Likewise, Nisenbaum said a useful next step would be to test semaglutide and other GLP-1s earlier in the course of the disease as a preventative measure.

Novo Nordisk said it was reviewing all data from the trial, but it was too early to speculate further on the effect semaglutide might have on dementia patients.

Science against the streets

Despite the fact that the innovations developed by Novo have the potential to have a significant impact on public health, many investors have turned their backs on the company over the past 18 months as its growth prospects face challenges.

Novo shares are having their worst year on record since they were listed on Nasdaq Copenhagen more than three decades ago. At its peak in mid-2024, the stock traded at more than 1,000 Danish crowns. Today it trades at around 320 crowns.

The stock’s 50% decline since the start of the year is due to increased competition from U.S. rival Eli Lilly and so-called compounding pharmacies that make cheaper, copied versions of semaglutide. The inability to convince investors that its pipeline will bring significant financial gains in a context of hopeful entrants to the market also adds to the pressure.

Reading data from the Alzheimer’s trial in November led shares to fall 5.8% on the day, although analysts said it was still a distant risk and Novo management itself called it a “lottery ticket”, highlighting its highly uncertain outcome.

The two Alzheimer’s drugs currently on the market, Eli Lilly’s Kisunla and Biogen/Eisai’s Leqembi, have been shown to slow the progression of Alzheimer’s disease up to a third, but carry a risk of serious side effects.

These drugs were studied 15 years ago, and there have been many negative studies along the way, ADDF’s Nisenbaum said. “We each learned something that then led to a better understanding of our patients in clinical trials and how to measure what’s happening in them.”

“It’s absolutely a long game,” she added, hoping that semaglutide or other new drugs targeting risk factors could be used in combination with Kisunla and Leqembi.

But the market doesn’t see it that way, and there are several reasons for that.

First, investors’ time horizons are much shorter than the decades-long process it typically takes to bring a drug to market, meaning pharmaceutical development often clashes with the faster pace of public markets. Adding new indicators for a drug also takes time, because they must be supported by often lengthy clinical trials.

Second, semaglutide faces key patent expirations in 2031 and 2032, which will give the green light for others to make generic versions of semaglutide.

“We don’t see a good argument for a valuation floor,” Jefferies analysts said in late November, noting that Novo now enters the five-year patent expiration window with no real moat.

“Lower prices in the U.S. could drive additional volume demand and improve patient retention, but we do not believe that at these prices generics and compounds cannot compete,” they added, noting the underperforming stocks.

Pressure from the Trump administration to drop in drug prices for Americans and the threat of high import taxes have posed additional hurdles for Novo, as well as many of its pharmaceutical industry peers over the past year.

Analysts at Goldman Sachs, led by James Quigley, are slightly more optimistic. “We maintain a Buy rating on Novo Nordisk, as although expectations have been significantly lowered for near- to medium-term estimates, we continue to believe there could be volume opportunities for Novo as the obesity market evolves,” they wrote in a note in late November.

“While Novo is unlikely to take a leading share, we still see opportunities for Wegovy, CagriSema and Wegovy oral to generate value above what the market currently believes, although we recognize that it will likely take time and evidence of upside scenarios before investors extend credit,” they added.