Can This Next-Gen Obesity Drug Save Novo Nordisk?

Things are going from bad to worse for Novo Nordisk (NVO 1.25%). The Denmark-based drugmaker had already seen its blockbuster weight loss medicine, Wegovy, lose ground to** Eli Lilly**'s (LLY +0.70%) Zepbound in this fast-growing market. But Novo Nordisk just released data from a clinical trial for its newer obesity drug, CagriSema, in which it was pitted against Zepbound. The result: Zepbound came out on top, suggesting that even Novo Nordisk’s next launch in this niche won’t allow it to keep pace with its rival.

Is there any hope left for the pharmaceutical leader? Novo Nordisk quietly announced results from a phase 2 study of another candidate that investors should consider.

Image source: Getty Images.

Impressive mid-stage data

Last year, Novo Nordisk acquired the rights to commercialize UBT251, an investigational weight loss medicine, in most countries from a China-based drugmaker. There’s one notable thing about this therapy: It mimics the action of three different gut hormones: GLP-1, glucagon, and GIP, which play various roles in the body, including blood sugar and insulin regulation, and satiety control. Targeting three different pathways to induce weight loss could improve efficacy.

On Feb. 24, Novo Nordisk announced that, in a study conducted in China, UBT251 led to a mean weight loss of up to 19.7% in just 24 weeks. Comparing results across studies is always tricky, but it’s worth noting that in Novo Nordisk’s recent phase 3 study pitting CagriSema against Zepbound, the former led to an average weight loss of 23% compared to the latter’s 25.5% – but that was over 84 weeks.

In fact, in a 72-week study, Zepbound’s 20.2% mean weight loss was only slightly better than UBT251’s 24-week performance. UBT251’s phase 2 results suggest it could outperform Zepbound and CagriSema (and Wegovy) in a study of equal length.

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NYSE: NVO

Novo Nordisk

Today’s Change

(-1.25%) $-0.49

Current Price

$38.58

Key Data Points

Market Cap

$130B

Day’s Range

$38.16 - $38.85

52wk Range

$35.85 - $82.57

Volume

16M

Avg Vol

24M

Gross Margin

80.90%

Dividend Yield

4.48%

What this means for Novo Nordisk

There are several things to keep in mind here. First, UBT251’s results in China won’t support approval in the U.S. Second, this was still a mid-stage study. Late-stage clinical trial results may not be nearly as strong as that. Third, Eli Lilly is working on its own triple agonist, retatrutide. In a recent phase 3 study, retatrutide achieved best-in-class weight loss of 28.7% over 68 weeks.

That’s a high bar to emulate, even for the so far very impressive UBT251. What does this tell us? Even if UBT251 performs well in late-stage clinical trials, that alone likely won’t allow Novo Nordisk to capture the weight loss medicine lead back from its longtime rival. However, CagriSema’s performance, albeit below Zepbound’s, was still very competitive and ahead of Wegovy. With UBT251 also making steady progress, and several other candidates in the pipeline, the pharmaceutical leader should at least maintain its position as the second-leading drugmaker in this large and fast-growing market.

With the stock near multi-year lows and the weight-loss space projected to exceed $100 billion in sales over the next decade, Novo Nordisk could bounce back and deliver competitive returns over the next few years, provided UBT251 and other candidates pan out.