Novo Nordisk stock surged Tuesday after the Danish drugmaker said its weight-loss drug reduced the risk of cardiovascular events for overweight adults and those with obesity.
The news benefits the entire class of weight-loss drugs, including Eli Lilly's Mounjaro. Novo studied its drug Wegovy over five years in more than 17,000 adults with cardiovascular disease but not diabetes.
Patients who received Wegovy were 20% less likely to experience a major cardiovascular event, like a heart attack or stroke, than those who received a placebo.
"Insurance plans still need to agree to reimburse for these drugs for certain patient types, but this (study's) results should open the door for this possibility, assuming Novo's full data is positive," Edward Jones analyst John Boylan said in a note to clients.
In response, Novo Nordisk stock rocketed 17.2% to close at 189.17 on the stock market today. Lilly shares also popped 14.9% to close at 521.60. Both stocks hit record highs. But shares of other companies in the diabetes treatment space tumbled. Dexcom stock lost 8.9% and closed at 110.19. Tandem Diabetes stock skidded 6.6%, closing at 28.13. Insulet shares toppled 8.6%, closing at 238.34.
Novo Nordisk Stock Boosts GLP-1 Class
Novo Nordisk's Wegovy, Ozempic and Rybelsus are different formulations of the same active drug, dubbed semaglutide. Wegovy is an obesity treatment, while injection Ozempic and pill Rybelsus are diabetes drugs. They compare with Lilly's injection Mounjaro, a diabetes treatment.
All four drugs, in part, mimic a gut hormone called GLP-1. It revolves around satiety and how quickly the stomach empties itself. They lead to powerful weight loss in overweight patients and those with obesity. But they're also expensive and have struggled to gain insurance coverage, including Medicare reimbursement.
Experts say showing a benefit of weight loss in patients without diabetes could be enough to make the case for insurance reimbursement. Leerink Partners analyst David Risinger says Novo's results also topped expectations.
This "is a material positive perception driver for future payer coverage of (the drug class) for obesity," he said in his note to clients. The results "may raise the bar for future" weight-loss drugs, he added.
Increased Risk Of Cardiovascular Events
Martin Holst Lange, Novo's executive vice president for development, says Novo's study "has the potential to change how obesity is regarded and treated."
"People living with obesity have an increased risk of cardiovascular disease but, to date, there are no approved weight management medications proven to deliver effective weight management while also reducing the risk of heart attack, stroke or cardiovascular death," he said in a written statement.
Novo soon plans to ask regulators in the U.S. and Europe to add the cardiovascular benefit to Wegovy's label. This could boost the number of patients eligible for treatment.
The results sent Novo Nordisk stock into a breakout. Shares easily topped a buy point at 172.97 out of a flat base, according to MarketSmith.com. Lilly stock also broke out of a flat base with an entry at 469.87, helped by its strong second-quarter beat and raise.
Shares Of Diabetes Device Makers Dive
Meanwhile, shares of medical device makers slumped in reaction to Novo's news.
Several of the stocks belong to companies that make medical devices to manage diabetes. This includes Dexcom, which makes a wearable device that tracks blood sugar in real time. Insulet and Tandem make wearable insulin pumps.
Abbott Laboratories and Medtronic, two bigger-name companies in this space, saw their stocks fall less than 3% apiece.
But William Blair analyst Margaret Kaczor doesn't expect the results from Novo's study to have a big impact on the use of diabetes-related medical devices.
"As clinicians work through approaches to manage long-term consequences of obesity, diabetes and cardiovascular disease, they have always turned to a variety of drugs, devices and procedures," she said in a note. "These tools work in combination and are often applied differently depending on the patient profile."
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
