Is Europe's top market cap spot about to change hands?
On Tuesday, August 8, Novo Nordisk announced results from its phase 3 trial of the "miracle weight-loss drug" semaglutide, indicating it reduces the risk of heart disease and stroke by up to 20%. As a result, the potential patient base for semaglutide saw a significant spike.
This news reignited the already hot market for semaglutide, with Novo Nordisk's share prices surging by 17% and even reaching a peak of 19% at one point. This represented the largest intraday gain in the company's history, pushing its market cap beyond $423.6 billion, inching closer to luxury giant LVMH's $442 billion.
Will Semaglutide Become Even More Popular?
On the same day, Novo Nordisk revealed the results of semaglutide in its SELECT phase 3 clinical trial.
Analysis suggested that the trial met its primary endpoint. A weekly subcutaneous injection of 2.4 mg semaglutide reduced the risk of severe cardiovascular events by 20% in overweight or obese adults without a history of diabetes. Novo Nordisk plans to apply for regulatory approval in the US and the EU to expand semaglutide's label indications this year.
In the SELECT clinical trial for cardiovascular outcomes, Novo Nordisk enrolled 17,604 adults aged 45 or older, who were overweight or obese and had cardiovascular disease (CVD) but no previous history of diabetes. Over a span of five years, they found that compared to a placebo, the risk was reduced by 20%.
Reports from Wall Street noted that while numerous studies had shown obesity's link to various cardiovascular diseases, semaglutide is the first clinically proven drug that can reduce the risk of such diseases through weight loss.
According to Professor Hertzel Gerstein, Deputy Director at the Population Health Research Institute (PHRI) in Canada, the positive trial results primarily indicate two things: such patient groups, apart from other heart protective treatments, should also consider GLP-1 targeted treatments like semaglutide, and the known cardiac protective effects of targeting GLP-1 are not limited to diabetes patients.
This is profoundly impactful for Novo Nordisk, not just in expanding the drug's application scope. More importantly, it might influence the scope of US medical insurance reimbursements, having a significant impact on the company's revenue.
According to a recent survey by KFF, about 45% of American adults expressed interest in taking "safe and effective weight loss drugs." However, without insurance coverage, only 16% remain interested. Notably, Wegovy in the US is entirely out-of-pocket. Without insurance, using Wegovy could cost more than $16,000 annually.
This suggests that the question of insurance reimbursement is a barrier for 29% of potential weight-loss consumers in the US.
With Novo Nordisk's recent favorable clinical results regarding semaglutide's cardiovascular benefits, there may be an accelerated push for the drug to be added to the US insurance reimbursement list, which would further increase its sales potential.
Weight Loss Drugs More Popular Than Luxury Bags?
Comparing weight loss drugs to luxury goods, is the market now favoring the former?
As a Denmark-based pharmaceutical company specializing in diabetes care, Novo Nordisk has drawn significant market attention in the past three years, primarily because of their "miracle weight loss drug" - Wegovy (the weight-loss version of semaglutide). Since the end of 2020, the company's share price has doubled, surpassing major European corporations like Nestle and ASML, making it the second-largest in market value in Europe.
Wall Street reports previously mentioned that since last year, the craze for semaglutide has seen weight loss enthusiasts snapping it up, leading to product shortages.
The exaggerated demand has caused shortages for both the weight loss version of semaglutide, Wegovy, and its diabetes version, Ozempic. This has led to real diabetes patients having to switch from daily injections to weekly ones.
The shortage even spread to the previous generation GLP-1 product Saxenda. Diabetes patients, dependent on this medication, found it out of stock, leaving them without their essential treatment.
According to the FDA's latest drug shortage list, due to skyrocketing demand, Saxenda's supply will be limited until the end of 2023. The issue of drug shortages for diabetes patients is becoming increasingly serious.
A research report from Morgan Stanley suggested that by 2030, the global market for weight-loss drugs might reach $77 billion, more than $20 billion higher than their initial forecast.
In contrast, the luxury goods industry is currently facing uncertainties. From LVMH to Italian brand Prada, various luxury brands have shown signs of stunted sales growth in key markets.
In the first half of the year, LVMH reported a sales growth of 17%, reaching 42.2 billion Euros. Their second-quarter revenue was 21.21 billion Euros, above analysts' expectations. However, their sales in the US market shrunk by 1% compared to the previous year, a rare occurrence that raised investor concerns.
LVMH CFO Jean-Jacques Guiony stated that the global consumer mood this year isn't as buoyant as in 2021 and 2022, indicating that the market is normalizing. He also emphasized that the US market isn't performing as well as before.
