According to ten investors and market analysts surveyed, encouraging trial results indicating Novo Nordisk’s obesity medicine helps save and prolong lives, not merely lose weight, might drive up Europe’s better-performing stock even more.
The United States’ booming demand for a Danish company’s weight-loss medication Wegovy prompted it to considerably increase its full-year profit and sales estimates last month.
However, Novo (NOVOb.CO) encounters difficulties in obtaining comprehensive health insurance coverage and safety from European insurers, governments, carriers, and the Medicare insurance programme for older Americans in the United States, which categorises weight-loss medications as lifestyle drugs.
It might be different if there was a demonstrable medical advantage in addition to weight loss.
But for the majority of insurance companies to conclusively see the link between weight loss and better outcomes, they may need to see that data.
To determine whether Wegovy lowers the risk of serious cardiovascular events like a stroke or heart attack in moderately to heavy overweight or obese persons with a history of heart disease, Novo began a large-scale trial including 17,500 patients about five years ago.
While analysts and investors will be watching for any cues on the outcome when Novo releases its quarterly profits on Thursday, the company has stated that it expects results during June and August.
In response to this report, the corporation declined to comment, citing a quiet period before quarterly results.
Barclays analysts, a favourable result from the SELECT study could increase the uptake of Wegovy by 25% by 2030 if the medicine is approved for use in treating more cardiovascular disorders.
Investors, notably BMO and AllianzGI, stated that a reduction of at least 17% in the risk of a serious cardiovascular event, such as a stroke, would be viewed favourably and would increase Novo’s share price.
Less than 15% might cause the stock to decline, while less than 10% would be a significant let-down, according to several investors and analysts.
Barclays claimed a 20% risk reduction could push the stock up to 1,500 Danish crowns ($220), a3rd higher than its present price, while a failure might cause it to drop to 900.
Two of the six analysts surveyed in an informal survey agreed with Barclays’ forecast that shares may increase by a mid-single-digit safe percentage if the trial demonstrates a 17% risk reduction. Four predict a more subdued response, predicting that shares will only increase by a low-single-digit safe percentage.
Some claimed that the trial’s significance had been exaggerated. According to UBS analyst Michael Leuchten, felt the trial will give important results, but it won’t give all the answers in a single go and won’t push the doors open for reimbursement.
The stock’s 140% increase since Wegovy launched in the United States in June 2021 might also be limiting the share price’s immediate growth.
Novo, valued at more than 340 bln euros (about $372.91 billion), surpassed Nestle in March to surpass LVMH (LVMH.PA) as the second-most valuable business on the pan-European STOXX 600 (.STOXX) index. This year, its stock has increased by more than 20%.
Barclays believed the global market for weight-loss treatments might be worth up to $100 billion in the following ten years, with early market leaders like Novo and Eli Lilly (LLY.N) benefiting most.
However, due to shortages brought on by a booming demand or production issues, Novo was forced to postpone the introduction of the weekly injection in the majority of Europe.
Investors claim that despite the medical value, the company will have difficulty persuading Europe’s cost-conscious well-being authorities to pay for the medication. In the US, the price per month is close to $1,350.
It is only offered in Norway and Denmark in Europe, where a monthly cost of between $160 and $350 must be paid out of pocket.
After the SELECT trial results are published, the public health authorities of the countries have declared that they will reevaluate whether or not to cover the medication, which they do not currently.
The biggest private insurance in Denmark, however, declared this week that reimbursements would end as of January 2020 as a sign of the difficulties.