Novo Nordisk Shares Plummet After Halting Alzheimer’s Trials
Novo Nordisk, a Danish company known for its weight-loss drugs Wegovy and Ozempic, has halted closely watched trials to treat Alzheimer’s disease, causing its shares to slump. The company had tested whether an important ingredient in the medication could slow the progression of the brain disease.
Background of the Trials
Novo Nordisk began the trials two years ago, viewing them as an outside bet with potential for big profits if successful. The company’s core diabetes and weight loss business is under pressure from intense competition, making the trials a significant endeavor. The drug tested was Rybelsus, a pill approved only for type 2 diabetes that contains semaglutide, like Wegovy and Ozempic.
Reaction to the Announcement
Shares initially fell more than 12% in Copenhagen, reaching their lowest level since the summer of 2021. This decline occurred when Novo announced it would not proceed with its planned extension of the trial to a third year. Martin Holst Lange, chief scientific officer and executive vice president of research and development at Novo Nordisk, stated that the company felt a responsibility to explore the potential of semaglutide despite the low probability of success.
Impact on the Company
The extensive body of evidence supporting semaglutide continues to provide benefits for individuals with type 2 diabetes, obesity, and associated comorbidities. However, the failure of the trials means that Novo’s revenues, which are increasingly threatened by generic alternatives to Ozempic and Wegovy, will not receive a boost from a potential Alzheimer’s treatment. More than 55 million people worldwide are affected by Alzheimer’s disease and other dementias, and there is no cure.
Market Reaction
Novo shares were down around 9% on the day, building on year-to-date losses that have now exceeded 55%. The share price reaction suggests that some investors had expected some success from Novo’s attempts. Some market analysts were dismayed by the extent of Monday’s share price decline, with Soren Lontoft from Sydbank stating that the outcome was not a big surprise given the history of Alzheimer’s treatment. The stock’s reaction is more likely due to the poor sentiment surrounding Novo Nordisk shares and the negative news flow over the past year.
