Novo Nordisk’s Wegovy sales hit by competition from Eli Lilly

Novo Nordisk A/S reported disappointing sales of its blockbuster weight-loss treatment Wegovy, a rare setback for the Danish drugmaker as it braces for more competition in the booming market.

Revenue from the drug was hit by higher-than-expected price concessions to U.S. managers of pharmacy benefits in the latest quarter, Chief Financial Officer Karsten Knudsen said in a conference call with journalists.

He called it a one-time factor, but the size of the shortfall raised concerns among investors about growing pricing pressure as Indianapolis-based Eli Lilly and Co. muscles in with its rival product, Zepbound.

Novo shares fell as much as 7.7% on Wednesday morning, their biggest intraday decline since August 2022, before paring losses to trade about 1.8% lower at 1 p.m. in Copenhagen. They had gained 27% this year through Tuesday’s close, despite falling from their June peak in recent weeks.

Second-quarter sales of Wegovy were 11.7 billion Danish kroner ($1.7 billion), the company said in a statement Wednesday, while the average estimate was 13.7 billion kroner.

Novo is vying with Lilly for supremacy in the pharmaceutical industry’s fastest-growing new business, obesity drugs. The market is expected to reach $130 billion by the end of the decade.

Until now, the biggest obstacle has been satisfying demand, and both drugmakers have pledged billions of dollars to increase production capacity while working to convince more insurers to reimburse them for patients.

“There’s now a competing product and significant volume growth, which puts pressure on everyone,” Barclays Plc analyst Emily Field said in a note to investors.

As Novo wins access to more insurers in the U.S., it’s being forced into discounting via a complex system of rebates paid to pharmacy benefit managers. It’s a phenomenon the company had foreseen, but the rebates Novo is paying are higher than the company expected last year, Knudsen said in a conference call with journalists.

“When you expand your market access, you typically also give somewhat higher rebates,” CEO Lars Fruergaard Jorgensen said in an interview with Bloomberg Television.

Lilly shares rose 1.2% in trading before U.S. markets opened. The Indianapolis-based drugmaker is scheduled to report results Thursday.

Novo said full-year operating profit will grow 20% to 28%, down slightly from its earlier forecast. Results will also be hurt by an impairment charge on a failed drug Novo acquired in a deal last year, the company said.

Novo’s biggest drug, diabetes treatment Ozempic, missed expectations as well. Sales were 28.9 billion kroner, shy of the 29.7 billion kroner analysts had anticipated. Total revenue for the year will rise from 22% to 28% at constant exchange rates, Novo said; the company had previously predicted sales growth between 19% and 27% on that basis.

Novo also said that it withdrew its submission to U.S. and European regulators for approval of Wegovy for treatment of heart failure. The company plans to resubmit in the beginning of next year with additional data.

Wegovy shortage

Lilly anticipates that Zepbound will be out of shortage soon, CEO David Ricks said last week. The drug, which launched in December, brought in $517 million in sales in the first quarter alone and is expected to top $5 billion in sales this year.

For Novo, which has struggled to lift supplies of Wegovy, the situation is slightly different. The company will continue to limit supply of starter doses because it wants to ensure that everyone who starts taking the medicine is able to scale up their dosage without interruption, Jorgensen said.

Only the introductory dose of the drug remains in shortage in the U.S., according to the Food and Drug Administration.

“We are only serving a few million patients in the U.S. with obesity,” Novo’s CEO told reporters on the early morning conference call. “It’s still early days in terms of saturating that market.”