Novo's Plight Offers a Lesson on Managing Market Perceptions

This weight-loss drugmaker suffered from stock value overhype

- CHRIS HUGHES

Zempic-maker Novo Nordisk saw its shares take a record plunge last week, sending their peak-to-trough collapse to 70% and returning them to levels last seen in 2022. The Danish drug giant's purpose may be to improve people's lives, but investors' shrinking gains from its opening of the anti-obesity market matter too. Novo's blind spot has been failing to see its share price as an asset to manage and exploit.

For years, Novo had a relatively quiet life as one member of an insulin oligopoly alongside US peer Eli Lilly & Company and France's Sanofi. While it wasn't a completely smooth ride—2016 was dire—Novo has never seen operational and strategic challenges on the scale it's now facing. In developing Ozempic for diabetes and its sibling Wegovy for weight loss, the company suddenly found itself riding a tiger.

As is well known, the sudden surge in demand for appetite suppressants was too great for Novo to satisfy. Eli Lilly had a second-mover advantage in launching challenger drug Zepbound, learning from Novo's experience. Trial data suggesting Zepbound is the more effective treatment has also helped. Both firms face competition from 'compounding' copycat drugs based on similar chemistry. Shares in the more diversified Eli Lilly have held up better.