Novo Nordisk pares 2024 profit outlook amid competition from Eli Lilly

UPDATE 3-Obesity drugmaker Novo Nordisk pares 2024 profit outlook 

Novo Nordisk on Wednesday trimmed its full-year profit outlook after reporting weaker-than-expected quarterly sales of its popular weight-loss drug Wegovy, stirring worries among investors about stiffening competition from Eli Lilly.

Operating profit in the quarter rose 8% at constant exchange rates to 25.9 billion Danish crowns ($3.8 billion) compared with the 27.3 billion crowns forecast by analysts in a LSEG poll.
 

The worse-than-expected second-quarter profit may deepen investor worries that Novo's first-mover advantage in the fast-growing obesity drug market is at risk as it races to expand capacity to meet runaway demand.
 

 

Novo's Frankfurt-listed shares fell 3.2% just after market opening.
 

The Danish company lowered its forecast for operating profit growth this year to between 20% and 28% in local currencies, compared to its previous forecast of 22% to 30%
 

The company attributed a decline in gross margin in the first half in part to costs related to its ongoing manufacturing capacity expansions.
 

Sales of Wegovy, Novo's first-to-market weight-loss drug rose 53% to 11.66 billion crowns, well below the 13.54 billion crowns expected by analysts in a company-compiled consensus, but up from sales of 9.4 billion crowns in the first quarter.
 

Nevertheless, it raised its sales growth outlook for this year to between 22% and 28% in local currencies, compared to the previously guided range for 19% to 27% growth.
 

"We are pleased with the sales growth in the first half of 2024, which has enabled us to raise the outlook for the full year," CEO Lars Fruergaard Jorgensen said in a statement.
 

Some analysts forecast the obesity drug market could be worth about $150 billion by the early 2030s.
 

Novo ended an advanced kidney disease trial in June, which resulted in an impairment loss of 5.7 billion Danish crowns ($833.37 million), which the company said impacted operating profit.
 

Investors are keen to hear more from Novo - Europe's most valuable listed company worth about $550 billion - on Wednesday about when it expects to significantly boost supplies of Wegovy in the U.S. and end shortages, as rival Lilly swiftly builds market share.
 

The company is spending billions of dollars to increase production of Wegovy to meet runaway demand and fend off Lilly, which launched its rival therapy Zepbound in the U.S. in December last year.
 

Though Novo and Lilly are now going head-to-head with their obesity treatments in a number of markets including Britain and Germany, the most lucrative one by far is the U.S., where more than 70% of adults are obese or overweight.
 

The lowest out of five dose strengths of Wegovy is still in shortage, according to the U.S. Food and Drug Administration website, which was updated late on Tuesday to show that two more dose strengths were now available.
 

On Friday, the FDA updated its website to say Lilly's Zepbound was available, but the agency did not remove the drug from its shortage list. It said in a statement it was working with Lilly to confirm that supplies were stable.
 

Novo's sales of Ozempic, a diabetes drug with the same active ingredient as Wegovy albeit in smaller doses, just missed expectations. They rose 30% to 28.9 billion crowns compared to the 29.8 billion expected by analysts.
 

Shares in Novo have risen about 230% since it first launched Wegovy in the U.S. in June 2021, compared with a 9% rise in the pan European STOXX 600 index in that time.
 

However, since the end of June shares have fallen 21%, a drop analysts link to factors including strong trial data released in July by Swiss drugmaker Roche for one of its experimental obesity drugs.
 

Lilly will release its quarterly numbers on Thursday.