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Novo Nordisk (NVO-0.93%) stock took a hit this week, after a Super Bowl ad highlighted a growing challenge to the company’s dominance over the weight-loss industry.
The Danish pharma giant, known for its blockbuster diabetes and weight-loss medications Ozempic and Wegovy, is on track to have its worst week on Wall Street this year. Novo Nordisk shares have tumbled more than 9%, following an ad during the Super Bowl from the millennial-focused telehealth company Hims & Hers (HIMS+3.24%), which promoted its off-brand Ozempic.
The controversial ad took a surprisingly political tone — with Donald Glover’s “This Is America” as its soundtrack — criticizing the high price tag of branded weight-loss drugs.
“Welcome to weight loss in America — a $160 billion industry that feeds on our failure,” said a narrator in the commercial. “There are medications that work — but they are priced for profits, not patients.”
The ad briefly featured the company’s GLP-1 injections. The weekly treatment contains compounded semaglutide, the active ingredient in Ozempic and Wegovy. In May, Hims & Hers started offering compounded semaglutide injections for just $199 a month — hundreds of dollars cheaper than Ozempic’s nearly $1,000 list price and Wegovy’s $1,349 price tag.
GLP-1 drugs are a class of medications that mimic gut hormones that regulate blood sugar and suppress appetite. However, due to their high retail price, U.S. patent protections, and skyrocketing demand, many patients have had difficulty getting their hands on these popular medications.
When a medication is in shortage, which Novo Nordisk’s Wegovy has been for years, the FDA allows pharmacies to make compounded or altered versions of the drug if they meet specific regulatory requirements. This loophole has led several digital health companies, online pharmacies, and wellness spas to produce and sell cheaper versions of brand-name weight-loss drugs.
Novo Nordisk’s executive vice president of U.S. operations, David Moore, told investors on a call last week that the compounded market is having an impact on the company’s demand, and that impact is “growing faster” than anticipated.
Novo Nordisk reported, this month, that full-year sales of all its drugs grew 26% to $40.5 billion. However, the company projects that sales growth in 2025 will slow down to between 16% and 24%.
Both Novo Nordisk, and its rival Eli Lilly (LLY-2.65%), have been ramping up production of their GLP-1 medications to remove them from the FDA’s drug shortage list, a goal Eli Lilly achieved late last year. The pharmaceutical giants have also filed petitions with the FDA to have their medications added to a list of drugs deemed too complex to compound safely. Novo Nordisk even took out a newspaper ad this week warning of the risks of taking copycat drugs.
This isn’t Novo Nordisk’s only recent setback. In December, the company’s experimental diabetes and weight-loss drug, CagriSema — touted as a potential successor to Ozempic — fell short of expectations. The drug failed to hit the projected 25% average weight loss anticipated by analysts and the company, with patients in a phase 3 trial shedding an average of 22.7% of their body weight after 68 weeks. The disappointment sent Novo’s stock plunging 20% in a single day.
The company’s shares are now down more than 34% over the past year, and it has lost its crown as Europe’s most valuable company to luxury conglamorate LVMH (MC+0.51%).
Meanwhile, Hims & Hers has seen its stock skyrocket nearly 500% in the past year.