Analysts, investors say Alzheimer’s miss adds to Novo’s challenges, but fundamentals intact

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(Reuters) -Novo Nordisk said on Monday that two late-stage trials testing an older oral version of its semaglutide drug failed to meet their main goal, sending shares of the Danish drugmaker down around 9% to their lowest level since July 2021.

The trials tested whether semaglutide, the active ingredient in Novo’s blockbuster diabetes and weight loss drugs Ozempic and Wegovy, helped slow progression of Alzheimer’s disease. Below are reactions from analysts, investors and Alzheimer’s associations:

SUSAN KOHLHAAS, EXECUTIVE DIRECTOR OF RESEARCH AND PARTNERSHIPS AT ALZHEIMER’S RESEARCH UK

“These trial results are another reminder that Alzheimer’s is driven by several different biological processes. No single approach is likely to be enough. The field now needs to focus on understanding those processes in much greater detail and developing treatments that can be used together to tackle the disease from multiple angles.”

MARKUS MANNS, PORTFOLIO MANAGER AT NOVO SHAREHOLDER UNION INVESTMENT

“The Alzheimer opportunity was only partly discounted in Novo’s valuation, but the failure is nevertheless disappointing. The share price drop is exacerbated by the fact that many investors were hesitant to sell or short Novos stock before today’s news, given the massive Alzheimer opportunity.”

“Focus now shifts to the results from the Cagrisema Redefine 4 head to head trial against Zepbound. If equivalent or superior efficacy over Zepbound is demonstrated, this trial could revive expectations for Novo’s obesity franchise”

FIONA CARRAGHER, CHIEF POLICY AND RESEARCH OFFICER AT ALZHEIMER’S SOCIETY

“It’s very disappointing that these eagerly awaited results are not what we hoped for. However, no trial is wasted. Every investigation helps us develop better drugs and design better trials in the future.”

“Despite these results, there is a critical window of opportunity to prepare for other disease-modifying treatments coming down the track.”

JOANNE PIKE, ALZHEIMER’S ASSOCIATION PRESIDENT AND CHIEF EXECUTIVE OFFICER

“While these results are not what we had hoped for, they will contribute to our understanding of this devastating and fatal disease.”

“We learn from every clinical trial, and these results do not diminish our optimism about the future of Alzheimer’s treatment and prevention.”

BAIRD ANALYST BRIAN SKORNEY

The failure for one of the most broadly clinically impactful mechanisms highlights how complex this disease is and strengthens the case for Biogen’sLeqembi

“Although this failure puts the GLP-1s in Alzheimer’s to bed, for awhile, we would not be surprised to see the thesis re-tested with more effective and better tolerated GLP-1s in the future.”

EVAN SEIGERMAN, ANALYST AT BMO CAPITAL

“Novo shares could see more significant downward volatility than otherwise expected as today’s miss adds to a list of recent struggles from the company.”

RICHARD VOSSER, ANALYST AT JP MORGAN

“Overall, while the failure of semaglutide to show a benefit in Alzheimer’s does remove a potential upside driver, in reality there is limited to no impact on Novo forecasts, hence we see the shares off c. 9% as an overreaction.”

YIHAN LI, ANALYST AT BARCLAYS

“Though the lack of success today is a negative, we believe the update also clears the way for investors to instead play a potential rebound in prescription trends for the core Diabetes/Obesity semaglutide indication.”

ERIK BERG-JOHNSEN, PORTFOLIO MANAGER AT NOVO SHAREHOLDER STOREBRAND ASSET MANAGEMENT

“The fact that the study was discontinued after two years, despite a planned third year extension, suggests that Semaglutide offers virtually no benefit in slowing Alzheimer’s progression.”

“The company has always been transparent about the high-risk nature of the Evoke study. Consequently, few analysts have factored in substantial revenue from Alzheimer’s treatments, so we shouldn’t expect to see major revisions in estimates. That said, the potential upside was considerable, which probably explains why the market reacted so negatively.”

SOREN LONTOFT HANSEN, SYDBANK ANALYST

“Based on the history of Alzheimer’s treatment, this doesn’t come as a big surprise to me. The share’s reaction is probably more due to the bad sentiment around the Novo Nordisk share and the negative news flow over the past year – perhaps there was hope for a little tailwind from this study.”

PAUL MAJOR, A HEALTHCARE INVESTOR AT BELLEVUE ASSET MANAGEMENT

“Even if it did show an effect (in Novo’s trial), that would arguably be a class effect for GLP-1s, so it wouldn’t really help Novo in its competitive fight with Lilly.”

SIMON BAKER, ANALYST, REDBURN PARTNERS

Baker said the stock’s nosedive was a “horribly overdone kneejerk reaction” and “could not be justified on any fundamental basis.”

“This (the results) shouldn’t really come as a big surprise to anybody and to the credit of the company, they always said, ‘this is high-risk, high-reward.”

HENRIK HALLENGREEN LAUSTSEN, JYSKE BANK ANALYST

“To me this looks like an overreaction to the share price, which is probably related to the fact that more people had started to hope that there would be a win on the lottery ticket.”

“In my opinion, this does not change anything fundamentally for Novo Nordisk or for our estimates.”

JEFFERIES ANALYSTS

“The Evoke results remove a near term upside scenario for Novo, and we think it’s unlikely investors will rush back into the name.”

(Reporting by Maggie Fick, Mrinalika Roy, Puyaan Singh; Editing by Tasim Zahid)