Shares of Novo Nordisk Decline Following Pricing Agreement with U.S. Government

Shares in Novo Nordisk dropped by as much as 3 percent on Friday following a pricing agreement between the Danish pharmaceutical company and its U.S. competitor Eli Lilly. This agreement, announced on November 2, 2023, aims to reduce the prices of their popular GLP-1 weight-loss medications, including Novo’s Wegovy and Lilly’s Zepbound.

The new pricing structure will see monthly costs for U.S. government programs, such as Medicare and Medicaid, as well as cash payers, drop to between USD 149 and USD 350. This is a significant reduction from current prices, which range from USD 500 to USD 1,000. The agreement also includes a three-year exemption from tariffs.

Market Impact and Future Outlook

Analysts predict that while these price cuts may hinder near-term revenue, they could drive increased volumes in the long run. According to analysts at TD Cowen, “These price cuts represent a near-term headwind laid on top of competitive pressures, but in the medium to long term, they may boost volumes.”

At 09:24 GMT, Novo’s shares were down by 1.8 percent, reflecting investor concerns as the company faces intensifying competition in the weight-loss drug market. Since the launch of Wegovy in 2021, Novo Nordisk briefly became Europe’s most valuable publicly listed company due to soaring demand. However, its market value has since diminished by 70 percent over the past year, impacted by supply constraints and commercial challenges.

In its statement, Novo Nordisk indicated that the lower prices could negatively affect global sales growth by a “low single-digit” percentage next year. Nevertheless, the company anticipates that larger volumes under Medicare could materialize in the mid- to long-term.

Regulatory Developments and Future Drug Launches

The agreement also encompasses provisions for starter doses of weight-loss medications currently under development by both companies, which will be priced at USD 149 per month through government programs and the White House’s TrumpRx site, pending regulatory approval. The U.S. Food and Drug Administration (FDA) has confirmed that these medications are being considered for expedited review under a new pathway designed to accelerate approvals.

While Novo is expecting an FDA decision on its product by the end of the year, Eli Lilly has yet to submit its drug, orforglipron, for approval. Analysts at Jefferies noted that the expedited review process could serve as a “headwind” for Novo’s upcoming launch, potentially limiting its competitive advantage over Eli Lilly.

This situation underscores the rapidly evolving landscape of weight-loss medications, where price adjustments and regulatory decisions are likely to significantly influence market dynamics in the near future.

Reporting by Jacob Gronholt-Pedersen, Maggie Fick, and Bhanvi Satija. Editing by Tomasz Janowski and Mark Potter, Reuters.