Virus Link: Here's what Wall Street is saying about Wegovy following Novo Nordisk's key study

Tuesday, November 14, 2023

Here's what Wall Street is saying about Wegovy following Novo Nordisk's key study - CNBC

Analysts are largely optimistic about a new class of anti-obesity medications following a landmark study released over the weekend. Novo Nordisk 's Select study of about 17,500 people found the use of its Wegovy decreased the risk of serious cardiovascular complications such as heart attacks. The study, which was shared at the American Heart Association conference over the weekend, was closely watched by analysts as a potential catalyst in what has become one of the biggest investing and health trends of the year. The "SELECT trial positions Wegovy in a sweet-spot to prevent diabetes, cardiovascular and kidney disease," said Morgan Stanley analyst Mark Purcell. "We believe these data will support broader payer adoption and partly mitigate Wegovy competitor pressure." The study found not only that the drug reduced the risk of a heart attack or stroke, but there was also a 19% drop in all causes of death. That was particularly well received by cardiologists despite being nominally significant, according to Richard Vosser of JPMorgan. Other data points of note included finding a 72% reduction in patients having diabetes due to their weight and a 22% drop in kidney disease progressing. Part of the hope coming out of the study is that Wegovy and similar drugs will gain wider approval from health insurance providers and doctors for weight loss use, as opposed to just a treatment for diabetes. "Based on our weekend discussions, cardiologist/nephrologist's willingness to embrace GLP-1 in the treatment of their non-diabetic patients is set to increase markedly," said Citi analyst Peter Verdult said, adding that the outlook for Wegovy and other GLP-1 drugs was now "supercharged." Wegovy contains semaglutide, the same active ingredient in Novo's type 2 diabetes drug Ozempic. The drug mimics the gut hormone glucagon-like peptide-1, or GLP-1. Eli Lilly has its own drug in this class known as tirzepatide, which is sold as Mounjaro for type 2 diabetes and Zepbound for weight loss. Lilly's version targets both GLP-1 and a second hormone, glucose-dependent insulinotropic polypetide, or GIP. Despite the positive response to the Select data, U.S. shares of Novo Nordisk saw muted trading on Monday. That could be due to the fact that the stock has already seen a strong year and because many expected good news heading into the data release. In total, the stock is up more than 45% compared with the start of 2023. Many analysts kept their expectations the same for the international shares following the study. While the typical analyst has a buy rating on the U.S. stock, the average upside implies just about 3% more to gain after the strong rally already seen, according to LSEG. A rising tide for Eli Lilly? Though the study was specifically about Wegovy, Wall Street sees a positive readthrough for similar medications from other providers, particularly Eli Lilly 's Zepbound. Eli Lilly's shares are in a similar boat. After surging more than 65% in 2023, the average analyst has a buy rating but sees further upside of less than 4%, per LSEG. Still, analysts said the study has positive reverberations for Zepbound, which was officially approved for weight loss by federal regulators just last week. "We see only upside for Lilly after this weekend's long-awaited presentation of the SELECT data," said Citi analyst Andrew Baum. Similarly, UBS analyst Trung Huynh called the weekend data a "best-case" scenario for Eli Lilly. That's in part because it showed a strong benefit for the use of the drug class for treating obesity. But it's also because the study left areas for improvement that Eli Lilly can move the needle on when Zepbound has outcomes trial data in 2027. One pain point employers and other health-care payers may focus on is the fact that the patients from North American enrolled in the trial showed fewer benefits than other cohorts studied, Huynh said. While that can also be a challenge for Zepbound, Lilly's drug has a cheaper price tag, which could be an incremental positive for getting more employers to include the drug in health-care plans, thus improving market share, he said. Zepbound also has shown greater weight loss compared with Wegovy in clinical trials. Before the 2027 data, investors can watch for data on heart and renal impacts due over the next two years, Huynh said. And the positive outcomes for both in the Wegovy study can be viewed as encouraging for how Zepbound should perform, the analyst added. 'Cold water' To be sure, not everyone is equally optimistic. Investors were buying diabetes care stocks Insulet and Tandem Diabetes Care after the data came in line with what was expected. Those two stocks along with other in the medical device space have being selling off in recent months as investors thought the benefits of GLP-1 drugs would hurt the device stocks' market share. Citi's Baum said that the study should help accelerate approval for Medicare coverage of the drugs for obese patients. But Deutsche Bank analyst James Shin isn't so sure. Shin pointed to the fact that the expected avenue for Novo Nordisk to secure Medicare coverage may not go as planned. And he said uptake by cardiologists may still be glacial given historical trends, even with the new data in hand. "Novo's comments from its AHA event suggest Semaglutide roundabout by way of securing Medicare coverage via CVD may not be on the cards and may pour some cold water on the GLP-1 space," he said. "Furthermore, cardiologists we've spoken with cautioned that GLP-1 uptake by cardiologists may be slow given the fields poor track record of adopting other cardioprotective treatments." — CNBC's Michael Bloom, Christina Cheddar Berk and Angelica Peebles contributed to this report

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Here's what Wall Street is saying about Wegovy following Novo Nordisk's key study - CNBC

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