Wegovy Maker Warns Price Cuts ‘Painful’ for Firm as Shares Plunge
Shares of Novo Nordisk, the Danish company behind Ozempic and Wegovy, fell 18% following a stark warning from its chief executive, Maziar Mike Doustdar. He cautioned that the company would face challenges before seeing improvements in a market shaken by aggressive price cuts.
Impact of Price Cuts on Novo Nordisk
– Profit and Sales Forecast: Novo Nordisk predicts a decline in profits and sales by as much as 13%.
– CEO’s Concern: Doustdar characterized the pricing pressures as unprecedented and painful.
– Amidst Competition: The situation has worsened due to a deal with Eli Lilly and former President Trump aimed at reducing the cost of weight-loss drugs for Americans.
Job Cuts and Competition
– Corporate Restructuring: The company has experienced turmoil recently, announcing thousands of job cuts.
– Rising Competition: Increased competition and the expiration of patents are significant contributors to the current crisis.
– Future Outlook: Doustdar expressed hope that the price reduction for Wegovy would serve as an investment for our future, allowing greater access to the medication.
Shareholder Sentiment
– Share Price Expectations: Doustdar advised that shareholders should prepare for further declines in share prices before recovery.
– Market Dynamics: The demand for weight-loss drugs like Ozempic and Wegovy is on the rise, but competition is also driving prices down.
Patent Expiry Concerns
– Future Competition: Chief Financial Officer Karsten Munk Knudsen indicated that expiring patents in India and China for semaglutide (the active ingredient in these drugs) would intensify competition from lower-cost alternatives.
– Sales Impact: He forecasted a potential 2% impact on group sales for the current year due to these developments.
Changes Triggered by the ‘Most Favoured Nation’ Agreement
– US Price Reductions: In response to complaints about high drug prices in the US, former President Trump announced the most favoured nation agreement with Novo Nordisk and Eli Lilly. This deal aims to make weight-loss medications more affordable.
– Price Breakdown: The agreement is expected to lower the average monthly cost of Wegovy and Zepbound to around $250, from $350. Medicare pricing for similar drugs is expected to be $245, compared to the typical over $1,000 cost without discounts.
Expected Market Adjustments
– Realized Price Changes: Novo Nordisk noted that lower realized prices, aimed at broadening market access, are part of their revised sales and profit guidance. The company is not engaging in a race to the bottom but aims for rational market expansion.
Future Prospects for Competitors
– Eli Lilly’s Performance: Shares of Eli Lilly experienced a rise as the company projected better-than-expected profits and sales.
– Analyst Insights: Dan Coatsworth from AJ Bell pointed out that Eli Lilly has made significant strides in addressing the side effects associated with weight-loss drugs, attracting investor confidence.
Conclusion
The Wegovy maker, Novo Nordisk, is grappling with significant challenges amid price cuts and increasing competition, leading to a plunge in share prices. As it navigates this tumultuous landscape, the company remains hopeful that these strategic moves will ultimately enhance market access for its drugs. Investors and stakeholders should brace for a potentially rocky recovery as the company adapts to its changing environment.