Ozempic's maker got crushed. The rebound is under way.

By David Wainer

Ozempic's maker got crushed. The rebound is under way.

It was first with the weight-loss injection Wegovy, yet Eli Lilly's Zepbound seized the top position. Now Novo is poised to debut a Wegovy pill early next year, pending U.S. regulatory approval. But Lilly's rival tablet is expected soon after -- and could once again come out on top.

Playing second fiddle to Lilly has weighed heavily. Novo's stock is down more than 50% in the past year.

That reflects slowing growth because of Lilly's market-share gains, as well as a swelling market for knockoff GLP-1 drugs.

Signs of a turnaround are emerging. Novo shares rallied after the company reported positive clinical data for its obesity program, including news Wednesday that the Wegovy pill produced weight loss comparable to that of the weekly injection. Yet the U.S. shares trade at about 15 times forward earnings -- on par with the slower-growing pharmaceutical sector. Eli Lilly, by contrast, fetches 27 times.

Fairly or not, Novo has earned a reputation for moving too slowly -- whether in increasing supply, confronting compounders or investing in direct-to-consumer marketing. It now needs to convince investors that it can move with more urgency.

The new chief executive, Mike Doustdar, has wasted little time sending that signal. Earlier this month, Novo said it would cut about 11% of its workforce. For a company long steeped in cautious Danish culture, such a drastic move marks a clear break with the past.

That kind of urgency is most evidently needed in tackling the compounding boom -- pharmacies selling knockoff versions of branded drugs long before patents expire. Wegovy now faces de facto competition from dozens of such players, which might already account for as much as 30% of the U.S. obesity market.

Novo has responded with more than 130 lawsuits across 40 states, but much more needs to be done.

Regulators are also turning up the heat. In an article published this month, FDA Commissioner Marty Makary singled out Hims & Hers -- one of the largest beneficiaries of the compounding wave -- for allegedly misleading advertising. That kind of scrutiny could open the door to broader enforcement against compounders.

Novo's obesity pipeline is looking more exciting, starting with the Wegovy pill. The company already sells an oral version of semaglutide for Type 2 diabetes, branded as Rybelsus. A higher-dose formulation is now under FDA review for obesity. Until recently, Wall Street was skeptical: Eli Lilly's rival pill, orforglipron, is cheaper to produce and avoids the fasting restrictions tied to oral semaglutide.

"You have to fast and then wait 30 minutes after taking the drug every morning," said Evan Seigerman, an analyst at BMO Capital Markets. "Imagine being a busy parent, trying to get the kids out the door and not even able to have your coffee."

Sentiment shifted last month after Lilly reported disappointing weight-loss results that fell short of Novo's data. (Lilly recently reported that its pill topped Novo's semaglutide in a head-to-head trial, but that was a lower-dose diabetes trial.)

Martin Holst Lange, Novo's chief scientific officer, said in an interview that beyond stronger efficacy, the company's pill also appears more tolerable, with fewer patients dropping out of trials.

Expectations for oral semaglutide remain modest, but could rise if uptake in the real world proves to be quick. The pharma-intelligence firm Evaluate projects sales of about $3.5 billion by 2032, compared with around $12 billion for Lilly's orforglipron.

Both are small next to the broader GLP-1 obesity market, which Evaluate expects to nearly quadruple from $26 billion this year to nearly $100 billion by 2032. And with supply issues largely resolved, Novo is in a stronger position than it was when Wegovy first stumbled. "We are prepared for a full launch, with no supply constraints," a Novo spokeswoman said.

Novo is also pitching breadth. For patients who can't tolerate GLP-1 drugs, the company is developing a drug called Cagrilintide, which mimics amylin, a satiety hormone. While recent study results showed weight loss of about 12%, which is on the low side, the drug appears to be far better tolerated, said Holst Lange.

For those seeking more efficacy, Novo is advancing CagriSema, a combination of Cagrilintide and semaglutide that has seen weight loss of more than 20% in people with obesity. The company is also expecting late-stage data of semaglutide in Alzheimer's disease -- an effort that could become a blockbuster but is more of a long shot.

"There have been a lot of failed attempts to serve patients with Alzheimer's, so we don't want to raise expectations," said Holst Lange. "But of course, we're very much looking forward to seeing the data."

Novo might never fully escape its reputation as a runner-up. But in a market this large, second place can still deliver first-rate returns.

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