Novo Nordisk A/S shares extended their rebound after telehealth firm Hims & Hers Health Inc canceled its plan to launch a low-cost compounded version of a weight-loss drug, bowing to regulatory and legal pressure. This development significantly eased market concerns about the potential impact of cheap copycats on Novo Nordisk's core products, reinforcing its competitive moat in the GLP-1 drug market.
Shares of Novo Nordisk, listed in Frankfurt, climbed more than 8% on Monday, building on gains from the previous Friday. The rally came after Hims & Hers, which had attempted to launch a compounded weight-loss drug based on semaglutide for just $49 last Thursday, announced on Saturday that it would stop offering the treatment. The reversal followed legal threats from Novo Nordisk and regulatory pressure from the U.S. Food and Drug Administration (FDA).
Hims & Hers stated that the decision was made after "constructive dialogue" with stakeholders. The episode signals a tightening regulatory stance against unauthorized compounded versions of GLP-1 drugs. On Friday, remarks from FDA Commissioner Marty Makary indicating a crackdown on such products had already helped lift Novo Nordisk's stock by over 5%.
Despite the short-term rebound, Novo Nordisk continues to face intense competition from Eli Lilly and ongoing challenges from other low-cost compounded alternatives. In its full-year earnings report released last week, the company warned of "unprecedented pricing pressure," triggering a sharp 17% drop in its share price. Since peaking in June 2024, the company's market value has fallen by nearly two-thirds.
**Regulatory Crackdown and Competitor Retreat**
The $49 compounded drug proposed by Hims & Hers contained semaglutide, the key ingredient in Novo Nordisk's blockbuster drugs Wegovy and Ozempic. The product quickly drew strong opposition from the Danish pharmaceutical giant and regulators.
According to Reuters, Hims & Hers reversed its position over the weekend after facing legal and regulatory threats from Novo Nordisk and the FDA. The company confirmed on Saturday that it would discontinue the treatment, a move that directly contributed to Novo Nordisk's stock rise in Frankfurt on Monday.
Prior to this, FDA Commissioner Marty Makary's comments about cracking down on unauthorized compounded GLP-1 drugs had already reassured investors. Such compounded drugs have been viewed as a major threat to Novo Nordisk's pricing power in the weight-loss and diabetes drug markets. This shift in regulatory sentiment helped drive a more than 5% rebound in Novo Nordisk's shares last Friday.
**Pricing Pressure Persists**
Although regulatory intervention has temporarily curbed the threat from certain low-cost copycats, Novo Nordisk's market environment remains challenging. In addition to fending off competitors like Hims & Hers that seek to enter the market with compounded drugs, the company must also contend with strong competition from its main rival, Eli Lilly.
In its full-year financial report, Novo Nordisk issued a clear warning to investors, stating that it faces "unprecedented pricing pressure." This pessimistic outlook sparked investor panic, causing its stock to plunge 17% after the earnings release. There are widespread concerns that the highly profitable weight-loss drug market could descend into a fierce price war as more competitors and alternative therapies emerge.
**Significant Market Value Decline**
These market fluctuations highlight the fragility of Novo Nordisk's current valuation. Once a market darling, the company's market capitalization peaked in June 2024. However, due to increasing competition and pricing pressures, its shares have fallen sharply since then, erasing nearly two-thirds of its value from the peak.
While the withdrawal of a competitor's copycat project has provided a short-term boost to the stock, whether it can reverse the long-term downtrend will depend on how well the company can maintain the competitiveness and pricing power of its products in an increasingly crowded market.