(Bloomberg) — Novo Nordisk A/S said the supply of its blockbuster obesity medicine Wegovy will continue to be restricted in the US as the drugmaker struggles to expand production.
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The Danish company made the comments even as it raised its profit and sales outlook for the year as demand for Wegovy and another related diabetes medicine fuel revenue growth. The stock fell as much as 2.2% in Copenhagen.
The supply challenge is raising questions about whether the drugmaker can stay on top of the wave that’s boosted its market value to about $420 billion — more than Denmark’s gross domestic product — and made it Europe’s most valuable company after French luxury giant LVMH.
Novo’s stock has more than quadrupled since the end of 2018, overtaking behemoths like Nestle. Now that it trades at a multiple almost double that of its peers, the company has little room for error. Novo also announced plans to split shares 2-for-1 next month.
Chief Executive Officer Lars Fruergaard Jorgensen shrugged off the supply worries and said the company was rapidly adding capacity to ease the Wegovy production issues.
“I’m not concerned,” he said in an interview with Bloomberg Television, adding that there’s “a lot of hope” because obesity might finally be treatable and the company is ramping up manufacturing as quickly as it can.
The roll out in other countries will be gradual after planned time-lines have lagged in markets such as the UK, Jorgensen said. For now, Wegovy is officially available to treat obesity in Denmark, Norway and Germany, besides the US.
Novo’s revenue is now expected to grow as much as 33% this year, up from a prior estimate of 30%. The company on Thursday also upgraded the guidance for operating profit by 3 percentage points. Wegovy’s sales surged beyond analysts’ estimates last quarter to 7.5 billion Danish kroner ($1.1 billion), despite the supply restrictions.
The unprecedented demand “remains a good problem to have,” Emily Field, an analyst at Barclays, wrote in a note to clients.
What Bloomberg Intelligence Says:
The top end of Novo Nordisk’s raised guidance is already reflected by consensus and may be conservative, though we believe scope for further upgrades hinges on supply of its GLP-1 drugs amid strong demand in diabetes and obesity.
— Michael Shah, BI Pharma analyst
The supply issues weren’t limited to metabolism drugs last quarter. The company’s rare-disease medicines also faced manufacturing constraints due to a factory move. Profit and sales fell short of analysts’ estimates in the quarter.
Novo has vaulted into the limelight thanks to a new generation of medicines that help people shed unwanted pounds by curbing their appetite. But the supply glitches, including problems at a contractor, have left it unable to fully capitalize on its first-mover advantage before rival Eli Lilly & Co.’s diabetes drug Mounjaro hits the weight-loss market.
Lilly expects to get US approval to use Mounjaro for obesity this year, but sales are already booming, spurred by off-label usage. The drug has been shown to help patients shed even more weight than Wegovy.
A study this week showed Wegovy cut the risk of heart attacks and strokes by 20%, which may aid Novo’s discussions with insurers. Many are balking at the treatment’s cost, which runs upwards of $10,000 a year in the US.
The success of Wegovy and the related injectable drug Ozempic has sparked something of a gold rush in the pharma industry and some analysts predict this class of treatments could become one of the biggest-ever blockbusters. About 40 companies are chasing after Novo to grab a share of the market, led by Lilly.
–With assistance from Francine Lacqua and Naomi Kresge.
(Updates with CEO comments in fifth and sixth paragraphs)
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