Novo Nordisk Shares Dip as U.S. Drug Price Cuts Announced

Shares of Danish pharmaceutical company Novo Nordisk declined by as much as 3 percent on March 15, 2024, following an agreement with its U.S. competitor Eli Lilly and the U.S. government to significantly reduce the prices of their popular GLP-1 weight-loss medications. This deal, announced late on March 14, involves the drugs Wegovy from Novo Nordisk and Zepbound from Eli Lilly, which will see prices for U.S. government programs, including Medicare and Medicaid, drop to between USD 149 and USD 350 per month, down from previous prices ranging from USD 500 to USD 1,000.

The agreement also provides the companies with a three-year reprieve from tariffs, potentially easing financial pressures. While analysts note that these price cuts could present a short-term challenge to revenue, they may lead to increased sales volumes over time. According to analysts at TD Cowen, “These price cuts represent a near-term headwind laid on top of competitive pressures, but in the medium to long term, they may boost volumes.”

As of 09:24 GMT on the day of the announcement, Novo Nordisk’s shares were down by 1.8 percent. The price reductions come at a time when Novo is facing intensified competition in the weight-loss drug market. Eli Lilly’s Zepbound and various compounded generic alternatives have gained traction, challenging Novo’s position since it launched Wegovy in 2021 and briefly became Europe’s most valuable publicly listed company. However, Novo has seen a staggering 70 percent drop in its market value over the past year due to supply constraints and other commercial challenges.

Novo Nordisk has indicated that the lower prices will likely have a negative impact on global sales growth next year, estimating a “low single-digit” percent decrease. Nonetheless, they expect to see a rise in volumes under Medicare in the mid- to long-term as more patients gain access to the medication.

The agreement also includes provisions for introductory doses of weight-loss medications currently under development by both companies. These will be priced at USD 149 per month through government programs and the White House’s TrumpRx site, contingent upon regulatory approval. The U.S. Food and Drug Administration (FDA) has confirmed that these medications are under consideration for expedited review, aimed at accelerating the approval process.

Novo anticipates an FDA decision on its product by the end of 2024, while Eli Lilly has yet to submit its own drug, orforglipron, for approval. Analysts from Jefferies suggest that the expedited review could pose a challenge for Novo’s launch, potentially undermining its first-mover advantage over Lilly.

The unfolding developments in the weight-loss drug sector highlight the competitive landscape, as pricing strategies and regulatory pathways continue to evolve. As the market adapts, the impact on both companies will be closely monitored by investors and health care stakeholders alike.