Novo Nordisk Suffers Stock Drop Amidst Copycat Drug Competition
Novo Nordisk A/S's shares have plunged 10% this week, marking their sharpest decline of the year. The drop stems from increased competition posed by generic versions of its popular weight-loss drug Wegovy.
Telehealth Firm's Counterfeit Ad
The decline was triggered by a Super Bowl advertisement from Hims & Hers Health Inc., a telehealth company promoting its Wegovy knockoffs produced by compounding pharmacies. This ad highlights the challenge faced by Novo as it attempts to maintain leadership in the obesity and diabetes drug market.
Regulatory Concerns
Compounding pharmacies are permitted under US regulations to create generic versions of drugs in shortage. The Food and Drug Administration (FDA) had designated Novo's semaglutide (sold as Wegovy and Ozempic) as being in shortage in 2022, allowing Americans to obtain alternative versions from telehealth firms.
However, drugmakers are contesting these copycat drugs, arguing that they lack the rigorous pre-marketing testing required for branded counterparts. The Pharmaceutical Research and Manufacturers of America criticized Hims' ad as "misleading" before its airing during the NFL championship game on February 9th.
Novo's Response
Novo has issued warnings against the safety risks associated with counterfeit drugs and announced plans to significantly increase supply this year, aiming to remove its drugs from the FDA shortage list. CEO Lars Fruergaard Jorgensen expressed confidence in meeting market demand but acknowledged the FDA's role in providing guidance.
Legal Challenges
Novo recently faced a setback in its efforts to combat generic drug production when a federal judge ruled against its claims that a Florida pharmacy was engaging in unlawful business practices.
Market Outlook
Industry analysts expect compounded GLP-1 drugs to remain a temporary phenomenon, but the timing of the FDA's decision regarding the shortage designation remains uncertain. Additionally, the appointment of Robert F. Kennedy Jr. as the new head of the US Department of Health and Human Services could introduce policy changes related to weight-loss products, potentially affecting Novo's earnings potential.